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Construction Contract Management & Its Importance

Construction Contract Management & Its Importance

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Once you own a construction business, you need to understand the importance of contracting. This is where most of the problems and disputes occur in the construction industry. Issues about managing projects, time delays, and cost overruns, are important to keep in mind when you are performing contracting services for your clients.

Here we are going to discuss what these agreements include, how they affect each party involved in the project, and why it’s important to have a well-written agreement.

What are Construction Contracts?

Construction contracts are legal documents that project managers and owners must use to define their roles and responsibilities, as well as procedures for managing a construction job. Because these documents specify the procedures and responsibilities for both parties, it is important to get them right in order to maintain legal and financial obligations throughout the construction project.
These contracts also include all the changes made during negotiation between the contract parties. Construction contracts also give the owner control over the project as there are specific clauses in the contract which eliminate uncertainty regarding the responsibilities of both parties; thus reducing time delays and cost overruns.

What is Construction Contract Management?

Construction contract management is a process that involves responsible parties such as the owner, project manager, lawyers, and contractors who create and implement the legal documents that support and facilitate construction projects. In essence, it is a vital project management component that ensures quality control, budget accountability, and schedule compliance.

Why is Construction Contract Management Important?

Construction contract management is an important role for all parties involved in a construction project. But too many times we do not appreciate its value, considering it only a business transaction and forgetting that this arrangement involves real people with real feelings and real emotions.
You should also know that proper management of a construction contract is an essential element to your success as a contractor. Properly managed contracts have positive implications which are:

A Construction Contract Provides Vital Protection for all Stakeholders

Construction is a field where things can go wrong if you do not have proper protection. Contracts are the backbone of construction and they protect everyone involved in the project. From the general contractor to the subcontractors, from the building employees to a building owner, everyone is better off when there is a contract in place. Seasoned contract experts at recommend that a written contract should be prioritized in order to avoid deflection of blame when things fail to go according to plan – which occurs frequently in a volatile industry such as construction.

Helps to Prevent Dispute

Preventing disputes is one of the main goals of a construction contract. Since every business deal is not always successful, disputes often arise that could add to your costs. It is better to have a well-planned contract for your project rather than facing the issue after the completion of the project.

Guarantee of Compliance From all Parties

Construction contract management is a process that helps contractors and owners comply with the terms of agreements, budgets, schedules, and specifications. The process ensures the owner’s project requirements are met in terms of quality, cost, and time.

Helps to Resolve Dispute If One Arises

Construction contract management is an important aspect of every construction project. It ensures the smooth flow of a project and helps curb costs. It also provides a mechanism to resolve disputes between parties if they arise. Construction contract management also provides for clear resolution of all matters regarding the project including scope, cost, time frame, and risk allocation.

What are the Details in a Construction Contract?

Construction contracts contain crucial information specific to the construction industry. Businesses that work with contractors need to be sure their desires are met in the contract. Some specifics in the contract are:

Construction Contract Agreement

Construction contract management is a critical part of the buying and selling of construction services. All construction contracts will have several major components attached. It is the principal agreement.

Scope of Work

The scope of work is a detailed description of the services and the equipment to be provided by the Contractor and a detailed description of the physical components of the project including, but not limited to, location, nature, amount, and quality of items.

General and Special Conditions

Construction contracts have both general and special conditions. General conditions cover the main features of the contract whereas special conditions cover details that are more specific to each particular project.

Construction Schedule

One of the files necessary in a construction contract is the construction schedule. These allow you to track the progress made on certain parts of a project or a building, and of course, also include the target time for completion of the installation of the building or certain parts of it.


The specifications in a Construction Contract and the appearance of the project are crucial to the success of the project, which is why it becomes fundamental to know more about them.

Bill of Quantities

A bill of quantities is a crucial part of any construction contract. The “bill” organizes and documents the list of materials and the work to be done. It is basically a list compiled in detailed format describing:

Cost Estimate

One of many necessities is a cost estimate for that venture to begin. The estimation needs to be completed by a competent expert in the field. In a way, it is like an agreement on the price, timeline, and services being performed. A concise and clear contract is key here.


Drawings are the foundation of any construction project. When it comes to building a brand new house or remodeling an existing floor plan, things need to be clearly defined in regards to what is supposed to be built.

List of Construction Insurance Coverage

This is an essential part of the document because it assures the owner that the contractor has the wherewithal to perform his obligation under the conditions of the construction contract.
Contracts are the lifeline that keeps you protected in the construction industry. If you’re a Construction Contractor, it’s important that you understand what Contract Management is and the role that you need to play in the process. You also need to be aware of the risks involved if you fail to comply with the rules set out for a project and how to work proactively with your team to ensure that you minimize those risks.


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