- Crafting Contracts for Clarity and Completeness
Today's world of major capital projects is very much driven by contracts between owners and vendors. Contracts can tie owners and vendors together for many years, so these documents need to form the basis of a strong relationship. It is important to remember that an owner and vendor share a common objective, to execute a safe, successful, and profitable project.
- The importance of contract management; an element of Contract Lifecycle Management
In recent years, market conditions have added ever increasing pressure on companies to reduce costs and look for ways to improve performance, efficiency and value. A common approach being utilized more often to address this dynamic is the concept of Contract Lifecycle Management (CLM).
- Major project planning: staying competitive in an uncertain market
Now more than any time in the past decade, companies need to change the way they plan and execute capital projects if they are to stay competitive. Major capital projects in Western Canada have traditionally been schedule driven, an approach that often increases costs and risks to the project. In the current economic environment, this is no longer sustainable.
- The Rationale for Implementing Process Automation
Major capital projects contain massive amounts of data and information that needs to be processed continuously throughout the execution of the project. Teams that are unable to keep up with the data flow risk significant impacts to overall project costs. The use of automation technologies can significantly improve a team’s ability to perform these necessary tasks.
- When rates mislead
Consider a scenario where a manager is filling in for a colleague and receives an invoice with a unique number, but its description s nearly identical to an invoice received and processed a week earlier. After looking back through the records it’s found to be a duplicate in everything except for the invoice number, and the vendor submitted a request for payment twice for a single service. The manager is then concerned that this may have happened previously but simply not been recognized.
- How can supply chain functions improve processes while optimizing costs?
The oil and gas industry has experienced tremendous change over the last two years. Dramatic drops in commodity prices have pushed organizations to accelerate their cost optimization strategies. In response to increasing cost pressures, oil and gas C-suite executives have readjusted their internal focus to help their organizations make adequate cost-control decisions to stay competitive and position themselves for long-term success.
- The internationalization of capital projects: The new economic reality
The new economic reality of the oil & gas sector has made it such that, in order to thrive and remain competitive, oil & gas proponents are now expected to operate more ‘modern’ value-chain: one which is much more global with a large number of related parties integrated across countries.
- Tax implications associated with employee allowances
Employees who are working out of town often receive a per diem to compensate for the expense of living away from home. When these employees are contracted to perform services for another company (the client), the per diems are invoiced by the contracting company (the contactor) as an expense to the client.
- What delivery method is right for a project? Ask some key questions.
Delivering capital projects is never easy. Balancing priorities between cost, schedule and scope considerations is a delicate process. However, choosing the right project delivery method can considerably ease the burden on the organization.
- The “why” behind turnaround audits
Few maintenance or capital projects can raise a company’s anxiety levels more than shutting down an operating plant for a turnaround or overhaul.
The loss of revenue from a shutdown, combined with concern as to whether the project will deliver its intended goals, brings turnaround projects to critical importance in manufacturing, resource extraction and refining roles. In the oil and gas sector, tight market conditions and a heightened importance of refining assets has brought new attention to the performance of turnarounds.
- How data analytics in your organisation can influence decision makers and effectively implement business solutions
What comes to mind when you think about data analytics? For some it can bring up memories of statistical formulas. For others it’s images of interactive dashboards. Wikipedia defines analytics as “the discovery and communication of meaningful patterns in data.”
- Statutory Burden Reconciliation on Cost Reimbursable Contracts
Capital cost controls are an increasingly important consideration for businesses across all industry segments. Organizations want to get the most “bang for their buck” when investing in capital projects. The cost of third-party labour contracts on projects often makes up a significant percentage of the total cost, whether the labour is front-end engineering design, project management and planning, or craft construction personnel. Organizations would be well served to work with their vendors to draft contracts that keep these costs controlled and predictable.
- Risk registers: capture the right information
Many Enterprise Risk Management (ERM) functions use what’s known as a risk register to help identify, assess and mitigate the risks the organization faces. Simply put, a risk register is a central inventory that catalogues various risks and, for each one, the type, origin, prevention tactics, mitigation options and potential countermeasures.
- Cash flow forecasting: Your construction project performance guide
Skilled project managers appreciate the story that can be derived by linking a project’s cost and time dimensions. Because construction projects experience change throughout the project lifecycle, the cost plan will also experience cash flow variances throughout the life of the project. Using cash flow forecasts enables project managers to understand change and make informed decisions while fulfilling monitoring and control functions critical to project management.
- Negotiating aboriginal contracts
According to the 2011 National Household Survey, over 1.4m people identify themselves as First Nations, Inuit or Metis in Canada. Together, these three distinct groups comprise the term “Aboriginal peoples.” As the first inhabitants of Canada, Aboriginal peoples hold an increasingly significant part of the country’s history and culture.
- Outsourcing, co-sourcing or in-sourcing vendor cost recovery projects?
With oil prices falling below $50/barrel, oil and gas companies have been forced to initiate drastic internal efforts to control cash leakage and cut costs. Vendor management departments are focusing on their vendor recovery initiatives in an effort to monitor ongoing costs, identify risk areas and uncover cost recovery opportunities. As a result, many companies are running cost-benefit analyses to determine whether in-sourcing, co-sourcing or outsourcing their contract/vendor audit mandates align with their enterprise cost reduction strategies.
- Vendor Audit is More than Just Vouching Invoices
Vendor audits can help reduce or recover costs by vouching invoices and other financial information to confirm compliance with contract terms and conditions. However, they can also cover many other aspects of a business to help a client get value for their money.
- Union agreements: the importance of continuous monitoring
Collective bargaining agreements (CBAs) play a significant role in major capital projects. These agreements, negotiated collectively between employers and trade unions representing workers, allow both sides to reach agreements regulating working conditions. If not monitored on a continuous basis, such agreements can greatly impact overall project costs, while a lack of adequate understanding of the relevant financial clauses can unnecessarily increase expenses.
- Using Benford's Law to target audits
Auditing is a way of life for many firms, but what do you target and how deep do you go? A surprising mathematical relationship can identify red flags within a data set.
- Mitigating subcontractor risk in times of economic uncertainty
Current economic conditions throughout Canada have resulted in the slowdown or cancellation of many capital projects. This has increased the financial stress facing both contractors and subcontractors as they cut margins and decide how to cut costs.
- Limited-scope JV audits miss potential risks for non-operating partners
Natural resource exploration and production often calls for multiple companies to work together. One common structure used in the sector is a joint venture (JV), where several companies come together and segment themselves into operator and non-operator roles. Operators manage the consortium’s overall daily activities, a responsibility that inevitably brings additional risks to the non-operators in both financial and nonfinancial means.
- How can you reduce the risk of construction delay claims after a major capital project is completed?
Construction delay claims and disputes related to schedule issues are among the most common and complex types of disputes in major capital projects. Claims of this nature are typically initiated by contractors against an owner based on contentions of interference causing a delay or loss of productivity.
- Internal controls over invoicing and payments: a critical component to the success of any major project
Internal controls are a critical component of any major capital project. They can help ensure owners get full value regarding the project’s cost. It’s important to make certain internal controls are correctly set up, consistently used and any deviations are accurately reported in a timely manner.
Labour, equipment and materials make up the largest costs on all major capital projects. And because the related invoices are typically for very large amounts, often with lots of supporting documentation, it can result in approval of payments without satisfactory review. Compound this with payment deadlines and demanding project schedules, and the risk of overpayment can be significant.
- Aboriginal title can be a significant factor in getting major capital projects off the ground
On 26 June 2014, the Supreme Court of Canada issued a ruling that could potentially have a great impact on capital project development in Canada. In the case, Tsilhqot’n Nation v. British Columbia, the Supreme Court ruled in favour of the Tsilhqot’n First Nation, declaring that they hold title over an area of land in central BC for which they had claimed historic use.
- Mitigating the risk of labour overpayments from statutory burdens
Labour burden costs in major capital projects are broadly divided into two categories: statutory and non-statutory. To help reduce the risk of overpaying for labour during a project, it’s important to include these cost elements into the contract and define what is reimbursable before any expenses are incurred.
- The importance of project health checks on effective capital projects
Capital projects are complex, expensive and challenging to manage. They’re executed in a dynamic, ever-changing environment. So it’s critical to embed effective project controls in the process to manage risks along the way. Control systems can manage scope, change, cost, risk, quality, communication, time, procurement and resources.
- Joint venture agreements: getting the basics right
Joint venture (JV) agreements take on a variety of forms, but they’re usually formed for the same reason — a commercial collaboration. Multiple unrelated parties pool resources with the intent of mutual gain. This pooling, exchanging or integration of resources is ultimately to leverage the expertise of the group as a whole, while at the same time remaining independent from one another.
- Reducing indirect tax costs can reap rewards on major capital projects
For major capital projects such as the oilsands projects in Northern Alberta or mining projects in British Columbia or Saskatchewan, indirect taxes can become a significant portion of the overall project cost and can negatively affect cash flow.
- Beware: ambiguous contracts can cost you big
In the course of a compliance audit of cost-reimbursable contracts, opportunities for cash recovery are regularly discovered. The recovery of these amounts, however, can often be put into question or simply denied due to missing or ambiguous contract language. But proper contract language can mitigate or even entirely eliminate such loss of recoveries.
- Pre-award audit of contracts
A pre-award contract audit takes place before the two parties sign the contract. Pre-award audits review the commercial terms to verify that costs are accurately presented by the contractor and there is no hidden profit within the cost elements.
- Contract compliance audits complement invoice attest
For most companies, payments to vendors represent the single largest contract spending category. Continued advancements in business needs, more complex business transactions and increased volumes of work are resulting in more complex contract terms. This can make proper invoice attest extremely difficult, and the intricacies of invoices only continue to increase.
- Risk doesn’t need to hold a project back — if you know your risk appetite
The motto of the British Special Air Service is, “Who dares, wins.” A successful, major capital project exemplifies this thinking: a large investment involves significant inherent risks, but has the potential to drive major returns for shareholders.
- Financing infrastructure through P3
Public private partnerships (P3s) are becoming an increasingly popular option for infrastructure development at all levels of government in Canada. They represent an innovative, performance-based approach to provide high-quality, long-lasting public infrastructure.
- Effective communications: an integral part of a contract compliance review
Effective communication during a contract compliance review between the auditor and each stakeholder — from the project sponsor to the contract owner and individual vendors — is of paramount importance.
- Value-added findings in vendor audit
Vendor audits usually focus on identifying opportunities for cash recoveries due to overpayments and/or noncompliant charges. However, a second type of finding, referred to in this article as “value-added” findings, instead provides long-term value by preventing overcharges before they occur.
- The need for project governance to manage risk
Key stakeholders in the Canadian mining industry — from Northern Quebec to British Columbia — have faced ongoing turmoil in recent years, highlighting the significance of clearly defining roles and responsibilities in mining projects to minimize operational risks.
- Finding the right technology balance for enterprise project management
Most executives of large project-centric organizations will agree that desktop tools such as spreadsheets and slide decks are inadequate for managing and reporting on a multibillion-dollar project portfolio. These tools are designed for discrete projects and do not provide insight into the employment of resources across the enterprise and the performance of the project portfolio.
- Data analytics can result in more effective and efficient supplier auditing
During supplier contract compliance and cost recovery assessments, data analytics can be an effective tool to identify non-compliant or erroneous transactions, such as hidden fraud schemes or duplicate charges.