Contingency and Contract Administration Its Risks

The Risks of Contingency Contract Administration

The uncertainties and risks result from workers' performance, quality of parts and materials, the complexity of the project, cost control, project budget, and delays in the supply of the essential materials. One risk associated with contingency contract administration is the failure to meet a precedent condition or when a clause passes without action, particularly when the clause or condition in question is related to safety matters. The measures should always be put in place before the commencement of any project. Should an injury occur without the measures in place, the company should face the consequences. This is a mistake that can be very costly for any organization coupled with possible financial and legal consequences (Yeo, 1990).

Another risk is the inconsistency in treating the contracts or the systems of document management that might occur in cases where the management of contracts differs within the departments. This might also occur when the same contracts are inconsistently treated for different projects or at different times. Documents might become misfiled, and the audits become burdensome. The result is that budget blowouts might occur because of the unchecked scope (Yeo, 1990). In worst-case scenarios, the suppliers might withdraw their partnerships because of frustrations that arise from the delays and the company's general incompetence. Litigation can also occur when there is a failure to meet the conditions and a general contract failure.

Another risk might be due to missed milestones, deliverables, or deadlines, a failure that is most common in the AD HOC systems. This is because they lack a systematic and centralized trigger to alert when the key date is approaching. The party that is in breach of the contract is likely to receive a penalty clause. In the worst-case scenario, a company can go bankrupt due to missed deadlines, particularly if other subsequent projects are contingent and dependent on the success of the deliverables or milestones. Failure of these means failure of the other projects. As a result, the company might face litigation that could damage its reputation and financial outlook (Smith and Bohn, 1999).