- February 23, 2024
- 15 min read
- Devinderjeet Singh
Introduction
The construction of the Golden Gate Bridge in California began in 1933 and was completed in four years at a project cost of $35 million, without any cost overruns. It was an ambitious project, which was completed without the aid of modern tools and technology. We can call it a construction marvel of the past given the resource constraints.
Today, the construction industry has more amenities and equipment at its disposal, but it also has more problems. With diverse business interests and key infrastructure projects, construction firms find it greatly challenging to navigate the labyrinth of suppliers, vendors, employees, and contractors. Construction industry’s complications have grown beyond logistical challenges.
Construction Industry’s Modern-Day Contractual Complications
Despite being one of the largest industries in the global economy, and expected to reach over $16,614 billion in 2025 at a CAGR of 7%, the construction industry is highly fragmented. With each project, the cost and complexity has increased, including the number of safety requirements, building compliance codes, and other legal obligations. Given how the business is multi-nodal, with a vast, multi-layered web of suppliers, contractors, and sub-contractors, the triple constraints of project management – scope, time, and cost overruns – are now more evident than ever before.
Today’s construction projects contain a significantly bigger technology component, which means that businesses in this domain are required to manage an increasing number of in-scope elements and associated testing requirements. This is true not only for commercial buildings but also for capital construction projects, especially in the offshore and infrastructure domains.
Changes in the in-scope elements related to design, site conditions, and several other factors that impact a construction project, have a cascading effect on the cost, project milestones, and delivery timelines. Hence, the scope of contractual relationships needs to be amended through multiple SOWs, work orders, and scope changes, interpretations, and definitions. This is likely to limit the organization’s ability to derive the maximum value from their contracts and plug the value leakage as well. In addition, the industry is also fraught with several state- and country-level regulatory requirements that need to be tracked and met to succeed in a litigious market.
Construction firms manage multiple contracts at once and as a result, receive a high volume of invoices. But a lot of the firms have limited visibility into sub-contracting relationships which can lead to errors in invoice processing. The overall limited visibility into the organizations’ contract can result in a lack of insights into project status, milestones, delivery timelines, payment status, resource utilization, and performance issues that could further lead to time and cost overruns.
Industry-focused Approach to Construction Contract Management
Sirion’s industry-specific data models have been fine-tuned to help enterprises manage every phase of a capital project while accelerating speed-to-completion, mitigating risks, and achieving better business outcomes. Irrespective of the length or the complexity of the contract’s lifecycle, our platform enables project teams to monitor milestones, due deliverables, and compliance and policy requirements, assign actions and tasks to members across the team, and set custom alerts to always stay on track.
Sirion enables businesses in this complex construction vertical to meet contract management needs with seamless functionality across the complete lifecycle of a contract – from authoring and negotiation to AI-powered legal review, automated risk assessment, and execution. The platform enables you to create complex multi-sourcing and subcontracting contract packages using smart tags to quickly populate first drafts and send for approval.
With the Sirion CLM platform, once the contracts are digitized, you gain deep visibility into your contracts. You can visually monitor performance against contracted milestones, deliverables, and policy and regulatory requirements while automating obligation schedules. The AI-powered contract analytics help to identify risk elements such as missing clauses and clause deviations from the company’s preferred position. It also enables complete visibility into the linkages between different parties across the contract chain – from contractors and sub-contractors to building owners and developers.
A purpose-built platform like Sirion integrates both pre and post-signature capabilities into a single platform, thus accessing the performance and consumption data. This is then tallied against invoices received from suppliers as well as pricing information, computation models, and other KPIs extracted from signed contracts by Sirion’s AI engine. The system will automatically identify invoice discrepancies as well as performance shortfalls and offer the remediation steps, thus preventing value leakages.
For an industry that’s highly sensitive to cost and time overruns, an effective contract lifecycle management platform ensures that deliverables are on point so that projects are completed on time. A smart, intuitive, and tech enabled CLM helps to reduce risks and ensure compliance with legal requirements.
Additional Resources
Digital Procurement Strategy: Guidelines for Success
6 Contract Management Software Benefits For Enterprise Success
11 Contract Management Best Practices to Drive Business Value
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