Change and claim management – a positive contribution to profitability?
Based on many recent discussions with our contractor clients, we sense a renewed appetite to master change & claim management on EPC projects. New business is hard to come by, the as-sold margins are often lower than they would like and the stakes are high. Therefore delivering the as-sold margin – or better – is becoming a real focus of attention for many companies.
On the basis of industry generated data and our own experiences, we have considered the effectiveness of current change & claim management practices and processes in international EPC Contractors working on lump sum contracts. Our findings indicate that no matter how good ‘contract management’ as a function might be in this respect, change & claim management alone is unlikely to contribute significantly to the generation of additional revenue and profitable project delivery. Indeed, we are convinced that to be effective change & claim management must work in unison with five other “foundations” if increased revenue and preservation of margins are to be achieved.
Why is this important? The current market trends suggest LSTK EPC contracts will continue to be the contracting arrangement of choice for most owners. Therefore, coupled with declining order book opportunities, higher competition, adverse contract conditions and slender margins it means that in order to sustain businesses through the difficult times there is a need to maximise revenue and profitability on legacy projects and assure achievement of the profit forecasted at the award of new contracts. This points to a change in approach to project delivery; what might have worked successfully thus far may not be effective for the immediate and mid-term future.
The “six foundations” addressed in the attached publication are all subjects where we provide support to our clients. We would be delighted to explore with you how the matters addressed by this paper might be adopted and adapted to work to your benefit.