TOOLS-Chapter 6 With Annex - EN

PUBLIC PROCUREMENT BEST PRACTICE GUIDE Page 1 of 84
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Public Procurement Directorate
TABLE OF CONTENTS
1-01-2008

TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS TABLE OF CONTENTS
TABLE OF CONTENTS............................................................................................. 0
CHAPTER 6: CONTRACT IMPLEMENTATION AND MANAGEMENT.............. 0
6.1 INTRODUCTION ............................................................................................... 0
6.2 FROM THE AWARD TO THE IMPLEMENTATION OF THE CONTRACT......................... 0
6.3 KEY ELEMENTS OF CONTRACT MANAGEMENT ................................................... 0
6.3.1 What is Contract Management? Why is it important? ............................. 0
6.3.2 Main Contract Management activities..................................................... 0
6.3.3 Key factors for an effective Contract Management ................................. 0
6.3.4 Roles involved in Contract Management ................................................ 0
6.4 MANAGING THE RELATIONSHIP WITH THE CONTRACTOR..................................... 0
6.4.1 Creating a spirit of cooperation and trust between Contracting Authority
and Contractor........................................................................................ 0
6.4.2 Factors having a negative effect on the relationship between Contracting
Authority and Contractor......................................................................... 0
6.4.3 Evaluation of the relationship with the Contractor ................................... 0
6.4.4 Ethical Behaviour and Professionalism................................................... 0
6.4.5 Communication ...................................................................................... 0
6.4.6 Negotiations ........................................................................................... 0
6.4.7 Handling problems ................................................................................. 0
6.5 CONTRACT ADMINISTRATION ........................................................................... 0
6.5.1 Change management ............................................................................. 0
6.5.1.1 Necessity to implement changes or modifications to the contract....... 0
6.5.1.2 Procedures to implement changes or modifications to the contract .... 0
6.5.2 Keeping a record of contractual documents............................................ 0
6.5.3 Payment procedures .............................................................................. 0
6.5.4 Claims management............................................................................... 0
6.5.5 Assets management............................................................................... 0
6.5.6 Management Reporting.......................................................................... 0
6.5.7 Contract Termination.............................................................................. 0
6.5.7.1 Cases of contract termination ............................................................ 0
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6.5.7.2 Actions for terminating the contract .................................................... 0
6.5.7.3 Actions following termination of the contract ...................................... 0
6.6 MONITORING THE CONTRACTOR & ACCEPTANCE MANAGEMENT......................... 0
6.6.1 Evaluation of the Contractors performance............................................ 0
6.6.2 Penalties for delay.................................................................................. 0
6.6.2.1 Supply Contracts................................................................................ 0
6.6.2.2 Service Contracts............................................................................... 0
6.6.2.3 Work Contracts.................................................................................. 0
6.6.3 Acceptance Management ....................................................................... 0
6.6.3.1 Acceptance of Supplies...................................................................... 0
6.6.3.2 Acceptance/ Approval of Reports and Deliverables (general service
contracts) ........................................................................................... 0
6.6.3.3 Acceptance of Information System..................................................... 0
6.6.3.4 Acceptance of Works Project in whole or in part ................................ 0
6.6.4 Risk management .................................................................................. 0
6.7 DISPUTE RESOLUTION..................................................................................... 0
6.7.1 Dispute Resolution Methods................................................................... 0
6.7.2 Description of Dispute Resolution Methods ............................................ 0
6.7.2.1 Amicable Settlement .......................................................................... 0
6.7.2.2 Alternative dispute resolution methods............................................... 0
6.7.2.3 What is currently applicable in the Republic of Cyprus....................... 0
6.8 CONTRACT CLOSURE...................................................................................... 0
6.8.1 Actions for the contract closure .............................................................. 0
6.8.2 Evaluation of the contract management procedures............................... 0
6.8.3 Checks during the completion of co-funded Projects .............................. 0
6.9 PROCEDURES FOR THE TRANSISTION INTO PRODUCTIVE OPERATION.................. 0
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CHAPTER 6: CHAPTER 6: CHAPTER 6: CHAPTER 6: CONTRACT IMPLEMENTATION AND CONTRACT IMPLEMENTATION AND CONTRACT IMPLEMENTATION AND CONTRACT IMPLEMENTATION AND
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
6.1 6.1 6.1 6.1 I II INTRODUCTION NTRODUCTION NTRODUCTION NTRODUCTION
The major part of this Chapter refers to the period from the signature of the contract to its
closure. The aim of this Chapter is to provide guidance to the Contracting Authorities and to
present best practices related to the management of contracts entered into with economic
operators (Contractors), and more specifically how to:
manage their relationship with the Contractor (e.g., development of a spirit of
cooperation and trust, observance of the Code of Ethics and professional behaviour,
communication, dealing with problems),
perform the administrative tasks required in the framework of contract management
(e.g., maintaining documents in updated format, asset management, conducting
payments, management of variations and claims),
monitor and evaluate the Contractor's performance,
accept the deliverables of the Project,
resolve their disputes with the Contractor,
implement the closure of the contract and the evaluation of its management
procedures

It is self explanatory that, the best practices regarding issues of time limits,
deadlines, penalty clauses, amounts or other procedures are preceded by the force
of Laws, Regulations, Circulars and the provisions of the contract each time as long as there
are differences between the two.
The last part of the Chapter refers to the procedures for the transition into productive
operation and it mainly involves contracts for the development, installation and operation of
integrated information systems, as well as service contracts for the organisational-
operational reengineering.
6.2 6.2 6.2 6.2 FROM THE AWARD TO THE IMPLEMENTATION OF THE CONTRACT
Following the end of the tender procedure and the signature of the contract, the Contractor is
called upon to implement the Project in accordance with the terms and conditions of the
contract while the Contracting Authority, in turn, is called upon to manage the contract that
has been signed with the Contractor and monitor the Contractor's performance during the
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execution of his works. The period between the award of the contract and the start of its
implementation is a transition period for the Contracting Authority, since it passes from the
procedures for the award of the contract to the procedures for its management. A significant
factor of success during this transition phase is the achievement of a smooth continuity
between the tendering procedures and contract management procedures. This is the reason
why the Contracting Authority must ensure the smooth transfer of knowledge from the team
that was involved in the tender procedure to the team that will be engaged with the
management of the contract. In order to ensure a smooth transition and continuity, it is
recommended that certain members from the team who were involved with the
conduct of the tender proceudre participate also as members of the contract
management team.
Following the award of the contract and before the Contractor starts the implementation of
the Project, there should be a discussion between the two parties in order to ensure that all
of the parties involved have a common understanding with regard to the goals and the
expected results of the Project, as well as that they agree on the performance requirements
and administrative procedures that must be applied based on the terms of the contract.
Depending upon the complexity of the contract, relevant risks, contract value, duration,
special requirements and having as a basis any previous experience from the management
of similar contracts, this discussion may result in an official meeting, which is known as the
"kick-off meeting". This meeting is conducted between the key representatives of the
Contracting Authority (i.e., Project Manager, members of the Project Steering Committee)
and their counterparts on the part of the Contractor. The time period between the signature
of the contract and the kick-off meeting is usually set forth in the terms of the contract and
ordinarily does not exceed 40 days.
This meeting helps the Contractor on the one hand to clarify points in the Terms of
Reference or in his tender that may leave room for different interpretations, and on the
other, to get a clear picture of the terms and requirements of the contract, as well as with
regard to the roles and responsibilities of the parties. The purpose of this meeting is to
explain or to clarify the contract requirements and to deal with issues which may lead to
misunderstandings in future in a timely manner. Despite the fact that, the Contractor's staff
as well as the staff of the Contracting Authority are required to be informed ahead of time on
the terms of the contract, the meeting that follows the signature of the contract ensures that
all those involved or those who will be involved directly in the procedures of contract
administration have a common understanding of all its requirements.
In no case should this meeting be used in order to make any changes in the
contract or to renegotiate its terms.
A properly planned kick-off meeting sets the basis for the successful development of
the Project. This is the reason why it is important that the meeting be conducted on a
predefined agenda, which must be distributed to all of the participants prior to the meeting
so as to give them the possibility of preparing themselves properly. The table below gives a
presentation of the most common contents included in such an agenda. It is noted that these
contents are not exhaustive and issues may be added or removed accordingly, in order to
cover the requirements of the specific contract.
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Table 61: Typical contents of the Kick-off Meeting Agenda
Introduction All of the participants (representatives of the Contracting Authority and the
Contractor) should introduce themselves by describing their current post briefly in the specific
Project and their role in relation with the execution of the contract.
Contract Scope. Discussion on the contract scope in order to clarify exactly what the
Contracting Authority expects to achieve from the execution of the specific Project. Despite
the fact that the contract scope has already been defined in the tender documents and the
Contractor had detailed in his tender the method of implementation of the contract scope in
the case that it is awarded to him, at this moment in time it is good and useful that both sides
provide the necessary clarifications to avoid the appearance of any problems during the
implementation of the Project.
Terms of Contract A summary reference to the terms and conditions of the contract with
emphasis on special conditions. This reference helps to avoid any misunderstanding in the
later stages of implementation, allowing the Contractor to better understand the terms of the
contract before he commences his work in the context of the Project.
Requirements Discussion about the technical requirements and the reporting requirements
in the framework of the contract. The technical requirements may also be covered during the
discussion on the contract scope. However, at any rate, proper explanations must be given to
the Contractor regarding the specifications that the deliverables must satisfy in order to be
accepted by the Contracting Authority. Also, the Contractor must realise the importance of
the reports he is required to draft in the framework of the Project and how important it is that
these reports respond to the contract requirements.
Contract Administration Discussion on the contract administration procedures with
emphasis on the monitoring of the Contractor and the progress of his works, as well as the
management of claims for variations or amendments to the contract.
Rights and Obligations. A brief reference to the rights and obligations of both parties with
the emphasis on the procedures of the Contractor performance evaluation. The Contractor
must be given clear explanations regarding the way in which the monitoring and evaluation of
his performance shall be made, during the implementation of the contract as well as during
its closure. He must also be informed that, any failure in the performance of his duties based
on the contract or non satisfactory performance during the Project implementation, may lead
to his exclusion from any future undertaking of any public contract for a specific period.
Potential Problems. The Contracting Authority should raise issues that may generate future
problems and solutions must be proposed jointly on how to handle them.
Payments. Clarification to the Contractor about the invoicing and the payment procedure
requirements. The matter of payments becomes especially serious in a case where
payments are associated with the achievement of specific goals on the part of the Contractor
or with specific milestones. Also, in a case where the payments are associated with the
charging of man - time, a discussion must take place regarding the respective procedure
based on which the man - time shall be certified (e.g., submission of Timesheets). In a case
where the contract includes provision for the indemnification of the Contractor for certain
expenses that he incurs in the context of the Project implementation, there should be a
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discussion of the respective procedure on the basis of which the certification of expenses
and the indemnification will be made.
Acceptance of Deliverables. Discussion with the Contractor of the procedures to be applied
for the acceptance and approval of his deliverables.
Competencies/ Powers. The Contracting Authority representatives must explain the limits of
their competencies and power in the framework of the contract management and
administration and obtain the same information from the representatives of the Contractor.

At the end of the meeting, the Contracting Authority prepares the minutes of the
meeting which are part of the contract file. The minutes must reflect the following
information: names of participants, topics discussed and critical decisions made, issues that
must be resolved, responsibilities and deadlines to take further actions. A copy of the
minutes must be distributed to all of the participants.
This meeting is the first official communication between Contracting Authority and
Contractor following the signature of the contract and essentially signals the
commencement of the Contract Management procedure on the part of the Contracting
Authority and the commencement of the project implementation on the part of the Contractor.
6.3 6.3 6.3 6.3 KEY ELEMENTS OF CONTRACT MANAGEMENT
6.3.1 6.3.1 6.3.1 6.3.1 What is Contract Management? Why What is Contract Management? Why What is Contract Management? Why What is Contract Management? Why is it important? is it important? is it important? is it important?
The term Contract Management refers to the procedures that allow a Contracting Authority
to verify that the Contractor is executing the Project in accordance with the terms of the
Contract, providing the services/ supplying the products or constructing the public works that
have been set forth by the Tender documents, at the time and in the quantity defined in the
Contract but also with the quality and the cost that have also been defined in it. Contract
Management, apart from the acceptance management includes administrative tasks and
most important, the building and keeping of a good working relationship with the Contractor.
Ineffective contract management has been proven that it may bring about the
following:
Decisions are not taken at the proper time thus allowing potential risks to appear
The Contractor executes the Project based on the understanding that he has
formulated himself regarding the contract requirements, without realising the actual
goals and results expected from the execution of the Project
The Project implementation described in the contract is underestimated by the
Contractor both in terms of time and human resources required, leading eventually to
deviations from the initial planning and possibly to exceeding the initially estimated
budget
The Project is implemented at a slow rate
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The opportunities to improve value for money are lost
The variations in the contract are not realised in accordance with a specific and agreed
fashion thus increasing the possibility for new risks to appear in the implementation of
the Project
The products, services and public works are delivered/ accepted without meeting the
acceptance criteria that had been set for them
The payments that are made and the amounts paid do not correspond to the works that
have been fully or adequately implemented
The handling of problems that arise during the execution of the Contract is not
conducted timely and effectively, which usually leads to tension between the
Contracting Authority and the Contractor
Communication between the Contracting Authority and Contractor is limited, increasing
the possibility for misunderstandings, misinterpretations and the drawing of incorrect
conclusions
The Contractor's performance is not evaluated throughout the execution of the contract
thus not allowing for actions to be taken to increase the performance and effectiveness
of the contract.
The Republic of Cyprus, in recognising the importance of the procedures in contract
management, has issued and put into effect the Regulation 115/2004, which applies
to the Ministries, Services, Departments of Ministries, Independent Offices and Independent
Services of the Republic and which sets forth - irrespective of whether the contract involves
supply of products, provision of services or execution of public works - the following:
The obligations of the parties
The establishment and operation of the competent bodies for the management of
variations and claims
The procedure for the acceptance of supplies (products/ goods)
The procedure for the evaluation of the Contractor and the sanctions in case of his
inability to execute the contract.
6.3.2 6.3.2 6.3.2 6.3.2 Main Contract Management Main Contract Management Main Contract Management Main Contract Management activities activities activities activities
The management of a contract is an integral part of the procurement cycle and
essentially starts much earlier before the award of the contract to the
Contractor, even before the drafting of the Tender Documents. More specifically,
contract management is considered to commence at the moment when strategic decisions
are made regarding the contracts type and duration, and the issues that it regulates, that is,
when there are answers given to questions like the following:
It is better for the Contracting Authority to contract one or more economic operators?
Will the economic operators be allowed to employ subcontractors?
What is the best type of contract for the specific Project?
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Is it preferable that the duration of the contract be short or long?
Which should be the mechanism that will be used for the invoicing of the offered
products/ services?
How will the variations in the contract be made and reviewed?
How will the Project deliverables be accepted?
How will the disputes between the Contracting Authority and Contractor be resolved?
In which cases will it be allowed to terminate the contract?
Who will have the intellectual property rights?
Which will be the mechanism for monitoring and control the contract?
The decisions made at this stage (see Subchapter 2.8) are then formulated and reflected in
the general and special conditions of the contract in the form of articles (see chapter 3 and
the model Tender Documents).
The contract is the cornerstone for the development and maintenance of good
relationship between the Contracting Authority and the Contractor as well as for the
acceptance of the Project deliverables ensuring value for money. If the Contract that was
drafted as part of the Tender Documents does not provide for issues that it should have,
includes ambiguities in the wording that leave room for different interpretations etc., it is very
difficult for the Contracting Authority to build, based on it, a successful working relationship
with the Contractor. Despite that, certainly there are actions which the Contracting Authority
may proceed with following the award of the Contract in order to improve the Contractor's
performance and consequently the effectiveness during the implementation of the contract.
The main procedures in Contract management that are executed for all types of contracts
(supplies, services, works) from the moment of its signature until its closure refer to:
The Monitoring of the Contractor and management of acceptance: These are
procedures that enable the Contracting Authority to ensure that the Contractor is
executing his duties and fulfils his obligations in accordance with the contract. At the same
time it allows the Contracting Authority to identify early any problems or issues that may
arise and thus to proceed with their timely resolution. More specifically, the framework of
monitoring the Contractor and management of acceptance includes the following
activities:
Monitoring, control and evaluation of the Contractor's performance
Evaluation of the quality and quantity of the products/ services and works delivered/
become accepted
Identification and handling of risks
Management of the relationship with the Contractor: Refers to the initiatives and
actions of the Contracting Authority to build and maintain a good relationship with the
Contractor, which will be based on mutual understanding, trust, good and frequent
communication and finally timely management of any problems that may arise.
Contract Administration: These are administrative procedures, such as:
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Keeping the contract in updated form
Control and management of variations in the contract
Payments to the Contractor
Asset Management
Drafting of reports
Termination of the contract.
Dispute Resolution: These are procedures for the selection and application of the
optimum method for the resolution of disputes with the Contractor.
Contract Closure: Refers to the control and certification procedures that both parties
have discharged their contractual obligations as well as the procedures to evaluate the
extent to which the contract was successfully executed and lead to the expected result.
The aforementioned procedures are generally applied even in cases of special types of
contracts, as for example the maintenance contracts. However, in cases of contracts that
refer mainly to the maintenance of products/ equipment and secondarily to the
maintenance of services, there are specific particularities that the Contracting Authority
must handle in a systematic and methodical fashion in order to enable the monitoring of the
implementation of maintenance works and payment of the Contractor, as well as the
evaluation of the quality of the services provided. More information and guidance on the
implementation and management of such contracts are given in Annex 6-12.
6.3.3 6.3.3 6.3.3 6.3.3 Key Key Key Key factors for factors for factors for factors for an effective Contract Management an effective Contract Management an effective Contract Management an effective Contract Management
The factors given below have been proven that they can play a particularly important
role in the effective management of a contract:
Proper strategic decisions and drafting of the right contract. As it was also
mentioned in the subchapter 6.3.2, the contract is the cornerstone in the exercise of its
effective and proper management. Every contract must set out its basic principles,
clarify its scope, define the term of its execution, define the procedures that must be
followed with regard to the communication between the Contracting Authority and the
Contractor, implementation of changes, Contractor performance evaluation,
acceptance or rejection of the deliverables of the Contractor, identification and
management of risks, problem handling, dispute resolution, approval of payments and
closure of the contract.
Effective evaluation procedures: The evaluation procedures of the candidate
economic operators and their proposals during a tender must be clearly defined and
executed in accordance with the principles of the Code of Ethics for the purposes of
objectivity, non-discrimination, integrity, transparency, secrecy and confidentiality in
order at the end to ensure that the contract is awarded to the most suitable candidate.
The Contract Management Team has the qualification, knowledge and
experience required in order to manage the contract effectively. The roles involved
in the management of a contract and their competencies must be clearly specified. The
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officials who will be called upon to serve these roles must have been selected using
objective criteria in order to ensure that on the one hand they have the necessary
technical knowledge, and on the other, they have those characteristics (e.g.
communication skills, cooperation skills, negotiation skilss, lack of irritability, etc.) which
are necessary to cultivate a good climate of cooperation with the Contractor.
Taking initiatives & preventive actions: For the management of a contract to be
effective, it must be based on actions of a preventive nature with anything regarding
possible risks, unsatisfactory performance of the Contractor, supply of low quality
services or delivery of low quality products, rather than actions of a suppressive nature.
Formulating a win-win situation for both parties: The management of a contract
must be based on the perception that both parties must "win" from its implementation
and thereby emphasis must be given to the development and maintaining of good
communication and cooperation between them, timely response to potential problems
and resolution of any tensions.
Provision for the implementation of changes. The contracts (general and special
conditions) are prepared together with the rest Tender Documents at quite an early
phase of the Project, in a time when the potential risks or other type of issues that may
arise next are not quite distinct. This is exactly the reason why they should provide for
the possibility that necessitates change and thus they should determine the procedures
and mechanisms by which the requests for change shall be made, reviewed and
become accepted or rejected.
Monitoring the Contractor's performance: The Contracting Authority must monitor
and continuously evaluate the performance of the Contractor in order to ensure that the
final product will be characterised by best value for money.
Flexibility/ adaptability: Given that in the Project implementation environment, the
need for change may arise due to technological developments, institutional changes
etc., it is very important to ensure that both parties are willing to adapt the terms of the
contract so that they respond to the new conditions.
6.3.4 6.3.4 6.3.4 6.3.4 Roles in Roles in Roles in Roles involved in Contract Management volved in Contract Management volved in Contract Management volved in Contract Management
In accordance with the internationally applied practices in contract management, in a case of
large scale Projects or Projects implemented by more than one contract, the Contracting
Authority as much as the Contractor (s) must define which of their executives shall assume
the role of Contract Manager.
The Contract Manager on the part of the Contracting Authority is engaged exclusively with
the management of the Contract (contrary to the Project Manager who is involved in the
planning and implementation of the Contract scope) and more specifically:
He/she is responsible for the correspondence on contractual issues exchanged
between the Contracting Authority and the Contractor.
He/she is responsible for keeping an updated file with all of the documents exchanged
with the Contractor and related with the execution of the contract.
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Oversees the execution of the contract.
Manages the resolution of problems and up to a point of any disputes/ disagreements
with the Contractor that appear during the execution of the contract.
Manages the issues of changes in the contract
Manages the Contractor payment issues
Reports to his/her superiors any possible problems on contractual issues and asks for
guidance in the decision making and implementation of specific actions.
Monitors the Contractor's performance.
He/she is responsible to establish a good spirit of cooperation with the Contractor
which will lead to the achievement of the desired results
He/she is responsible for the closure of the contract.
In the majority of cases the Contract Manager and Project Manager on the part of
the Contracting Authority are roles performed by the same person. This is also the
practice applied in Cyprus. In accordance with the Regulation 115/2004, for each contract
drafted, the General Director of the interested Ministry or the director of the Department or
Service under which it falls, or the director of the independent Office or Independent Service
of the Republic appoints a suitable official as the Competent Official or Project
Manager, with the responsibility of monitoring and managing the contract in the
context of the provisions of the contract. The Competent Official or Project Manager has
also the competency to handle changes or modifications to the contract of a value that does
not exceed the total amounts and respective percentages set forth in the Annex 7-15.
Based on the aforementioned and to avoid confusion in the context of this guide,
ONLY the term Project Manager shall be used to cover both cases. Especially in the
case of public works and given that in this sector the term Engineer or Architect is used
against the term Project Manager for the person with the responsibility for managing the
contract and the Project as well, wherever in this Chapter there are relevant references the
term to be used shall be Engineer.
6.4 6.4 6.4 6.4 M MM MANAGING THE ANAGING THE ANAGING THE ANAGING THE R RR RELATIONSHIP WITH THE ELATIONSHIP WITH THE ELATIONSHIP WITH THE ELATIONSHIP WITH THE C CC CONTRACTOR ONTRACTOR ONTRACTOR ONTRACTOR
The effective management of the relationship between Contracting Authority and Contractor
is a very important factor to the successful outcome of a contract. The following paragraphs
include advice/ instructions to the staff of the Contracting Authority involved in contract
management related with how to:
contribute to the creation of a spirit of cooperation and trust between Contracting
Authority and Contractor,
safeguard the relationship with the Contractor from factors that may affect it in a
negative way,
evaluate the relationship with the Contractor
behave professionally observing the Code of Ethics,
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communicate effectively with the Contractor,
be effective in any negotiations with the Contractor,
deal in an organised manner with any problems which may arise during the
execution of the contract.
6.4.1 6.4.1 6.4.1 6.4.1 Creating a spirit of cooperation and trust between Contracting Creating a spirit of cooperation and trust between Contracting Creating a spirit of cooperation and trust between Contracting Creating a spirit of cooperation and trust between Contracting
Authority and Contractor Authority and Contractor Authority and Contractor Authority and Contractor
Every time a Contracting Authority enters into a contract with one or more Economic
Operators, it creates a subordinate relationship the extent of which varies depending on the
type and duration of the contract. By applying the best practices in public procurement, the
successful Contractor must be the most suitable one to implement the Project to be
executed. Based on this assumption and given that the procedures and cost of changing the
Contractor or terminating the contract and re-announcing a tender is high, the Contracting
Authority must care for the development of a good working relationship with the Contractor
and furthermore, continuously invest in that relationship.
It is estimated that the good working relationship between Contractor and Contracting
Authority:
Gives the Contractor the possibility to better understand the goals of the Project
and expectations of the Contracting Authority, as well as its business and
administrative environment, thus allowing him to act preventively and submit
proposals for the improvement of the actions to be executed,
Motivates the Contractor to improve his performance
Allows the Contracting Authority to realise the weak and strong points of the
Contractor and hence to concentrate its efforts on the improvement of the
performance of the latter where there is room for better performance.
The relationship between Contracting Authority and Contractor is described and delineated
by the conditions of the contract. This does not mean that this relationship in itself is defined
strictly in the contract, but rather that the nature of the contract defines the framework within
which this relationship is developed and cultivated.
Depending on the duration of the contract, the relationship may be short term or long term.
In the first case it involves individual collaborations that are based on short term contracts,
where the interactions of the two parties are limited, while the second case involves contracts
lasting two or more years, where each party has the opportunity to get to know the other in-
depth and to develop communication and cooperation channels. A key element, however,
that defines to a greater extent (than the duration of the contract) the type of relationship that
will be developed is the contract scope. Supply contracts (e.g., purchase of equipment,
paper, automobiles, computers), contracts for the provision of training in a specific subject
(e.g., specific project management programs, human resources management, negotiations
etc), contracts for the construction or maintenance of small scale public works (e.g.,
maintenance of pavements, configuration of a square, paving works, maintenance of public
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buildings etc) neither favour nor do they require the development of close cooperation
relationships with the Contractor. On the contrary, the contracts which refer to Projects:
for the formulation of a development strategy for an entire sector (e.g., tourism,
trade, telecommunications, transportation, education, etc)
which are critical to the viability of an organisation/ entity,
which possibly change the business operation environment of an organisation/
entity, its role and competencies, its technology infrastructure and services that it
provides,
for the development, operation and maintenance of information systems that are
combined with or require a total or partial operational and organisational
restructuring,
which are innovative and are also aimed at, among other things, the transfer of
know how,
which refer to constantly growing sectors of the market (e.g., the sector of
information and communication technologies),
for the development of critical infrastructures which may possibly change the
linking and communication of the country as well as its economic development
(e.g., construction of roads, airports, ports etc),
for the provision of services or the development of infrastructures in the utilities
sector (e.g., water supply networks)
are the ones that require and must be characterised by the development and maintenance of
a robust and strong cooperation relationship between Contracting Authority and Contractor.
Building such a relationship demands investment of time and human effort, while it further
requires that at least the Project Manager (or Engineer in the case of public works), who is
responsible for the contract management, has the necessary skills and characteristics that
are required for the development and maintenance of a good working relationship with the
Contractor.
The development of a good cooperative relationship between Contracting Authority
and Contractor can be achieved only when it is based on an open exchange of
views, mutual trust and is guided by the goal of achieving a mutual benefit. The attitude
and behaviour towards the Contractor and the respect of the contractual rights are essential
for the development of a smooth and productive relationship.
In this framework, the Contracting Authority must adopt attitudes and
behaviours as those mentioned below:
Table 62: Attitudes and proposed behaviours towards the Contractor
Recognition of the contribution of the Contractor.
Seeking benefits for both contracting parties.
Development and demonstration of a cooperative (and not competitive) approach
(harmonious cooperation to achieve the goal),
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Demonstration of interest for the success of the relationship.
Conducting an open discussion on issues of strategy, exchange of concerns and
seeking solutions jointly.
Development of suitable organisational structure and creation of communication
channels between different organisational levels so that apart from the management of
the two parties, the end users of the final product/ service/ work can communicate with
the members of the Contractor's Project Team.
Giving space to the Contractor in order to take initiatives in the context of execution of
his works, which are estimated that will contribute to the production of the desired
result.
Demonstrating trust a) to the capability of the Contractor to fulfil his contractual
obligations and b) the integrity he demonstrates during the execution of the contract.
Trust cannot be imposed by one party to the other. Instead, it is developed and
earned through the observance of the previously mentioned attitudes and
behaviours and tested in the presence of problems and disagreements. The trust of the
Contracting Authority towards the Contractor must be expressed in public and demonstrated
in every awareness action to the staff of the Contracting Authority regarding the Project being
executed and its expected results. Exactly the same must also be done in the case of
communication of the Contracting Authority with all interested parties.
In contrast to the aforementioned, the following attitudes and behaviours must be
avoided:
Table 63: Attitudes and behaviours towards the Contractor that should be avoided
Continuously pointing out the hierarchical power
A competitive attitude towards the Contractor
An effort to achieve unilateral goals
Close, typical monitoring of the Contractor which is not accompanied by constructive
comments and remarks.
Limited communication with only one communication channel towards the Contractor
It should be noted that the development of a relationship and the way in which the
other party perceives it, is directly affected by those managing the relationship.
Consequently, a great emphasis and attention must be paid in the competencies and skills of
the people occupying critical posts, while furthermore, the adoption of appropriate behaviours
must also be encouraged. In cases that mistakes are made, these must be dealt with as
lessons for the improvement of the capabilities and thus the performance of the officials next
time.
It is pointed out that the development of good cooperation relationship with
the Contractor must always be made in a professional fashion and with the
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appropriate attention so as not to violate the framework of the Code of Ethics. The
Contractor is an associate of the Contracting Authority, who will help to cover its needs and
achieve its goals and the relationship must be, above everything else, a professional one.
Attention must also be paid, so that the development of a good cooperation
relationship with a supplier/ service provider or constructor will not lead the
Contracting Authority to engage itself with him for period longer than the duration of the
contract, thus infringing on the principles governing the public procurement (equal treatment,
promotion of competition, etc.)
In accordance with what was mentioned previously, in order to ensure a good
relationship of cooperation between Contractor and Contracting Authority it is
important to ensure:
The observance of the rules of conduct and professional behaviour (see subchapter
6.4.4)
Proper management in the communication between the two parties (see subchapter
6.4.5)
Conducting negotiations in an acceptable manner (see subchapter 6.4.6)
Proper problem management with a view to their prompt solution (see subchapter
6.4.7)
6.4.2 6.4.2 6.4.2 6.4.2 Factors having a negative effect on t Factors having a negative effect on t Factors having a negative effect on t Factors having a negative effect on the relationship between he relationship between he relationship between he relationship between
Contracting Authority and Contractor Contracting Authority and Contractor Contracting Authority and Contractor Contracting Authority and Contractor
Cases where the Contracting Authority and Contractor relationship is affected by external
factors and lacks the room for development which, under normal conditions, it could have,
are:
The Contracting Authority and the Contractor are characterised by different cultures
which are in conflict during the implementation of the contract scope, Project
management and contract management.
The contract scope is innovative and the economic operators which can implement it
apart from the successful one are few. The Contractor does not feel, during the
execution of the Contract, the competitive pressure in the market and begins to deviate
from the course to provide the best value for money.
Most of the Contractor's turnover comes from the implementation of projects for the
specific Contracting Authority, in which case he is quite susceptible to the pressures he
may be subjected by it
The activity, operation and services of the Contracting Authority depend to a great
extent on one economic operator (the Contractor) resulting in the former fearing of any
withdrawal of the economic operator from the market for any cause/ reason
whatsoever.
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6.4.3 6.4.3 6.4.3 6.4.3 Evaluation of the relationship with the Contractor Evaluation of the relationship with the Contractor Evaluation of the relationship with the Contractor Evaluation of the relationship with the Contractor
The relationship and cooperation between Contracting Authority and Contractor are
some of the issues that must be evaluated throughout the execution of the Contract in order
to identify what goes well and what needs improvement. More specifically, the following must
be reviewed on a regular basis:
The degree of involvement of the Contractor or the degree to which the Contracting
Authority invites the Contractor to be involved with different activities arising from the
How well are the Project administration structures of both the Contracting Authority and
the Contractor operating and collaborating.
Whether there is a successful communication between all the organisational levels of
the Contractor and Contracting Authority.
The extent of the appearance or avoidance of any conflicts of interests and if appeared
whether they were resolved effectively.
Whether the results of the Contractor's performance monitoring are notified to him in
order to proceed with improvement actions that may be required.
The degree of satisfaction of both sides from the cooperation, communication and
problem solving until now.
6.4.4 6.4.4 6.4.4 6.4.4 Ethical Behaviour and Professionalism Ethical Behaviour and Professionalism Ethical Behaviour and Professionalism Ethical Behaviour and Professionalism
1 11 1

The staff of Contracting Authorities participating in Contract Management, as well as all of
the staff participating in the public procurement procedures is required to observe the "Code
of Ethics" and apply in practice the rules and guidelines arising from it. The observance of
the Code of Ethics sets the basis for an open, fair and efficient cooperation between
Contracting Authority and Contractor, which leads eventually in the more successful
execution of contracts and the achievement of better value for money.
In general, the behaviour towards the Contractor must be characterised as "strict but
fair".
More specifically, the people involved in contract management must:
Table 64: Rules of Conduct during contract management
Be honest, fair and maintain their integrity in their dealings with the Contractor.
Refrain from discriminations based on nationality, race, sex or religion.
Serve the public interest and act scrupulously in using the money of the "tax

1
This reference to ethical behaviour and professionalism is not aimed at the substitution of the rules
and application instructions included in the "Code of Ethics for Public Procurement", but is made in
order to stress their importance in the formulation of the relationship of the Contracting Authority with
the Contractor.
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payers." The payments must be made following the approval of the expenses by the
Project Manager (or the Engineer in the case of public works). Final payments to the
Contractor must be associated with the successful conduct of all the acceptance tests
or with the acceptance of the deliverables, and the transactions must be properly
monitored.
Work with a high level of professionalism, comply with the applicable
legislation and apply the best practices.
Ensure the implementation of the Project based on the agreed time schedules and
financial planning.
Monitor and evaluate regularly the execution of the contract in order to ensure its
efficiency and effectiveness and realisation of best value for money.
Provide the Contractor immediately with any information or/ and
documentation they have available that is related with the execution of the
Contract.
Cooperate with the contractor for the resolution of problems and disputes as
early and possible.
Keep confidential the information devolved to them during and on the occasion of
the execution of the Contract and refer to technical or commercial issues or work or
production methods of the Contractor and avoid using them to gain personal
benefit.
Be fully informed by the Contracting Authority regarding the instructions or
information that may be necessary or suitable to facilitate the prompt and effective
execution of the Contractor's duties, before they proceed with any communication
with him (either through a meeting, or by telephone or by written communication).
Take notes, minutes of meetings and proof of all the communications they have
with the Contractor, thus enhancing transparency and facilitating any review by the
Project Manager and his superiors.
Avoid any efforts on the part of the Contractor to establish an excessively
friendly climate in their relationship intended to exploit this relationship in order to
promote the interests of the Contractor. For example, they must avoid:
o being excessively generous during the Contractor's performance evaluation,
especially when it is associated with his payments
o being elastic during the acceptance of the deliverables of the Contractor, by
accepting deliverables that do not fully meet the predefined criteria.
o being excessively conciliatory during the negotiation of terms of the contract
o being less "diligent" when reviewing the actual expenses in relation with the
Project budget, thus leaving the Contractor room to increase his revenues or
profits from the execution of the specific contract
o being more favourable when dealing with the specific Contractor against the
others, especially when the Contracting Authority has concluded a Framework
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Agreement with more than one Contractor.
Reject any offer by the Contractor of gifts, hospitality and any other material
gains in order to proceed with the acceptance of a deliverable (project, service or
procurement of goods) which fails to meet the quality targets defined in the contract.
Declare from the beginning any particular relationship of theirs (as this is
described in the legislation and Code of Ethics) with the Contractor or/ and his
staff which may lead to a conflict of interest and request to be replaced.
Avoid accepting from the Contractor any discounts with personal purchase of
goods or services, if the offer is based on the business/ contractual relationship and
is not a general offer available to the general public. In general, the name of the
Contracting Authority must not be invoked for the private buying of any goods or
services.

6.4.5 6.4.5 6.4.5 6.4.5 Communication Communication Communication Communication
Establishing a good communication is a structural element in the relationship between the
Contracting Authority and the Contractor. The international practice in contract execution has
proven that problems of lack of trust or concern related with the performance of the
Contractor are frequently due to the ineffective communication of those managing the
contract from both sides as well as the failure to communicate and explain to the Contractor
the goals and intentions of the Contracting Authority with reference to the specific Project.
The practice of communication must begin immediately after the end of the tender
procedure and signature of the contract, with the kick-off meeting (see paragraph
6.2), at which time is set the foundation for the application of a continuous information
exchange policy between Contracting Authority and Contractor. The effort to achieve
optimum communication between Contracting Authority and Contractor must be continued
during the planning of the method for executing the contract (Project implementation), at
which time answers must be given to the questions of the checklist below and draft the
"Communication Plan"; (see Chapter 7, subchapter 7.4.8 "Communication
Management.")

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Checklist 61: Critical questions to achieve optimum communication between Contracting
Authority and Contractor
Has the frequency of official communication with the Contractor been defined?
Who will participate in the review meetings?
Who is authorised to have written communication with the Contractor?
Who represents the Contractor in the Steering Committee?
Will there be possibility for electronic communication and submission of deliverables
using electronic means (e.g., emails)?
Do the suitable means and infrastructures to conduct communications exist? Are
these available to all those involved in the communication actions?
Has a procedure for keeping the minutes of meetings been foreseen?
The communication management procedures included in the "Communication Plan" must be
applied throughout the duration of the contract period, while each time the need arises for a
modification, the initial Plan must be reviewed.
In order to avoid problems with the communication of Contracting Authority and
Contractor, it is suggested that the following rules are applied:
Whenever there is a deadline for the receipt of a written communication, the sender
shall take all of the necessary measures in order to ensure the prompt receipt of the
communication
Any notice, consent, approval, certificate or decision by any person required by the
contract shall be made in writing, unless otherwise defined in the contract
Any verbal instructions or orders shall be put into effect at the time of their
communication and then confirmed in writing
Communication levels
An aspect of communication management that needs special attention is the flow of
information between the organisation levels of the Contracting Authority and
the Contractor. If we assume that in accordance with the best practices the Contracting
Authority as well as the Contractor have organised themselves for the execution and
management of the contract into 3 or 4 (in the case of large in scale or complexity projects)
levels, the flow of information must take place "horizontally" between similar organisational
levels of the Contracting Authority and the Contractor, as well as "vertically" between the
different organisational levels of each of the contracting parties.
Example 61: Communication levels (horizontal & vertical) between Contracting Authority and
Contractor in the context of a contract for the supply of information technology services
The figure below presents the example of a Contracting Authority which has concluded a
contract with an economic operator (e.g. a Societe Anonyme) for the supply of information
technology services (e.g., operation of the information system). At the strategic level, the
Administration of the Contracting Authority and the Board of Directors of the Contractor must
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communicate on issues involving the cooperation between them, any changes in strategic
goals affecting the contract scope, as well as exchange views for taking initiatives that will
serve the new strategic goals. At the management level, the Project Manager
communicates with the Project Manager on the Contractor side on issues involving the
contract administration (e.g., changes, payments, claims etc), practical issues of the
execution of the contract scope and monitoring the performance of the Contractor and the
progress of his works. Finally, at the operational level, the end users of the information
system applications communicate and ask from the technical staff of the Contractor to
provide support with any technical difficulties they encounter during the daily performance of
their work.
Senior
Management
Project
Manager
End User
Management
Project
Manager
Project
Team
Strategic Level
Management Level
Operational Level
Contracting Authority Contractor

As it is shown in the above figure, it is very important to apply so much horizontal, as
much as vertical communication. For example, if one of the End Users of the
Contracting Authority thinks that the level of the service provided is below the required one,
then he/she should not communicate directly with the Management of the Contractor, but
he/she should report the issue to the Project Manager (vertical communication). Following
that, the Project Manager of the Contracting Authority should care for resolving the problem
by communicating with his/her counter part from the management of the Contractor
(horizontal communication).
Any diagonal communication must be avoided. This means that in the
aforementioned example, any direct communication of the end user (Contracting
Authority) and the Contractor's Management should be avoided, as this undermines the
authority of the Project Manager on the part of the Contracting Authority. With the same
logic, it not allowed for example that the technical staff of the Contractor complains regarding
its work load to the Project Manager on the part of the Contracting Authority.
In order to deem the communication between Contracting Authority and Contractor as
a successful one, there must be homogeneity and consistency in the communication
of all the organisational levels. If, for example, the communication at the strategic level is
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good but there are serious disagreements at the management level, nobody can ensure that
the overall relationship between Contracting Authority and Contractor will not collapse.
6.4.6 6.4.6 6.4.6 6.4.6 Negotiations Negotiations Negotiations Negotiations
One of the most important parameters affecting the degree of success in the Contracting
Authority and Contractor relationship is the way in which the negotiations between them are
conducted. With the term "negotiations" we mean the open and honest discussions through
which the Contracting Authority efficiently communicates its requirements to the Contractor,
requests modifications of the method or scope of the work, discusses the claims that the
Contractor may request or finally, presents to the Contractor its assessment regarding
insufficient performance on his part and requires that corrective actions are taken.
The basic principles that must be observed for a negotiation to be successful are
given below:
Table 65: Factors contributing to successful negotiations
The participants on the part of the Contracting Authority (members of the Project
Steering Committee or/ and the Project Manager or Engineer in the case of public
works) must be aware of the negotiation techniques and have the proper skills to
practice them.
The participants in negotiations on the part of the Contracting Authority must be
authorised by their superiors and this authority must be obvious so as not to allow for
any questioning on the part of the Contractor. If for example, the Project Manager on
the part of the Contractor thinks that he may discuss and negotiate a specific issue with
the Project Manager of the Contracting Authority (or the Engineer in the case of public
works) while in practice the Contracting Authority has delegated this responsibility to
the Steering Committee, the possibilities to achieve an agreement are few since the
issue must be referred to discussion in a future meeting of the two sides with a different
composition of participants.
Minutes must be kept in every meeting between Contracting Authority and Contractor
related with the negotiation of claims.
Before the start of the negotiation the participant representing the Contracting Authority
must prepare himself properly. The usual information that he is required to collect refer
to the issues of Contractor's performance, progress of the physical scope of the
Project, payments and claims, legal issues and restrictions, expectation of the
interested parties, etc.
The stands and positions of the Contracting Authority must be clearly expressed during
the negotiations and must not allow any room for misinterpretation. The same must
also apply on the part of the Contractor. If, despite all this, there are still points that are
not clear, clarifications must be asked.
The Contracting Authority must, in every negotiation, evaluate what is important for
itself and what is for the Contractor and furthermore, it must examine who is the one
who will have the most losses in a case that things do not evolve as they should.
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6.4.7 6.4.7 6.4.7 6.4.7 Handling Handling Handling Handling problems problems problems problems
Regardless of how good the relationship and communication between Contracting Authority
and Contractor is, it is quite likely that problems will arise during the execution of the
contract. This is why it is imperative, on the one hand to include provisions in the
contract regarding the resolution of any problems that may arise (e.g., when the
performance of the Contractor is inferior to the goals set), and on the other to institute
and agree from the beginning procedures for the drafting and submission of reports
as well as transfer/ reference of the problems to be resolved at higher level.
The problem that appears most frequently during the execution of contracts
involves the performance of the Contractor. However, apart from this problem, a
considerable number of other problems referring to issues like invoicing, payments,
communications, contract administration procedures etc., may appear throughout the
execution of the contract scope and their possible causes are as follows:
The time dedicated to the management of the Contractor's performance is limited and
inadequate;
The Project support by the Senior Management of the Contracting Authority is
insufficient;
The Contracting Authority or the Contractor failed to anticipate early significant risks
or the need to implement changes;
The Contractor's organisational structure changes or significant changes are made in
the Project management team on the part of the Contractor;
The planning for the execution of the contract and its scope is of limited extent and
inadequate;
The contract requirements change as a result of changes in the operational
environment of the Contracting Authority or due to modifications in the needs of the
end users;
The appearance of conflicting goals and interests between Contracting Authority and
Contractor;
The original hypotheses and assumptions made on the part of the Contractor during
the planning of the Project implementation are proven inaccurate or mistaken in
practice;
The occurrence of unforeseen events;
The Contractor fails to fulfill his contractual obligations;
The personalities of the key executives involved in the execution of the contract have
so many differences that lead to conflict;
When a problem arises, irrespective of the nature and issue that this involves, it is
important and critical:

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Checklist 62: Actions after the appearance of a problem
To be recorded in order to be taken into account in the evaluation of the overall
performance as well as when reviewing the achievement of best value for money.
The Contractor to be notified about it through the proper communication channel
and at the proper level each time (see par. 6.4.5).
The problem resolution procedures provisioned in the contract to be followed.
The problem to be referred to/ transferred for resolution to the immediately higher
level when its resolution at the initially involved level is not possible or becomes
impossible.

The problems appearing and their effects can be reduced through:
Table 66: Actions to reduce the possibility of problems appearance and their consequences
Organised, systematic and effective monitoring/ management of the Contractor's
performance (see par. 6.5.1. Monitoring the Contractor's performance)
Implementation of regular meetings - reviews with reference to the progress in the
execution of the physical scope and potential problems/ risks identified either by the
Contracting Authority or by the Contractor
Planning and application of the procedures for the management of issues (see
Chapter 7, paragraphs 7.4.5 & 7.5.5), changes (see Chapter 7, paragraphs 7.4.6 &
7.5.6 and Chapter 6, par. 6.4.4.1) and risks (see Chapter 7, paragraphs 7.4.5 & 7.5.7)
Timely identification/ recognition of the problems and application of corrective actions
Definition of roles and responsibilities with clarity in order to avoid any
misunderstandings and taking initiatives on the part of the executives participating in
the Project execution but not having the relevant responsibility
Seeking and receiving assistance and consultation support from other executives of
the Contracting Authority on special issues (e.g., legal, technical, etc)
Establishment of escalation procedures for the problems that cannot be resolved in
one organisational level to the immediately higher one.
Escalation procedures
The problems that appear during the execution of a contract must be resolved promptly
before they turn into more significant issues. This is why the Project Manager of the
Contracting Authority (or the Engineer in the case of public works) must meet regularly with
his counter part from the Contractor's administration in order to discuss the problems that
appear as soon as they arise.
However, in cases where the resolution of a problem or disagreement is not
possible at the organisational level where it appeared, the involvement of the
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immediately higher level becomes necessary
2
. The procedures for the transfer of a
problem to be resolved to the immediately higher organisational level must be planned and
finalised by the Contracting Authority during the commencement of execution of the contract.
Despite that, an effort must be put forward so that the problems are resolved at the lowest
possible organisational level (best, at the level they appear).
Example 62: Escalation of problems
Let us consider the Authority of example 6-1, which has contracted an economic operator for
the supply of information technology services.
If we assume that the organisation and communication levels are those presented in the
figure of the Example 6-1 of paragraph 6.4.5, then the transfer of any problems to be
resolved in the context of execution of the contract to a higher level would be as follows:
If the problem appeared at the operational level, that is the level of the End User
(Contracting Authority) and Project team (Contractor's technical staff), which could
not be resolved or it was beyond the competency of those involved at that level,
then the members of the operational level of both parties should collect all of the
relevant information (problem identification and notice documents, information
related with the analysis of the problem, effect reports, practice from meetings of
discussion - resolution of the problem) and forward them to the next
organisational level that being the Project Manager (Contracting Authority) and
the Project Manager (Contractor). Thus, the problem would be transferred to the
immediately higher level and it would be now under the responsibility of those in
charge from both sides at the management level to reach the resolution of the
problem.
In a case where a solution would be impossible to find at the management level
as well or following a review it was proven that it is outside the jurisdiction of the
management level, the management of the problem would have to be transferred
to the Senior Management of the Contracting Authority and the Contractor's
Administration.
The flow chart below shows the problem escalation procedure between the organisational
levels of the Contracting Authority and the Contractor.

2
The stratification/ hierarchy of the levels for the transfer of problems to be resolved is the same as
the one that applies for the definition of communications between Contracting Authority and Contractor
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Problem
identification at
operational level
Is it under the
responsibility of the
operational level?
Problem
Resolution
Procedure
Is the problem
resolved?
Escalation of
problem to the
management
level
Is it under the
management level?
Problem
Resolution
Procedure
Is the problem
resolved?
Escalation of
problem to the
strategic level
Is it under the
strategic level?
Problem
Resolution
Procedure
Is the problem
resolved?
YES
YES
YES
NO
NO
YES
YES
NO
NO
NO Problem closure
and filing of the
information
regarding the
problem handling
Activation of
Dispute
Resolution
Procedure
YES

.
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6.5 6.5 6.5 6.5 C CC CONTRACT ONTRACT ONTRACT ONTRACT A AA ADMINISTRATION DMINISTRATION DMINISTRATION DMINISTRATION
The term "Contract Administration" refers to a series of administrative procedures and office
work, which in their majority are performed by the Project Manager (or the Engineer in the
case of public works). This involves the following procedures:
Change management
Keeping record of contractual documents
Invoicing and payments
Claims management
Management of the assets of the Contracting Authority, which are used during the
execution of the contract scope
Reporting to the Management of the Contracting Authority
Termination of the contract
The specific procedures play a very important role in the success of a contract as
well as in keeping a good relationship between Contracting Authority and Contractor,
since they essentially clarify who does what, when and in what way.
6.5.1 6.5.1 6.5.1 6.5.1 Change management Change management Change management Change management
6.5.1.1 Necessity to implement changes or modifications to the contract
During the execution of a contract it is likely that the operational environment of the
Contracting Authority to change, to have changes in the legal framework that affect its role
and competencies or that significant developments at the technological level occur, thus
necessitating the modification of the contract scope and possibly the final deliverables
produced. In addition, during the execution of a contract it is possible that problems or risks
are identified the handling of which requires the implementation of changes or modifications
to the terms of the Contract. Characteristic indicative examples are the following cases:
key members of the Project Team of the Contractor, with respect to duties and
responsibilities, need to be replaced by others of equivalent qualifications and
capabilities
the Contactor's initial assessment for the overall time of execution of the contract is
proven in practice mistaken and an extension is required
the Contracting Authority undertakes, during the execution of the contract, a new
additional role, which affects the works and deliverables of the Project executed, thus
leading to the need to expand the Contract scope, its implementation schedule and
its total cost
the Contractor does not appear to have understood the Terms of Reference very well
and the first results produced do not seem to fully satisfy the requirements of the
Contracting Authority. The time to identify and record the remarks on the part of the
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Contracting Authority, as well as that of incorporating the remarks to the revised
deliverables leads eventually to the need for extension of the total duration of the
contract
unforeseen weather conditions lead to violation of the time schedule for the
construction of a public works project resulting in the requirement to extend the
execution of the contract
during the execution of a public works project the Engineer estimates that he needs
to modify the nature, quality or/ and quantity of the project or to add works that he
considers necessary to complement the said project
In order to implement a change in a contract concluded between Contracting Authority
and Contractor it is required that:
Checklist 63: Conditions to implement changes in the contract
There is provision in the contract for the implementation of changes
The contracting party (e.g., the Contractor) which intends to submit a request for change
must have notified the other party of its intention before the official submission of the relevant
request
The necessity for the change as well as the consequences from failure to implement it must
be fully documented
The proposed change must be in accordance with what is provisioned in the contract (e.g., if
the contract includes provision for its extension, this extension must be within the allowed
limits)
The change requested must not change/ alter the conditions for competition that applied
during the phase of the tender procedure and evaluation of tenders of the economic
operators
The change requested must not affect negatively the value for money as this was revealed
from the tender of the Contractor and consequently the original contract
The roles and procedures for the change management have been defined (submission of
request, review of request, approval or rejection of change, implementation of change and
updating the contract)
Whatever the changes, they must not distort the initial conditions of
competition. The Project scope, the range of activities that the Contractor is called
upon to implement, the Project budget, the possibility to employ subcontractors are a few of
the elements which define the competition and formulate the final group of economic
operators that will compete for the award of the contract. If, after the award and signature of
the contract a Project component is removed from the initially agreed contract scope, which
required a particular experience on the part of the candidate Contractor, there is the
possibility that this move is considered as an alteration of the initial conditions of competition
since the remaining components of the Project would be likely to allow for the participation of
other economic operators in the tender as well.
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In addition, the Contracting Authority must be very careful with the reduction of
the range of activities to be executed in the context of a contract, since it must
ensure legally that it does not leave any room for the Contractor to state claims for liquidated
damages due to a deliberate misleading description of the volume and range of the scope to
be executed or due to creation of false expectations that were not realised. Finally, when the
Contracting Authority increases the range of the activities to be executed in the context
of a contract, it must examine and ensure on the one hand that it shall continue to receive
services, products or works with best value for money, and on the other, that the said
additions do not modify what is provisioned in the publication of announcement in the Official
Journal of the European Union and that they are not moving outside the boundaries
provisioned in the contract itself for its expansion.
The replacement of members of the Contractor's Project Team the knowledge
and experience of which were evaluated based on the qualitative selection
criteria and the names of which are stated explicitly in the contract documents, is
considered as a change and thus its management must be made by the designated (per
type of Contracting Authority) competent bodies. In a case of replacement of the members of
the Contractor's Project Team, the replacement must possess at least equivalent
qualifications and experience. Where the Contractor is unable to provide a replacement with
equivalent qualifications or/ and experience, the Contracting Authority may, either decide to
terminate the Contract if its proper execution is at risk, or if it considers that this is not valid,
to accept the replacement, provided that a modification to the Contract shall follow for the
appropriate reduction of the contract value.
6.5.1.2 Procedures to implement changes or modifications to the contract
Every Contracting Authority is required on the one hand to have instituted
change management procedures for covering the steps below, and on the other to
have assigned the relevant competencies and responsibilities to individual persons,
roles or committees:
Submission of request for change
Evaluation of the effects and impact of the change
Review and acceptance or rejection of the change
Update of contract documents
Implementation of the change
A common practice applied in change management is the review of the
requests and decision making by different bodies with escalating limits of
authority. This means that the small scale changes characterised also by a small effect on
the key parameters of the scope to be executed, are reviewed by the role or body with the
lowest authority compared to the others.
In accordance with the Regulation 115/2004 which applies for the Ministries, Departments
and Services that come under these as well as for the Independent Offices and Independent
Services of the Republic of Cyprus, the handling of changes or modifications to the contract
is carried out by the Project Manager (or the Engineer in the case of public works), the
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Departmental Committee for Variations and Claims and the Central Committee for Variations
and Claims depending on the limits of authority granted to each one of them and set forth in
the Annex 7-15.
If the request for change comes from the Contractor, it must be submitted to the
Contracting Authority at least 30 days (unless otherwise set forth in the
contract) before the modification is intented to be put into effect, except in cases that
are properly documented by the Contractor and accepted by the Contracting Authority. The
Contractor's request is reviewed by the competent body depending on the value of the
change, pursuant to the following method:
When the amount of the change or modification to the contract comes under the limits
of authority of the Project Manager (or Engineer in case of public works) (Annex 7-
15), the decision is made by the Project Manager (or the Engineer), who prepares a
documented report in accordance with the Annex 6-1
3
. The report is notified
immediately to the administrative superior of the Project Manager (or the Engineer)
and the competent Departmental Committee.
When the amount of the change or modification to the contract exceeds the limits of
authority of the Project Manager (or the Engineer) but not those of the Departmental
Committee (Annex 7-15), then the Project Manager (or the Engineer) prepares a
documented report in accordance with the Annex 6-1 for the proposed change and
sends it to the competent Departmental Committee for the decision making. The
decision of the Departmental Committee is notified to the head of the Contracting
Authority.
When the amount of change or modification to the contract exceeds the limits of
authority of the Departmental Committees the issue is studied by the Departmental
Committee and submitted along with the appropriate recommendations and
proposals and the report of the Project Manager (or the Engineer) (through the
Head of the Contracting Authority) to the Central Committee for the decision
making.
In a case where the request comes from the Contracting Authority the Project
Manager (or the Engineer) must notify the Contractor of the nature and form of
the modification that the Contracting Authority intends to promote and requires him to
submit a written proposal which will contain:
description of the service to be executed or measures to be taken and their
implementation schedule if the request for change is accepted, and
the necessary modifications in the implementation plan or in any of the obligations of
the Contractor based on the contract.
Following the receipt of the Contractor's proposal, the Project Manager (or the Engineer in
the case of a public project) sees to grant the approval of the change by the competent
bodies (as these were mentioned previously) always based on the value of the change.

3
The template of the Report of Annex 6-1 is the Annex II of the KDP 115/2004 (Regulation 20).
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Following the approval of the change or modification to the contract, the Project Manager
(or the Engineer) must inform the Contractor in order to proceed with the
implementation of the modification in accordance with the general conditions that had
been set forth in the original contract. In the case of public works for example, the Engineer
(Official representing the Office of the Chief Architect of the Department of Public Works and
has the role of Project Manager in public works) once he receives approval for the requested
modification in the nature, quality or quantity of the works through the legal procedures
mentioned previously, he is entitled to give instructions to the Contractor, so that the latter
executes any one of the following:
raise or reduce the quantity of any work included in the contract
omit a certain work included in the contract (but not when the work removed is
executed by the Contracting Authority or another economic operator)
modify the type or quality or nature of any work
modify the levels, lines, position and dimensions of any part of the project
execute additional work of any kind that is necessary to complement the project
modify any chronological order in the construction of any part of the project.
It is pointed out that the modification of the Contract is set forth in writing in an
Amendment which is drafted and governed by the same terms as those of the
original contract. Also, as long as the approved changes affect the Plans for the execution of
the contract scope (Project implementation plans), the Project Manager (or the Engineer)
and the Project Manager on the part of the Contractor must update the relevant Plans (e.g.,
Activities Schedule, Resources Plan, Cost Plan etc.).
In a case where the modification to the contract involves the supply of
complementary services (services deemed necessary to ensure the complete
functionality of the product being produced and which became necessary due to unforeseen
events), usually the Contracting Authority negotiates with the Contractor the cost of such
services. In a case, again, where the modification involves the supply of the same type
of services for additional time, the common practice is to use the same unit price to that
of the original contract readjusted depending on what is set forth in the relevant article of
the original Contract. In the case of public building and technical works any additional or
minor expenditure that arises from the modifications in their execution contract must be
estimated with the prices and unit prices of the Contract as long as in the opinion of the
Engineer such prices are applicable. If the original Contract includes prices or unit prices that
are not applicable in the modified work, then these prices may be used simply as the basis
for the estimation of the additional or minor expenditure. If this approach proves to be
unsuitable, the suitable prices and unit prices will be agreed upon following consultation of
the Engineer with the Contracting Authority and the Contractor. In a case of disagreement,
the Engineer, once he receives the concurrent opinion of the Contracting Authority, defines
such prices and unit prices which in his opinion are appropriate and notifies the Contractor
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6.5.2 6.5.2 6.5.2 6.5.2 Keeping a record of contractual documents
Parallel to the keeping of a documents' record related with the implementation of the physical
scope of the Project by the Contractor (see par. 7.6.1.3), the Contracting Authority must keep
another record which will basically refer to the contractual documents
4
, as well as all those
documents (in hard copy and electronic format) related with the contract administration. The
responsibility for the establishment and maintenance of this record lies with the Project
Manager (or the Engineer), who must additionally see to it in order to have available in the
record the last/ updated version of the documents included.
The list below presents the typical contents of the Contractual Documents Record
Checklist 64: Typical contents of the contractual documents record

Special Conditions of Contract between Contracting Authority
and Contractor

Contractor's Tender
General Conditions of Contract
Terms of Reference and Technical Specifications of the Project
Requests for changes in the Contract and relevant
recommendations

Approval of changes
Amendments to the Contract
Extensions of the Contract
Correspondence of Contracting Authority and Contractor on
contractual issues

Advance payment guarantee
Performance guarantee
Contractor's account details where the Contractor's fee is
deposited

Invoices
Payment approvals/ Certificates
Receipts of payments
Contractor's Claims and recommendations to the Departmental
Committees and the Central Committee for Variations and
Claims

Minutes of meetings for the discussion and resolution of
contractual issues

4
As Contractual documents are defined: the Agreement - Special Conditions of Contract between
Contracting Authority and Contractor, the Contractors Tender and any other relevant correspondence
between Contracting Authority and Contractor, the Annex I of the Tender Documents - General
Conditions of Contract and the Annex II of the Tender Documents - Terms of Reference - Technical
Specifications.
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Decisions related with the resolution of contractual differences
Contractor's Performance Evaluation Reports
Reports to the Management of the Contracting Authority related
with the Contractor's and the contract performance

Minutes of acceptance of deliverables of the Project
Risk Log
It is pointed out that when all of the versions of specific documents must be kept on
record (adherence to historical order), the Project Manager (or the Engineer) must
check and make sure that every version has a serial number and a date of production written
on it. This way it is easy to identify the last version or the one that is in effect each time.
6.5.3 6.5.3 6.5.3 6.5.3 Payment procedures Payment procedures Payment procedures Payment procedures
The management of payments to the Contractor and ensuring their proper handling is one of
the most important procedures taking place in the context of contract administration, and this
is because it is directly associated with the ultimate goal of public procurement which is to
acquire products, services or works with the proper quality, at the agreed time and within
the limits of the budget. The payment of the Contractor for the supply of products, provision
of services or the construction of public works constitutes an obligation of the Contracting
Authority, which arises from the terms of the contract each time. As the Contracting Authority
is expecting from the Contractor to observe his contractual obligations with respect to the
quality, quantity, and timely delivery, the same way the Contractor on his part expects from
the Contracting Authority to respond to its contractual commitment for timely and exact
payment for the products, services or works that were accepted.
Depending on the type and particularities of the contract (supply of products, provision of
services, design/ construction of works, equipment maintenance) different payment methods
and procedures are applied. For example, in the supply or service contracts it is customary to
grant an advance payment following the signature of the contract and on condition that the
Contractor produces an equal amount Advance Payment Guarantee with the balance
amount paid in one or more interim payments and repaid with the final payment following the
final acceptance of the entirety of the products or services provided. In work contracts the
grant of advance payment is made following the issue of the start order by the Engineer and
on condition that the Contractor produces an equal amount Advance Payment Guarantee.
The interim payments by the Contracting Authority to the Contractor are made on a monthly
basis following the submission of the Monthly Statements by the Contractor, their review by
the Engineer and issue by the latter of the Interim Payment Certificates. Respectively, the
Final Payment is made following the issue of the Defects Liability Certificate and following
the submission by the Contractor of the Final Statement and the written Repayment
Statement and issue by the Engineer of the Final Payment Certificate.
At any rate, the conditions and procedure for payments are described in the
Special and General Conditions of the contract each time. Also, it is pointed out
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that, excluding the advance payment, all of the other payments are associated with
respective deliveries/ acceptance (total or partial) of the supplies, services or works.
The Project Manager (or the Engineer) must necessarily understand and apply the
proper procedures for reviewing the invoices (or the statements in the case of public
works) issued by the Contractor, in order to ensure that the payments are made only if the
performance of the Contractor is in accordance with the terms and conditions of the
contract.
This is why it is recommended that, the application method of the payment
procedures be a topic for discussion between the Contracting Authority and
Contractor during the kick-off meeting that takes place with a view to explain/ clarify the
relative terms of the contract (see subchapter 6.2).
The most important competency of the Contracting Authority and more specifically the
Project Manager (or the Engineer) is the correct and thorough review of the invoices
(or the Statements respectively) issued by the Contractor before the grant of approval to
deposit the appropriate amount to the Contractor's Bank Account (or respectively, before the
Payment Certificate is issued by the Engineer). Table 6-7 includes the items on which the
Project Managers attention must be focused during the review, approval and payment
of the invoices issued by the Contract for a supply or service contract, as well as
instructions/ best practices so as to ensure that the invoices issued are consistent with the
terms and conditions of the contract, respective to the result produced and handled in a
timely manner without undue delays. Table 6-8 presents brief instructions for the issue of
Certificates and the conduct of payments in the cases of public work contracts.
Table 67: Instructions/ Best Practices for the review and approval of the Contractor's
invoices and effecting payments in cases of supply and service contracts
AUDITING INVOICES
The Project Manager must check whether the invoices respond to the progress of
Contractor's works and to the result produced. This presumes that the progress of the
Contractor's work is measurable. The expenses incurred or invoices submitted are not in
themselves reliable and adequate indices of progress in the contract scope and in no case
should they be used as such.
It is recommended that a thorough control of the first invoice is conducted in close
cooperation with the Contractor, with respect to the form and level of details of the
information that it must provide in order to facilitate the review and approval of the
subsequent invoices.
Any delays due to incorrect completion of the invoices by the Contractor may be limited by
being included in the contract or by providing, during the kick-off meeting, detailed
instructions regarding the correct completion of the invoices. These instructions may also
include a sample of a completed invoice.
The Project Manager as well as the staff of the Economics Department or Economics
Directorate in charge of the handling of payments must always check the numerical precision
of the amounts written in the invoices (e.g., decimal points in numbers, numerical operations)
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in order to avoid paying the Contractor a larger amount than the one that should actually be
paid based on the correct invoice.
The Project Manager must check that the Contractor has invoiced only the deliverables
(products, services), which have been accepted by the Contracting Authority. Also, a check
must be made to make sure that the invoice does not refer to deliverables, which have
already been paid.
In cases where the invoicing is made based on the unit price (e.g., supply of products,
charges for labour), the Project Manager must check that the unit prices written on the
invoice do not differ from the ones that have been specified in the contract. He must also
check whether the quantities written in the invoice are consistent with the ones finally
measured/ accepted.
In cases where the payments of the Contractor are made in percentage instalments (% over
the total value of the contract) the Project Manager must check that the amount written on
the invoice actually corresponds to the percentage of the specific instalment as defined in
the contract.
In cases where the payments of the Contractor are associated with the acceptance of
specific deliverables, the Project Manager must check that the specific deliverables have
been approved by the Project Steering Committee and that the invoice issued by the
Contractor corresponds to these deliverables as set forth in the contract.
In cases where the payments of the Contractor are associated with the approval of interim
progress reports, the Project Manager must check, apart from the respective report, whether
all of the deliverables that should have been submitted up to the time of submission of every
interim report have been approved.
In cases of Fee-based Contracts, the Project Manager must certify the labour charges, that
is, approve the Timesheets, by checking that the stated man-time indeed corresponds to the
actual time worked, that the people for which the timesheets are submitted are indeed the
ones stated for the implementation of the specific activities/ tasks and that the (sum) total of
the certified time up to that moment does not exceed the man-time set forth in the contract
(for more information related with the review and approval of the Timesheets see Chapter 7,
section 7.5.2.1).
In cases of Fee-based Contracts or/ and cases of Global Price Contracts where payments
are linked to the measurement of the work carried out after such work has been completed,
the Project Manager must check that the amount written on the interim payment invoices
corresponds to the man-time provided and certified or the work carried out and certified,
multiplied by the respective rate offered. In these cases, it should be checked that when
making each interim payment an amount proportional to the advance payment shall be
deducted from the amount due to the Contractor, the Advance Payment Guarantee being
reduced by the same amount.
In cases of contracts where specific categories of the Contractor's expenses are covered/
paid by the Contracting Authority following the approval of the Expense Form and production
of the respective receipts/ invoices, there must be a very careful audit conducted of the
expenses stated in order to ensure that these have not been incurred prematurely in relation
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to the planning of the respective activities, that they have been incurred within the duration of
the contract, that are related with the progress of the project and that the (sum) total of the
approved expenses for the specific category up to that moment does not exceed the amount
set forth in the contract (for more details related with the review of the Expense Forms and
their approval, see Chapter 7, section 7.5.3.1).
APPROVAL OF INVOICES
The invoice is approved and forwarded for payment by the Project Manager.
In a case where the Project Manager deems that the payment required by the Contractor
exceeds the one that corresponds to the Project progress, he may require explanations or
clarifications from the Contractor before he proceeds with the approval of the invoice.
IMPLEMENTATION OF PAYMENTS
All payments shall be implemented following the approval of the respective invoice of the
Contractor by the Contracting Authority. In cases where the contract provides for the
payment of advance payment, the Contractor must be required to produce an equal amount
Advance Payment Guarantee against it. (the Advance Payment Guarantee must be drafted
in accordance with the relevant template attached as Appendix to the Tender Documents).
The payments shall be made to the Contractor's Bank Account, which shall be notified to the
Contracting Authority upon the start of the contract using the respective form given in the
attached Annex of the standard Tender Documents.
The staff of the Financial Department or Directorate in charge of making the payments must
return a copy of the invoice paid to the Project Manager, in order to enter it into the contract
record. Keeping a payment record either manually or using a personal computer (PC),
makes it easier for the Project Manager to monitor the payments (expenses or fees) due to
the Contractor in relation to what is provisioned in the contract.
Cultivating a climate of cooperation between the Project Manager and the Financial
Department or Directorate in charge of handling the payments is one of the most important
parameters to ensure timely payments.
In cases of supply contracts or service contracts, the period of time between the time of
commencement of the Contractors right to remuneration, as such right is specified in the
respective article of the Special Conditions, and the date on which the account of the
Contracting Authority is debited, shall not exceed 45 calendar days (unless otherwise
specified in the contract). Despite that, payments must not be made prematurely without
justification (always within the period specified in the contract) unless there is a term in the
contract in accordance with which the Contracting Authority shall gain a certain benefit in
return from the Contractor (e.g., free transportation and delivery, discount due to early
payment, etc.)
The payment of the final balance is subject to the execution by the Contractor of all his
obligations based on the contract and the approval/ acceptance of the entirety of the
products or services.
The total of payments to the Contractor must not exceed the contract value.
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The Contracting Authority may withhold payments of the Contractor in cases where this is
deemed necessary to protect its interests as long as such withholdings are stated expressly
in the contract. Certain of these cases are mentioned suggestively:
There is material breach of the terms of the contract by the Contractor;
Errors or omissions in the invoices;
Expenses not supported by the appropriate receipts;
To compensate for/ restore any excess with previous payments made in the context of
the same contract;
The performance of the Contractor is deemed as non compliant or non acceptable;
The Contracting Authority may, by its written notice to the Contractor, suspend in whole or in
part, the payments owed to him according to the contract, as long as any of the following
events occurs and persists:
The Contractor defaults in the execution of the contract.
Any other condition for which the Contractor is responsible and which, in the opinion of
the Contracting Authority, interferes, or threatens to interfere, with the successful
completion of the Project or the Contract
Table 68: Instructions for issuing Certificates and implement payments in cases of public
work contracts
The Engineer must determine the form of the Statements (Interim & Final) that the
Contractor is required to submit in order to facilitate the auditing and drafting of the
respective Payment Certificates.
In cases of public work contracts with approximate quantities, the Engineer must check
that the unit prices written in the Statements do not differ from those defined based on the
contract. Also, he/she must check whether the quantities written are consistent with the ones
finally measured.
In cases of public work contracts with fixed price, without quantities, the Engineer must
check that the amount that the Contractor states in the Statements as the value of
Permanent Works that were executed corresponds to the percentage of completion of every
component of the project defined in the Analysis of Contract Value.
The Engineer must, within 35 days (unless otherwise specified in the contract) from the
receipt of the Monthly Statement, deliver to the Contracting Authority the Interim Payment
Certificate by stating the amount the he/she considers as due and payable to the Contractor
taking into account the amount of deduction provisioned in the contract (and until the amount
deducted reaches the Deducted Amount Limit
5
which is mentioned in the contract), the
amounts that have become due and payable by the Contractor to the Contracting Authority

5
One half of the Deduction Amount is certified by the Engineer for payment to the Contractor upon the
issue of the Acceptance Certificate for the entire project and the other half upon the expiration of the
Defects Liability Period.
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and the amount for the repayment of the advance payment (starting from the moment when
the certified value exceeds 30% of the Net Contract Amount).
The Engineer must not certify any amount for payment until the Performance Guarantee is
submitted by the Contractor and approved by the Contracting Authority.
The Engineer may, through any Interim Payment Certificate, correct or modify any previous
certificate issued by him.
In a case where the Engineer, during the review of the Preliminary draft of the Final
Statement disagrees or cannot verify any part thereof, he must instruct the Contractor to
provide additional information or to make changes in the preliminary draft statement in order
to achieve accord. In a case where no accord is achieved, the Engineer must issue an
Interim Payment Certificate for the parts of the Final Statement Preliminary Draft for which
there is no disagreement.
The Engineer must, within 84 days (unless otherwise specified in the contract) from the
receipt of the Final Statement and the written Repayment Statement, issue the Final
Payment Certificate.
The amount due the Contractor based on any Interim Payment Certificate issued by the
Engineer must be paid by the Contracting Authority within 28 days from the delivery of this
certificate to the Contracting Authority, or in the case of the Final Payment Certificate, within
56 days from delivery (unless otherwise specified in the contract).
Delayed Payments
The prompt payment of the amounts due to the Contractor is an important factor for the
completion of the contract within the budget, as following the expiration of the deadlines
provisioned in the contract for the implementation of payments, the Contractor may claim
payment of interests. In the following paragraphs there is a presentation of the procedures to
implement delayed payments in the cases of supply or service contracts and in the case of
public work contracts, as well as the conditions under which the Contractor is entitled to
claim payment of interests.
Supply or service contracts
In a case where any part of the invoiced amount is questioned by the Project
Manager, the countdown toward the expiration of the deadline of 45 days stops
(or of any period defined in the contract) and the Contractor is notified that this part of the
invoice is not acceptable, either because the said amount is not payable, or because the
relevant deliverables or relevant report cannot be approved and the Contracting Authority
deems necessary to conduct further inspections. In such cases, the Contracting Authority
must not withhold without due reason any non questioned part of the invoiced
amount, but it may require clarifications, modifications or additional information, which must
be provided by the Contractor within 30 days from the relevant request (unless otherwise set
forth in the contract). The countdown toward the expiration of the deadline shall expire on the
date on which the Contracting Authority shall receive a correctly stated invoice.
Within two months (unless otherwise specified in the contract) from the
expiration of the above deadline for payment of the delayed payment, the
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Contractor may claim interest over the delayed payment with the default rate set forth
by the Minister of Finance by his decree based on the "Uniform Public Default Rate
Law of 2006"

Public work contracts
For every amount included in a Payment Certificate that the Contracting Authority
fails to pay to the Contractor within the deadlines specified in the contract (e.g., 28
days for the Interim Payment Certificates and 56 days for the Final Payment Certificate), the
Contracting Authority is required to pay the Contractor default interest, with the interest
rate defined each time by the Minister of Finance or other competent administrative agent.
The obligation of the Contracting Authority for payment of interests is limited
only to the case of failure to pay certified amounts and presumes the
existence of liability.
The Contractor is entitled to claim the payment of interests when the following conditions are
met:
non inclusion in a Payment Certificate of the value of the executed work due to omission
to measure the entire quantity of the work executed, or
non inclusion in Payment Certificate of the value of executed work due to delay in the
determination of the proper unit price, or
non inclusion in Payment Certificate of an amount against claims of the Contractor which
is finally decided to be paid to the Contractor and which at an earlier time had been
rejected by the Engineer.
The proper starting time for the interest calculation period is the earlier day on which the
principal amount could become payable, considering a reasonable period to review the claim
of the Contractor and the time determined in the Contract for the certification of the amount
by the Engineer and payment of the certificate by the Contracting Authority. It is pointed out
that the submission of claim/ notification by the Contractor and his compliance with the
service of any other notices constitutes a prerequisite for the start of the interest calculation
period.
6.5.4 6.5.4 6.5.4 6.5.4 Claims management Claims management Claims management Claims management
Claims may, theoretically, be submitted during the execution of the Contract by the
Contractor or Contracting Authority, however the most common case is that of the
submission of a claim for additional remuneration by the Contractor of a public work project
due to the fact that the actual conditions of project execution were found to be different than
those described in the Tender Documents - Terms of Reference. A characteristic example is
the case in which the Tender Documents and the Contract provided for the excavation and
removal by the Contractor of e.g., 600m
3
of rock while in practice the under soil was
exceptionally rocky and required the use of special machinery for the excavation and
removal of 120.000m
3
of rock.
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The list below includes a presentation of the main reasons for which the Contractor
may raise a claim for additional remuneration
6
.
Checklist 65: Main reasons for which the Contractor may raise claim for additional
remuneration
The Engineer fails to promptly deliver to the Contractor drawings that are necessary to start
the construction work or critical instructions for the execution thereof resulting in causing
delays and cost to the Contractor;
The requirements of the Contracting Authority contained errors which were impossible to
identify earlier than the time when the Contractor actually identified them;
The Contracting Authority cannot ensure access for the Contractor to the site where he will
implement the Project within the period or on the date specified in the Contract;
The Contractor is dealing with physical conditions that were impossible to anticipate during
the drafting of the Tender Documents and the Contract;
The Contractor of a public work project locates, during the execution of excavations, fossils,
coins, documents or other items of geological or archaeological interest and is called upon by
the Engineer to handle the issue and to protect the findings from damage
The testing of materials, mechanical equipment and works of the Contractor of a public work
project is delayed due to liability of the Contracting Authority;
The Engineer instructs the Contractor to suspend the progress of the Project being executed;
The Contracting Authority removes work volume from the Contract scope of the Contractor
with a view to implement them by own means or another Economic Operator;
The Contracting Authority delays with the check of completion of the contract and in fact, of a
public work project;
The Contractor of a public work project is called upon by the Engineer to investigate the
cause of a defect for which he is not responsible;
A Law, Regulation or other Administrative Act is promulgated or amended resulting in causing
an increase in the expenses of the Contractor for the execution of the Contract;
The public work or any materials or mechanical equipment on or near the construction site or
on the way to the construction site suffer destruction or damage due to manifestation of one
of the special risks (as these are set forth in the model contracts for public works);
The public work or any part thereof or the mechanical equipment or materials that will be
incorporated in it, suffer loss or damage which is due to the special risks of the Contracting
Authority or combined with other risks. The Contractor restores this damage or loss following

6
The Contractor is entitled to make a claim for the extension of the term of completion of the Project
that he has undertaken through the contract when for reasons that are not due to his performance and
working method the completion of the Project within the time prescribed in the contract becomes
impossible. However, the claim for extension is considered and presented in this Guide as a request
to change the contractual term of execution of the Project and thereby it is covered in Paragraph 6.5.1.
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the instruction of the Engineer and claims the amount for such restoration;
The Contracting Authority fails to fulfil its obligations as these are set forth related with the
insurance for damages to people and property (case of a public work project);
Following the issue of the Acceptance Letter conditions arise beyond the control of the
Contractor and the Contracting Authority, which render impossible or illegal for any one or for
both parties the fulfillment of their contractual obligations. In this case the Contractor may
claim his payment for the work that has been executed.
The Contract is terminated due to liability of the Contracting Authority and the Contractor
raises a claim for an additional amount covering the loss or damage to the Contractor due to
the termination of the Contract.
The Contractor of a public work project suspends his works or lowers the rate of the works
and incurs additional expenses (provided there is a relative provision in the specific contract)
For the Contractor to be able to claim additional payment he is required to
provide the Engineer with a notice of his intention, with copy to the Contracting
Authority, within 28 days (unless otherwise specified in the contract) from the moment of
the first occurrence of the event on which such claim is based. Furthermore, from that
moment on the Contractor is required to keep continuously all of the evidence that are
necessary to document the claim that he wishes to submit subsequently.
The Engineer immediately following the notice of the Contractor and without this
meaning that the Contracting Authority acknowledges its responsibility, is required
to inspect the evidence that the Contractor is collecting and maintains and possibly
indicate additional information that must be kept and submitted as evidence and
documentation material of the claim. Within a period of 28 days from the moment that the
Contractor gave notice to the Engineer (or within a different equally reasonable period to
be agreed between Contractor and Engineer) the Contractor is required to submit a
Report with fully documented evidence for the amount claimed and for the basis of his
claim. If the event on which the claim was based has subsequent results, then this Report
shall be considered as interim and the Contractor is required to submit further interim reports
which will include a summation of the amounts claimed and any additional documentation to
support the claim. In these cases, the Final Report must be submitted to the Engineer within
28 days after the end of the event that caused the claim.
The Project Manager (or Engineer in the case of public works) is not required
to examine the claim of the Contractor when such claim has not been
submitted pursuant to the terms of the Contract. However, should he deem that the
specific claim must be examined, the final amount which may be approved for the Contractor
must be less than the amount which would have resulted if the Contractor had followed what
is set forth in the contract and therefore the Contracting Authority had promptly proceeded
with actions to reduce its costs.
The claims must be examined by the competent physical persons, roles or
bodies as these are defined in the Regulations which every Contracting
Authority is required to abide by. In the case where the Contracting Authority is a
Ministry, Department or Service that belongs to a Ministry or Independent Office or
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Independent Service of the Republic of Cyprus, the decisions on claims are made
depending on the total of the claim by the same bodies who make decisions related with the
requests for modifications of the contract, that is, the Project Manager (or the Engineer),
Departmental Committee for Variations and Claims and Central Committee for
Variations and Claims (Regulation 115/2004).
The claim of the Contractor may be accepted in whole as long as he has submitted
sufficient evidence of justification. In this case he is entitled to include the approved
amount in any of his interim payments, which is certified by the Project Manager (or the
Engineer). In a case where the documents are not sufficient to document the claim of
the Contractor in its entirety, the Project Manager (or the Engineer) is obliged to
evaluate the part of the claim that is substantiated by the evidence submitted and
certify the amount due, informing the Contractor either of the final rejection of the entire or
other part of the claim or to submit further evidence in order to evaluate it.

If the Contractor submits complete evidence of justification and the Project Manager
(or the Engineer):
Fails to examine the claim within a reasonable period and include the amount in an
interim payment certificate which will be considered as due to the Contractor;
Fails to notify, within a reasonable period, the Contractor about the additional
evidence that must be submitted;
or if the Contractor submits evidence which, even incomplete, may substantiate a certain
payment against but the Project Manager (or the Engineer) omits to determine this payment
within a reasonable time,
then the Contractor is entitled to interest (from the lapse of the reasonable period) for the
amount which will finally be accepted that he is entitled to receive.
Indicative cases in which the Contracting Authority may have a claim against
the Contractor of a public work are the following:
The Contractor fails to effect or to maintain the effect of insurance for damages to
people or property (manufacturer's risk) provisioned in the Contract and the
Contracting Authority undertakes to do it itself by paying the required premium.
The Contracting Authority can then claim this amount from the Contractor.
The Contracting Authority incurs expenses in cases of rechecking of the materials
and mechanical equipment of the Contractor that were found to have defects or
not to comply with the specifications and requirements of the Contract. The
Contracting Authority may claim such expenses from the Contractor, which means
that it will require that these are deducted from the amounts owed to the
Contractor.
A common case in which the Contracting Authority makes a claim against a
Supplier is the case where the Acceptance Committee for specific products
considers that the products show deviations from the specifications which however
are not essential in order to affect their use, and proposes the acceptance of the
supplies at a reduced price. In such a case the Acceptance Committee must record the
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events and its proposal for the acceptance of the products at a reduced price in a special
Report which it must refer to the competent body (pursuant to the Regulations applicable for
decisions on claims per type of Contracting Authority) for the final decision. The decision of
the competent Body must be notified to the Acceptance Committee which will then have to
issue, depending on the decision, the Acceptance or Rejection Certificate.
6.5.5 6.5.5 6.5.5 6.5.5 Assets management Assets management Assets management Assets management
In certain cases the Terms of Reference provide for the supply of Assets of the Contracting
Authority for use by the Contractor in the context of contract execution. The two basic
categories of assets that may, as long as provisioned in the contract, be used by the
Contractor during the execution of his works are the following:
Infrastructures (e.g., space to install the Project Office of the Contractor, rooms to
conduct training seminars, etc.)
Machinery & Equipment (e.g., personal computers (PC), photocopiers, vehicles,
machines and special tools, etc.)
The daily management of the assets of the Contracting Authority, which are
provided in the context of execution of a contract is conducted by the Contractor.
However, the Contracting Authority remains responsible for its assets. More specifically, the
Project Manager has the responsibility to ensure that:
Table 69: Information to ensure the proper management of assets of the Contracting
Authority
the Contractor's staff has sufficient and uninterrupted access to the infrastructures,
machinery and equipment which, based on the contract, are conceded for use to the
Contractor;
the assets are kept in smooth and proper operating condition throughout the duration of their
use by the Contractor;
the assets are returned by the Contractor to the Contracting Authority in the condition in
which they were received;
any records of the assets are kept updated (e.g., equipment and machinery maintenance
logs, record for the entry of machine operation information, etc.);
any use of such assets by a third party (that is, outside the staff of the Contractor and
Contracting Authority) is monitored and recorded;
any infrastructure upgrades and replacements of machinery and equipment (or parts thereof)
are pre-planned and have been included in the Project budget;

Even in a case where the Contractor is not using assets of the Contracting
Authority for the implementation of the contract but he is based solely in the use of
his own infrastructures, machinery and equipment, the Contracting Authority, through the
Project Manager, is required to check and ensure:
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The suitability of the equipment and machinery in order to enable the Contractor to
execute the works or provide his services based on the contract specifications;
that the use of any infrastructures, machinery and equipment of the Contractor does
not cause any negative effects on the environment as well as on the health and
safety of the employees;
that following the completion of the Project, within a reasonable period of time, all
machinery or equipment of the Contractor have been removed and the construction
site has been cleaned and is in order.
6.5.6 6.5.6 6.5.6 6.5.6 Management Reporting Management Reporting Management Reporting Management Reporting
The Management Reporting procedure ensures that the information related with the
appearance of a problem in the execution of the contract reaches timely those who
have the power to act accordingly by taking immediate measures. For example, when
the performance of the Contractor is deemed by the Project Manager (or the Engineer) as
non satisfactory, the Management of the Contracting Authority must be notified in order to
decide whether to propose the forfeiture of the right of participation of the specific Contractor
in future tenders for public contracts (see Paragraph 6.6.1).
In the context of contract administration, the Project Manager (or the Engineer) has
the responsibility to inform the main stakeholders (Project Steering Committee, Senior
Management of the Contracting Authority, Project Owner, and Funding Agency) about the
progress of implementation of the Project and the performance of the Contractor. To this
end, he/she regularly drafts (usually every quarter or six-month period depending on the
duration and particularities of the contract) Project Status Reports which include the
presentation of a general picture of Project progress during the reference period and issues
are raised which require immediate decision making to be resolved. In order to draft these
Reports, the Project Manager (or the Engineer) uses the information he collects from
the Contractor through the Progress Reports that the latter submits regularly in the
periods set forth in the contract
It is pointed out that for the Progress Reports as well as the Project Status
Reports to be useful, the data they include must be presented in such a way
that it allows for comparisons with what is described in the contract. The Project
Status Reports must reflect all of the modifications in the contract, as well as any changes
agreed with the Contractor in writing. For example, if during the reporting period a change in
the duration of a certain activity is deemed necessary and agreed upon, this must be clearly
reflected in the implementation schedule which will be included in the Report. This of course
does not mean that the agreed changes must also be accompanied by a revision of the
baseline schedule, because this way the implementation schedule will be constantly
changing and the Project Status Report will not reflect the actual picture.
In cases of low risk contracts, during the execution of which there is no particular
information required to monitor the performance of the Contractor, the reports to the
Management may be made in the form of "exception reports" when a certain deviation is
observed from the provisioned performance of the Contractor.
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Note that in cases where monitoring the execution of the contract and
performance of the Contractor are assigned, by the Contracting Authority, to
another economic operator, then this operator shall have the responsibility to
prepare the respective Reports and keep the Contracting Authority informed about the
status of the Project. This practice is one that is frequently applied in construction projects
(building or civil engineering works).
More detailed information and indicative contents of the Progress Reports and
Project Status Reports as well as a template of the latter are presented in Chapter 7
"Project Management" (section 7.5.9 "Communication Management," 7.5.9.2).
6.5.7 6.5.7 6.5.7 6.5.7 Contract Termination Contract Termination Contract Termination Contract Termination
The term contract termination refers to the premature termination of the contract
between Contracting Authority and Contractor, that is the final suspension of the
contract before the entirety of its scope is completed and before the official expiration date
set forth in it has lapsed. The cases and the reasons for which a contract may be
terminated as well as the obligations of the two parties, both during the termination
procedure as well as following it, are explicitly set forth in the terms of the contract
each time. In the following subsections there is a description of the common cases of
contract termination, as these are defined in the model contracts for services, supplies and
works, as well as the actions required for the termination of a contract as well as those
required following the termination.
6.5.7.1 Cases of contract termination
A contract may be terminated:
automatically
7
, if, it has not given rise to any payment within a period of one year
after its signature by both parties.
by the Contracting Authority when the reasons stated in Table 6-10 are conducive;
by the Contractor when the reasons stated in Table 6-11 are conducive;
It is noted that at any rate, the termination shall be made without effect on any rights
or authorities of the Contracting Authority as well as of the Contractor, by the force of
the contract.
Table 610: Reasons for which the Contracting Authority may terminate the contract

7
A contract may also be automatically terminated in a case where the Contractor is a physical person
and this person passes away. However, the Contracting Authority shall examine any proposal made
by that persons heirs or beneficiaries, should they express their wish, within fifteen (15) days of the
date of decease, to continue the Contract. The decision of the Contracting Authority shall be notified to
the parties concerned within thirty (30) days of receipt of the said proposal.
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The Contractor fails substantially to fulfil its contractual obligations.
The Contractor does not comply within a reasonable time with the notice given by the
Project Manager (or Engineer in the case of public works), whereby the Contractor is
requested to make good every negligence or failure to perform its contractual
obligations which seriously affects the proper execution of the Contract within the
deadlines prescribed.
The Contractor refuses or neglects to carry out Orders given by the Project Manager.
The Contractor assigns the Contract or subcontracts a part thereof or replaces
subcontractors without the authorisation of the Contracting Authority.
The Contractor becomes bankrupt or is being wound up, is having its affairs
administered by the Courts, enters into an arrangement with creditors, has suspended
business activities, is the subject of proceedings concerning similar matters, or is in
any analogous situation arising from a similar procedure provided for by the national
legislation and/or regulations.
The Contractor has been convicted of an offence concerning its professional conduct
by a judgment which has the force of res judicata.
The Contractor has been guilty of grave professional misconduct, which may be
proven by any means which the Contracting Authority can justify.
The Contractor has been the subject of a judgment which has the force of res judicata
for fraud, corruption, involvement in a criminal organisation or any other illegal activity
detrimental to the financial interests of the European Union and the Republic of
Cyprus.
The Contractor undergoes organisational modifications involving a change of its legal
form or of its nature, unless such modification has been recorded in an Addendum to
the Contract.
It is found that the Contractor employs or is exploiting minors under the age of 15, in
violation of articles 138 and 182 of the International Labour Convention.
Any other legal disability hindering execution of the Contract occurs.

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Table 611: Reasons for which the Contractor may terminate the contract
The Contracting Authority fails to pay the Contractor the amounts due based on the certificate
issued by the Project Manager (or the Engineer) following the expiration of the deadline set
forth in the contract (e.g., in the case of service or supply contracts: 2 months following the
expiration of the deadline for payment of the overdue payment, in the case of public work
contracts: 56 days following the lapse of the time mentioned in the contract as the deadline
for making the payment)
The Contracting Authority without reason intervenes or obstructs or refuses any approval
required for the issue of any payment certificate.
The Contracting Authority in constantly unable to fulfill its contractual obligations following
repeated reminders.
The Contracting Authority suspends the progress of services/ deliveries or any part thereof, for
more than one hundred and twenty (120) days (unless if otherwise set forth in the contract), for
reasons which are not mentioned in the Contract or for which the Contractor is not responsible.
The Contracting Authority refuses to serve notice to the Contractor that due to unforeseen
financial reasons it is impossible for him to continue his contractual obligations.
None of the contracting parties must be considered as unable to fulfill its
contractual obligations (and hence there are grounds for termination of the
contract), if the fulfillment of these obligations is inhibited by any event of force
majeure
8
, which arises following the date of signature of the Contract. For the Contractor to
be entitled to invoke force majeure, he is required to, within 20 days (unless otherwise set
forth in the contract) from when the events constituting force majeure occurred, report these
in writing and produce, if required, to the Contracting Authority the required evidence of
proof. The Contracting Authority is required to answer within 30 days (unless otherwise set
forth in the contract) from when the aforementioned report of the Contractor was devolved to
it. If the Contracting Authority fails to answer within the above period of time, the said event
of force majeure shall be considered to have been accepted. In a case where the Contracting
Authority invokes force majeure, it is required to notify the Contractor within 20 days (unless
otherwise set forth in the contract) from when the events constituting force majeure occurred.
In a case where the force majeure affects the works of the Contractor, the Contracting
Authority must suspend the execution of such works.
It is stressed that the Contracting Authority is not required to terminate the
contract even if one of the reasons mentioned in Table 6-10 is conducive to it. It

8
"Force Majeure" means acts of God, strikes (except if these are limited to the persons in the
Contractors employment), lock-outs or other industrial disturbances, hostilities, wars (whether
declared or not), blockades, insurrection, riots, epidemics, landslides, earthquakes, storms, lightning,
floods, washouts, civil disturbances, explosions and any other similar unforeseeable events which are
beyond the control of the parties, are occurring in the territory of the Republic of Cyprus over which
Government exercises effective control or in the place where the Contractor is established, and cannot
be overcome by due diligence by either party.
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must first examine alternative ways for the compliance of the Contractor, such as for
example, possible extension of the deadline for the submission of a deliverable, as long as
such extension does not affect the completion date of the Project. This will give the
Contracting Authority the possibility, if it so desires, to continue its cooperation with the
specific Contractor.
In general, the termination of the contract due to the Contractor's failure to comply
with the contract requirements must be the last solution and should not be
construed as a form of penalty towards the Contractor. In this framework the Contracting
Authority must, once it identifies a certain non compliance of the Contractor and before
proceeding with the termination of the contract, make an effort to answer the following
questions:
Checklist 66: Questions that must be answered before deciding to terminate the contract
Has every possible effort been put forward, in order to assist the Contractor with resolving the
non compliance?
Have the terms of the contract been examined/ reviewed and the relevant legislation in order
to ensure the legality of terminating the contract?
Does the Contractor document/ justify in a convincing manner the appearance of the specific
non compliance?
How urgent is the need for the supply of the specific products or provision of the specific
services or the construction of the specific project? (the Contracting Authority must weigh out
the benefits/ advantages against the cost/ disadvantages in the case of continuing the
cooperation with the existing Contractor as well as in the case of conducting a new tender to
select another Contractor.)
Is there availability of the specific products or possibility to provide the services or capability to
construct the project by other economic operators and if yes, how much time is required to
acquire them (compared to the additional time required by the existing Contractor to complete
his works)?
Are the necessary funds or necessary resources available to repeat the tender procedure in a
case where such expenses cannot be recovered by the existing Contractor? (It is noted that,
when provisioned in the Contract, the Contracting Authority is entitled to claim liquidated
damages from the Contractor to cover the expenses for the re-announcement of the tender.
However, it is possible that the financial status of the Contractor does not allow him to do this,
in which case the Contracting Authority must take legal action against him.)
6.5.7.2 Actions for terminating the contract
Before the termination of the contract by the Contracting Authority, the Project
Manager (or the Engineer) must draft and send notice to the Contractor affording him a
term (e.g., 7 days in the case of supplies and service contract or 14 days in the case of a
public work contract) within which it shall invite him to comply and restore every negligence
or inability to fulfil his contractual obligations.
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The Table below includes the presentation of two alternative wordings which may be
used as templates to draft the Provisional Notice for Termination depending on the
case and the reason for which the Contracting Authority intends to terminate the
contract.
Table 612: Templates for drafting the Provisional Notice for Termination
1st Alternative wording
The <name of Contracting Authority> notifies the <company name or full name of Contractor>
that it considers the <reason of non compliance> as a condition which jeopardises the
performance of the contract. For this reason, should this condition have not been corrected within
<> days from the receipt of the letter hereby, then the <name of Contracting Authority> may
proceed with the termination of the contract hereby, invoking the terms and conditions mentioned in
the Article "Termination by the Contracting Authority," of the contract hereby.

2nd Alternative wording
Due to failure in the execution of the as above mentioned contract within the time required by the
terms of the contract, the Contracting Authority is considering the possibility to terminate the
contract in accordance with what is provisioned in the contract about non compliance. With the final
decision on the issue pending, it is necessary to determine whether the said failure of execution was
due to causes beyond your control and with no liability or responsibility on your part. Therefore, you
are given the possibility to submit in writing any evidence on this issue to <full name of Project
Manager> within <......> days from the receipt of the letter hereby. Failure to present any
justification within this period of time shall be considered as acceptance of the fact that there are no
excuses.
It is noted that, any facility that may be provided to you in the context of the contract or any
acceptance by the <name of Contracting Authority> of non compliant product or service or work,
shall be implemented with the sole purpose of alleviating the damages and the <name of
Contracting Authority> does not intend to tolerate any non compliance or waive any of its/ his
rights provided based on the contract.
Upon the lapse of the term of 7 or 14 days or as many days as specified in the contract and if
the Contractor has failed to settle the situation or failed to provide satisfactory explanation as
required during the notice, the contract may be terminated.
The Project Manager (or the Engineer) drafts, on behalf of the Contracting Authority,
the contract Termination Notice which he notifies to the Contractor.

The Termination Notice must include the following information:
Table 613: Typical Contents of the Contract Termination Notice
Reference number (code) of the contract and date of signature of the contract
Date on which the termination of the contract is put into effect
Reference to the term or terms based on which the contract is terminated
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Complete and precise statement of the evidence justifying the termination
Statement that the contract being terminated may be re-announced from the beginning and
that the Contractor is considered liable for the additional costs that the Contracting Authority
will incur in order to conduct a new tender. (Before this statement is drafted it must be
examined whether the contract provides this right to the Contracting Authority)
6.5.7.3 Actions following termination of the contract
After the termination of the contract, the Contracting Authority has the possibility to either
complete itself the scope of the contract (case of service or public work contracts), or to
conclude any other contract with a third party for the execution/ completion of the contract
scope, with the Contractor covering any possible difference in the price. In a case where the
Contractor is a consortium of physical and/ or legal entities and one or more of the
reasons for terminating the contract which are given in the Table 6-10 refers to one of
the members of the consortium, the other members of the consortium, as being
responsible in solidarity, are required to complete the implementation of the contract
scope without differentiation with regard to the contractual obligations of the Contractor.
At any rate, the Contracting Authority reserves the right to terminate the contract if the
member of the consortium for which the reasons for exclusion apply is the leader of
the consortium or if the participation percentage of this member creates grounds to
suspect inability to fulfill the contractual obligations by the other members.
It is noted that especially in the case of public work contracts, the Contracting
Authority or the new Contractor are entitled to use in the completion of the Project
part of the machinery of the Contractor, Temporary Works and materials they deem suitable.
Furthermore, as long as not prohibited by law, the outgoing Contractor is required, if
instructed by the Engineer within 14 days (unless otherwise specified in the contract) from
the entry to the construction site and solution of the contract, to assign to the Contracting
Authority the privileges of any agreement which he had concluded for the supply of goods or
materials or services or/ and the execution of any work for the purposes of the contract.
Upon the contract termination by the Contracting Authority, the Contractor ceases to
have any responsibility for delay with the completion of the Project, without this meaning that
he is relieved of any responsibilities that may had resulted before the solution of the contract.
In the case of termination due to inability or non satisfactory performance of the
Contractor in the execution of the contract, the Contractor may be devoid of the right
to participate in future tenders, either permanently or for a specified period of time,
pursuant to what is provisioned in the Regulation 25 of the KDP 115/2004 for the Contracting
Authorities that are Ministries, Departments or Services belonging to a Ministry or
Independent Office or Independent Service of the Republic of Cyprus or the respective
specified procedures for the other Contracting Authorities (for more information see
paragraph 6.6.1).
In addition, in case of termination of the contract by the Contracting Authority, the
latter must proceed with the forfeiture of the Performance Guarantee. If the
damage incurred by the Contracting Authority exceeds the amount of the aforementioned
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guarantee, then the Contracting Authority reserves the right to take legal or other measures
that deems necessary against the Contractor for the restoration of the situation.
As soon as possible after the termination of the contract, the Project Manager (or the
Engineer in the case of public works) must certify the value of the services provided
or products delivered or works executed and all of the amounts due to the Contractor up to
the termination date. The Contracting Authority is not required to proceed with any further
payments to the Contractor until the completion of the services or delivery of the products or,
in the case of public work contracts, until the expiration of the Defects Liability Period and,
following this, until the expenses for the execution, completion and repair of the defects, the
liquidated damages or penalties for delay in completion and all of the expenses incurred by
the Contracting Authority have been ascertained and the respective amount has been
certified by the Project Manager (or the Engineer). Following their completion, the
Contracting Authority is entitled to recover from the Contractor additional costs, if any, which
will arise for the completion of the services or deliveries or works and, once these are offset
against the amount due the Contractor, pay to him or require from him the amount of the
difference.
Also, in a case where the Contracting Authority terminates the contract, it is
entitled to recover from the Contractor any damage it has incurred up to the
maximum amount specified in the contract. If the maximum amount is not specified, the
Contracting Authority, without prejudice of the other remedies provisioned by the contract, is
entitled to recover the part of the contract value that is ascribed to this part of services/
supplies/ works which have not been, due to omission of the Contractor, completed
satisfactorily. On the other hand, the Contractor is not entitled to claim, beyond the
amounts due to him for the work which has already been executed, compensation for
any damage or loss he incurred, unless otherwise specified in the contract.
In a case though of termination of the contract by the Contractor, the Contracting
Authority is required to compensate the Contractor for any loss or damage that
he may incurred. This additional payment cannot be such that the total payments exceed
the contract value.
When a contract is terminated without achieving the acceptance of its deliverables
(e.g., due to non satisfactory performance of the Contractor), the Contracting
Authority must examine the possibility of re-announcing the Tender. In this framework,
on the one hand the needs identified originally and which would be covered by the said
contract must be reviewed and on the other, identify any new additional needs or
requirements. The Contractor's performance problems, any gaps in the contract that had
been signed and all of the experience gained from the mistakes in contract management
must be considered seriously during the preparation of the Documents for the new Tender as
well as during the management of the new contract with the new Contractor in order to avoid
repeating them.
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6.6 6.6 6.6 6.6 M MM MONITORING THE ONITORING THE ONITORING THE ONITORING THE C CC CONTRACTOR ONTRACTOR ONTRACTOR ONTRACTOR & && & A AA ACCEPTANCE CCEPTANCE CCEPTANCE CCEPTANCE M MM MANAGEMENT ANAGEMENT ANAGEMENT ANAGEMENT
The present section examines the procedures for monitoring and evaluating the Contractor's
performance, imposing penalties in case of delays in the completion of the Project,
acceptance of supplies and acceptance of deliverables from service contracts and public
works as well as management of the risks appearing during the execution and management
of the contract. It is pointed out that the sub chapter hereby is directly associated with the
sub chapter 7.5, since that one provides guidance regarding the monitoring and control of
Project implementation. In complement, then, to those instructions which are applicable
whether the project is executed by own resources or by a Contractor, the issues presented or
analysed here to a greater extent are those that are directly associated with the fact of a
contract with an economic operator as well as with the provisions that such a contract should
include.
6.6.1 6.6.1 6.6.1 6.6.1 Evaluation of Evaluation of Evaluation of Evaluation of the Contractors performance the Contractors performance the Contractors performance the Contractors performance
Throughout the duration of execution of the contract the Project Manager (or the Engineer)
must monitor and control the Contractor's performance, that is, whether the Contractor is
executing his works based on the terms of the contract and Plans that were developed and
agreed upon with the Contracting Authority during the planning phase of the Project.
More specifically, the Project Manager (or the Engineer), in order to evaluate the
Contractor's performance, must check that the Contractor:
observes the agreed baseline schedule or any approved revisions thereof;
uses the proper resources which he had included in his tender and Resource Plan;
refrains from making and claiming liquidated damages for expenses that are not
provisioned in the contract and not covered by the Project budget;
observes the agreed Quality Plan and performs the proper quality controls of his
deliverables that are specified in it;
applies the procedures provisioned in the Issue Management Plan to settle issues
arising during the execution of the contract;
sees to the observance of the Change Management Plan and the enforcement of the
applicable procedures in each case;
enforces the procedures provisioned in the Risk Management Plan to identify, assess
and handle the risks that may appear during the execution of the contract;
implements the provisioned communications based on the Communication Plan and
submits the Progress Reports provisioned in the contract;
Though the Contractor's performance evaluation is an ongoing process, which takes
place throughout the duration of the contract, it is recommended that a Contractor's
Performance Evaluation Report is drafted once all of the contractual obligations of the
latter have been completed so that the Contracting Authority have gained a more complete
picture that will help it in formulating a more objective judgement. This Report may be
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prepared for all contracts irrespective of value or only for those with value above a limit, as
well as it may be drafted only by the Project Manager (or the Engineer) or by a competent
Committee based on what is provisioned in the Regulations which every Contracting
Authority is required to apply
9
.
This Report includes the presentation of the results of the Contractor's evaluation
against specific criteria which reflect his compliance with the terms and requirements
of the contract. The Tables below present the basic criteria for the performance evaluation of
the Contractor in the cases of supply contracts, general services contracts, engineering
consulting services contracts and public work contracts. Templates of the Performance
Evaluation Reports for a Contractor of a supply contract, service contract, public
works contract and engineering consulting services contract are given in Annexes 6-
2, 6-3, 6-4, and 6-5
10
respectively.
Table 614: Contractors Performance Evaluation Criteria in a supply contract
Timely delivery
Response of the products to the quantitative and qualitative requirements described in the
contract
Delivery services (transportation, packaging) - Suitability and adequacy of technical means of
support
Cooperation with Contracting Authority
Provision of certificates
Submission of documented request for extension of contractual time
Breach of other terms of the Contract by the Contractor
Table 615: Contractors Performance Evaluation Criteria in a service contract
Quality of deliverables (e.g., completeness, practicality, clarity, expandability, user friendly,
parameterising) or service rendered (e.g., reliability, functionality, safety, environmentally
friendly, end user satisfaction, timely provision, etc.)

9
It is pointed out that the Contracting Authorities obeying the K.D.P. 115/2004 (i.e. Ministries or
Departments or Services that come under them or Independent Offices or Independent Services of the
Republic of Cyprus), are required to prepare a Contractors Performance Evaluation Report for
the public work contracts and supply contracts valued beyond 100,000 each and for service
contracts irrespective of value. The Evaluation Report is prepared by the competent Committee
appointed by the Director of the Contracting Authority and drafted upon the acceptance of the works,
supplies or services. The Report is notified to the Public Procurement Directorate and Auditor General
of the Republic.
10
The template of the Reports of the Annexes 6-4 and 6-5 are the respective Annexes II and III
of the Circular 1593/2005 issued by the Central Committee for Variations and Claims. The template
of Reports of the Annexes 6-2 and 6-3 were prepared in respect of the aforementioned for the
purposes of this Guide.
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Organisation and function of project team - Staff suitability, adequacy and behaviour
Cooperation and communication with Contracting Authority and the other stakeholders
Effectiveness in Project management
Planning and achievement of time goals
Suitability and adequacy of technical means of support
Submission of documented request for time extension
Breach of other terms of the Contract by the Contractor
Table 616: Contractors Performance Evaluation Criteria in a public works contract
Quality of materials based on laboratory testing and measurements of the technical
specifications of the contract
Response of Contractor to the Engineer's and supervisors' written instructions
Response/ compliance of the Contractor to the provisions of the contract regarding the
management of safety issues for the personnel and passers by/ visitors
Timely completion of the contract
Organisation and planning
Suitability and adequacy of personnel
Suitability and adequacy of mechanical equipment
Cooperation and coordination with subcontractors
Submission of documented requests for time extension and observance of deadlines when
submitting claims with respect to the terms of the contract.
Submission of documented and non exaggerated claims for liquidated damages
Submission of provisional and final statement based on the terms of the contract (time and
completeness of information)
Breach of other terms of the contract by the Contractor
Table 617: Contractors Performance Evaluation Criteria in an Engineering Consulting
Services contract
Completeness, compatibility with legislation and relevant standards, applicability/ feasibility,
precision and correctness of design elements
Response/ compliance of Contractor with Engineer's written instructions
Timely completion of the contract
Organisation and planning
Suitability and adequacy of personnel
Suitability and adequacy of office equipment
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Cooperation and coordination with the Services
Submission of documented requests for time extension and observance of deadlines when
submitting the claims
Submission of documented and non exaggerated claims for liquidated damages
Breach of other terms of the contract by the Contractor
Irrespective of the Contractor Performance Evaluation Report that is prepared upon
the closure of the contract, the Contracting Authority must prepare a special
report in every case where an omission or failure of the Contractor to fulfil his
contractual obligations is ascertained. This report must be sent to the Public Procurement
Directorate and notified to the General Director of the Ministry of Finance. Parallel to this
information, the Contracting Authority must immediately proceed with the forfeiture of the
Performance Guarantee
11
.
It is noted that in certain countries, like for example the United Kingdom, the
Contracting Authorities are employing the technique of benchmarking to compare
between different contractors with a view to continuously maintaining the best value for
money, ensuring better performance and improving the existing business practices.
Benchmarking comprises the marking of the Contractor's performance in relation with
the best performance of respective contractors in the sector, comparing between similar
procedures or/ and prices for the provision of similar services. The results of such an
evaluation may be used by Contracting Authorities to facilitate them in their selection of the
candidate contractors in the case of tenders conducted by the "Simplified Procedure" or by
the "Nagotiated Procedure without publication of contract notice." However, it is noted that,
benchmarking provides an indication of the level of performance and must not be used to
extract absolute conclusions that will have as a consequence the restriction of competition
and violation of the principle of non discrimination.
Blacklisting (Forfeiture of the right to participate in tenders leading to award of
contract)
Pursuant to what is provisioned in the K.D.P. 115/2005 (Regulation 25), when based on the
Evaluation Report the performance of the Contractor is deemed as non satisfactory, the
Contracting Authority must propose the blacklisting of the specific Contractor from
participation in future tenders leading to award of contract. This blacklisting may be either
permanent or for a specific period of time.
The procedure which is followed from the completion of the Contractor's evaluation to

11
In a case where the ascertained damage incurred to the state exceeds the amount of the above
mentioned guarantee (by an amount greater than the one specified by the Public Procurement
Directorate in its circular), the Contractor is called upon to cover the damage incurred by the state
within a set deadline. In a case where the Contractor omits to respond to the claim submitted to him
until the set deadline, the issue is referred to the General Attorney of the Republic to initiate judicial or
other measures against him.
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the imposition of the sanction is the following:
1. The Contracting Authority submits the evaluation report to the President of the
Central Committee for Variations and Claims proposing the blacklisting of the
specific Contractor from future tenders;
2. The President of the Central Committee notifies to the Contractor the request of the
Contracting Authority and invites him to submit, if he so desires, an objection against
the request for sanction. The objection of the Contractor must be made in writing,
mention the grounds of the objection and it must be submitted to the President of the
Central Committee within a specific period of time.
3. The Central Committee may, if it deems expedient, invite the competent
representative of the Contractor or/ and his legal counsel for an audience in which he
will present the reasons for the objection.
4. The final ruling regarding the blacklisting or not of the Contractor from future tenders
is made by the Central Committee, which also specifies the period of time for which
the sanction will be imposed
5. The ruling of the Central Committee is notified to the Auiditor General of the Republic,
the Public Procurement Directorate and all of the Contracting Authorities and Tender
Boards.
The Public Procurement Directorate must maintain and update a list with all the
names of the economic operators which have been blacklisted from
participating in a tender. This list shall be published once a year in the Official Gazette of
the Republic and at least in two domestic newspapers.
6.6.2 6.6.2 6.6.2 6.6.2 Penalties for delay Penalties for delay Penalties for delay Penalties for delay
In cases of delays in the delivery of the supplied products or the execution of
works or the submission of deliverables or the completion of the works
project, by liability of the Contractor, penalties are imposed by the Contracting
Authority pursuant to what is provisioned in the respective article of the Special Conditions
of the contract each time.
In the paragraphs below there is a description of the recommended method of calculating the
penalties for delay in the cases of supply, service or work contracts.
6.6.2.1 Supply Contracts
In a case of delay in the delivery of the products supplied under the Contract or part
thereof due to liability of the Contractor, a Penalty for Delivery Delay is imposed. The
penalty, for every day of delay of delivery, amounts to a percentage of the contract
value of the products for which the delivery is delayed. This percentage must be defined
(in the terms of the Agreement) by the Contracting Authority taking into account the degree
of significance of the supply and it usually ranges between 0.2% and 0.5%.
To calculate the penalty, the Project Manager must also take into account any
possible, due to the delay, inability to use other products that have been delivered earlier.
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The penalties imposed by the Contracting Authority shall be withheld from the next
payment of the Contractor or, in case that the latter is insufficient, they will be
collected by forfeiture of an equivalent amount of the performance guarantee or/ and
the advance payment guarantee. In the event that the delivery periods set have been
exceeded and the penalties for delay imposed in connection therewith have reached in
total 10% of the Contract Value (or any other percentage specified in the contract), the
Contracting Authority may declare the Contractor in default and terminate the Contract.
6.6.2.2 Service Contracts
In a case of delay in the performance of work or in the submission of a deliverable
under the Contract due to liability of the Contractor, a Penalty for Delivery Delay is
imposed. The penalty, for every day of delay of delivery, amounts to a percentage of
the daily Contract Value of the work or of the deliverable. This percentage must be
specified (in the terms of the Agreement) by the Contracting Authority taking into account the
degree of significance of the contract scope and usually amounts to about 10% of the
daily contractual value.
To calculate the penalty, the Project Manager must also take into account any
possible inability to use other deliverables which have been submitted earlier due to
the delay.
The penalties imposed by the Contracting Authority shall be withheld from the next
payment of the Contractor or, in a case that the latter is insufficient, they will be
collected by forfeiture of an equivalent amount of the performance guarantee or/ and the
advance payment guarantee. In the event that the delivery periods set have been exceeded
and the penalties for delay imposed in connection therewith have reached in total 10%
of the Contract Value (or any other percentage specified in the contract), the
Contracting Authority may declare the Contractor in default and terminate the Contract.
6.6.2.3 Work Contracts
In a case where the Contractor fails to complete the project (or any part thereof if
provisioned) within the period of time specified in the contract (depending on the
case), this time counting from the Start Time and considering any extension of time granted
officially, then he is imposed with the Penalty for Delay in the completion of the project. The
penalty, for every day or for the part of the day that lapses between the respective
completion time and the date written in the Acceptance Certificate for the entire
project or the respective part, is specified in the contract.
In order to determine the amount of the penalty per calendar day which will be
included in the contract, the Contracting Authority must estimate the amount of daily
damages expected that it will incur in a case of delay in the completion of the project. For the
calculation of the daily damages, the costs, losses and expenses below must be taken into
account:
Costs for supervision (continuous or/ and periodical) and contract management
including all the wages of the supervising staff on site, the scientific and technical
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staff that supervises or visits the project periodically or monitors the project from the
office, transportation costs, overhead or other special office costs etc.
Loss, due to delay in the operation of the project, of the economic benefit (return),
which the Contracting Authority is expecting to gain from the operation of the project.
In a case where the estimation of the benefit (return) of the project is difficult,
consideration will be given to the cost of the capital expenditure of the project based
on the value of the contract (pursuant to the estimate, excluding contingencies) and
the Lombard rate specified by the Central Bank.
Any other special costs, losses or expenses which the Contracting Authority is
expected to incur for the specific project.
The penalty per calendar day must range between the limits corresponding to
percentages of 8% and 20% of the average daily value of the project. The
average daily value is estimated as the ratio of the contract value (pursuant to the estimate
excluding contingencies) divided by the contractual time of completion (in days). In a case of
projects in which the timely completion is of material importance to the Contracting Authority,
the amount that may be specified as penalty, following the approval of the Director of the
Contracting Authority, may correspond to percentage up to and including 30% of the average
daily value of the project. If the amount of the daily damages that is calculated based on the
above is less than the lower limit or exceeds the upper limit arising from the above
calculation, then the amount of the penalty shall be defined respectively to be the minimum
or maximum. It is self explanatory that at any rate the amount of the penalty shall be rounded
off to the closest ten or hundred pound, depending on its total.
Annex 6-6
12
includes an example of calculation of the penalty for delays in the completion of
a public works project.
6.6.3 6.6.3 6.6.3 6.6.3 Acceptance Acceptance Acceptance Acceptance Management Management Management Management
As important is the drafting of the proper specifications during the preparation of the
tender documents, so is also the control of the deliverables of the Contractor
(products, services or works) during the execution of the contract, in order to ensure that only
those deliverables that are in accordance with the specifications and meet the acceptance
criteria, as these have been specified in the Terms of Reference, will be accepted by the
Contracting Authority.
Chapter 7 (section 7.4.8), gives a description of the steps which must be followed
for the development of the Acceptance Management Plan, that is the determination
of criteria and standards of acceptance, as well as the basic elements that must be
determined during the documentation of the acceptance procedure for the deliverables.
It must be noted, that the procedure to be followed for the acceptance of the Contractor's
deliverables is part of the General Conditions of the contract. Depending on the type of

12
The example given in Annex 6-6 is included in the Circular 1593/2005 which was issued by the
Central Committee for Variations and Claims.
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contract (supplies, services, works) a different procedure is followed for the acceptance of
the respective deliverables, which in certain cases in fact (e.g., acceptance of supplies) is
dictated by the respective regulatory provisions. In the paragraphs below there is a
description of the common procedures followed pursuant to what is provisioned in the
General Conditions of model contracts and the relevant legislation for the acceptance of
supplies, services, information systems and public works.
6.6.3.1 Acceptance of Supplies
The acceptance of supplies is performed by the competent body (Acceptance Committee)
which is appointed by the Contracting Authority pursuant to the applicable regulatory
provisions
13
. The decisions of the Acceptance Committee shall be taken by majority vote
which is the reason why the Committee comprises an odd number of members.
The Acceptance Committee for every delivery of supplies, is required to perform
checks of the supplies delivered and depending on its findings to proceed with the
acceptance or rejection of the relevant supply. The examination conducted on the supplies
during the acceptance procedure may be:
Quantitative (macroscopic): In a case where the Terms of Reference provide only
for the macroscopic examination of the supplies, the Acceptance Committee issues, a
Certificate of Acceptance or Rejection depending on the case, in the form
specified in Annex 6-7
14
and Annex 6-8 respectively. It is noted that, during the
macroscopic examination of supplies, the Contractor is always invited to attend if he
wishes to do so.
The drafting of the certificate following the end of the macroscopic
examination must not be further from the date of delivery of the supplies
by more than 20 days (unless otherwise specified in the contract). In a case
where the period of 20 days lapses (or as many days as specified in the contract) and
the Acceptance Committee has not drafted the certificate, the supplies are
automatically considered as accepted.
Quantitative and Qualitative: In a case where the Terms of Reference also provide
for the performance of quality control, then there is a Certificate of Temporary
Acceptance and Sampling Report issued in the form specified in the Annex 6-9
15

upon the end of the macroscopic examination, with a view to conduct the provisioned

13
In case of Contracting Authorities obeying the K.D.P. 115/2004 (i.e. Ministries or Departments or
Services that come under them or Independent Offices or Independent Services of the Republic of
Cyprus) the acceptance is made by a three-member Acceptance Committee which is appointed by
the Head of the Contracting Authority. Members of the Acceptance Committees can also be
appointed, following the approval of their superior, officials outside the Contracting Authority.
14
The templates of the Acceptance and Rejection Certificates are the respective Annexes II and
III of the Circular 6/2004 issued by the Competent Authority for Public Procurement.
15
The sample of the Provisional Acceptance Certificate and Sampling Minutes is the Annex III of
Circular 6/2004 issued by the Competent Authority for Public Procurement.
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tests and examinations in each case.

In the case where required in the Terms of
Reference, the Contractor is obligated to produce to the Project Manager the
manufacturer test results or production data of the supplies or, materials and
drawings that may be required to conduct the quality control. Following the end of the
provisioned in each case tests and examinations for the needs of quality control, the
Acceptance Committee issues the Certificate of Final Acceptance or Rejection of
the supplies (in accordance with the tempaltes of the Annexes 6-7 and 6-8). In case
of rejection, the Acceptance Committee must determine in the certificate the specific
deviations from the terms of the Contract that the supplies show and the reasons for
the rejection.
The drafting of the Certificate of Temporary as well as Final Acceptance
or the Certificate of Rejection must not be further from the date of
delivery of the supplies or date of completion of the quality control testing and
examinations respectively, by more than 20 days (unless otherwise specified in
the contract). In a case where the period of 20 days lapses (or as many days as
specified in the contract) and the Acceptance Committee has not drafted the
certificate, the supplies are automatically considered as accepted or finally accepted
respectively.
As long as any deficiencies or defects are found during the quality
control, that prevent the final acceptance of the supplies, the Contracting
Authority may allow the Contractor the restoration of these deficiencies or defects and
the Contractor, in this case, is required to immediately proceed with the required
actions in each case
16
.

Following the restoration of the deficiencies or defects by the
Contractor, the Acceptance Committee must repeat the quality control procedure for
the supplies that presented deficiencies or defects and the results of the repeated
control in this case shall be final.
The Acceptance Committee is entitled to examine the possibility of accepting
supplies which following the conduct of the specified testing and
examinations are proven to show deviations that are not material (minor) in relation with
the specifications or the terms of the Contract, do not affect the use of the supplies and do
not incur any material cost for the Contracting Authority. In such a case, the Acceptance
Committee must record the events and its proposal for acceptance of the supplies at a
reduced price, in a special Report (in accordance with the template of the Annex 6-10
17
),
which must refer to the competent Committee for Variations and Claims for its final ruling.

16
Note that, the Contractor bears no responsibility for deficiencies or defects that are caused by
omission on behalf of the Contracting Authority regarding any proposal of the Contractor, or claim by
the Contractor to enforce a decision or proposal with which the Contractor disagrees or for which he
expresses serious reservation, or inappropriate execution of the instructions of the Contractor by the
employees or independent Contractors of the Contracting Authority.
17
The template of the Report drafted by the Acceptance Committee for reference to the Competent
Committee for Variations and Claims is the Annex IV of Circular 6/2004 issued by the Competent
Authority for Public Procurement.
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The proposal of the Acceptance Committee to reduce the price shall be handled as a
claim of the Contracting Authority from the Contractor (see paragraph 6.5.4 "Claims
Management"). The Acceptance Committee must proceed, once it has been notified of the
decision by the competent Committee for Variations and Claims, with the issue, depending
on the case, of a Certificate of Acceptance or Rejection.
For the purposes of proper management, monitoring and control of the contracts, the
Project Manager is required to maintain a Certificate Log, a template of which is
given in the Annex 6-11
18
.
Note that in the case of acceptance of the supplies the relevant certificate of
acceptance must definitely accompany the invoice forwarded to the accounting office
for payment.
In the case of final rejection of the contractual quantity, in whole or in part, of
the supplied products, the Contracting Authority, by its decision, may approve the
replacement of the specific quantity with another, which will be in accordance with the terms
of the Contract within a set deadline defined by such decision. This deadline cannot be
greater than half of the total contractual time of delivery, in a case where the replacement is
made following the expiration thereof. If the Contractor fails to replace the supplies that were
rejected within the deadline set for him and provided that the contractual time has expired,
the Contracting Authority declares him forfeited and he is subject to the provisioned
sanctions (see paragraph 6.5.7 "Contract Termination"). In this case the Contracting
Authority is entitled to procure similar supplies from another source and claim any additional
expenses or damages from the Contractor.
6.6.3.2 Acceptance/ Approval of Reports and Deliverables (general service contracts)
The reports and deliverables prepared and submitted by the Contractor in the context of a
service contract are subject to review by the Contracting Authority in order to ensure that
they are in compliance with the terms and requirements of the contract. The compliance
review of the reports and deliverables against the predefined acceptance criteria is
usually conducted by Review Committees which are appointed following the proposal of
the Project Manager to the Project Steering Committee and the concurrent opinion of the
latter. The Review Committees are established (ad hoc) based on the subject of each
deliverable and they are usually participated by the staff of the Contracting Authority that is
qualified and experienced in the specific subject. Personnel of other Contracting Authorities
may also participate in these Committees, provided that they are granted the concurrent
opinion of their superior.
More specifically, the procedure that should be followed for the approval of the
reports and deliverables of the Contractor is the following:

18
The template of the Acceptance/ Rejection Certificates Log for Supplies is the Annex V of Circular
6/2004 issued by the Competent Authority for Public Procurement.
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The Project Manager, after receiving the report or deliverable by the Contractor, forwards
it along with the acceptance criteria and any instructions for their evaluation to the
members of the respective Review Committee.
The members of the Committee examine, initially in closed session, whether the report or
deliverable responds to the contract requirements.
Next, a review meeting is held
19
, which is participated in by all of the members of the
Committee, during which the remarks and comments of all members are discussed and
in the end the Committee Report to the Project Manager is drafted, which comprises the
results/ conclusions of the review meeting.
The Project Manager
20
, once he studies the Report of the Review Committee, proposes
to the Project Steering Committee either final approval, or conditional approval or
rejection of the specific report or specific deliverable.
The decision of the Steering Committee is notified in writing to the Contractor by the
Project Manager, at the same time presenting the reasons in case that it rejects the
report or deliverable or requires further modifications to them. The period from the receipt
of the reports or/ and deliverables within which the Contracting Authority is required to
inform the contractor on its decision is specified in the General Conditions of the contract.
An indicative period of 15 days is suggested which may be extended to 20 days or even
longer depending on the volume and significance of the specific report or deliverable.
If the Contracting Authority fails to proceed with any comments on the reports or/ and
deliverables within the predefined time limit, the Contractor is entitled to require their
written acceptance. The reports or/ and deliverables shall be considered as approved by
the Contracting Authority if the Contractor hasnt been explicitly notified on any comments
within the predefined term (e.g., 15 days) from the receipt of the written request.

When a report or/ and deliverable is approved by the Contracting Authority by the force of
the modifications that will be made by the Contractor, the Contracting Authority should
specify a reasonable period to implement the modifications required.

It is noted that, where the Contract is executed in stages/ activities, the execution of
each stage/ activity shall be subject to the approval by the Contracting Authority of
the preceding stage/ activity, except in cases where the stages/ activities are carried out
concurrently.
6.6.3.3 Acceptance of Information System
The final acceptance of an Information System by the Contracting Authority is
implemented following the successful acceptance testing, unless the contract
provides for a period of pilot operation, in which case the successful acceptance testing

19
In the review meeting it is also possible for the staff of the Contractor to participate should this be
deemed expedient by the Project Manager to help in the better understanding/ consolidation of the
relevant remarks, corrections or suggestions for changes.
20
Note that the Project Manager may also participate himself as member in the Review Committees
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marks the provisional (or temporary) acceptance of the System.
The system control and testing procedure is aimed to ensure that the information
system under review satisfies the specified acceptance criteria of the users and
informatics staff, as well as the business goals of the Project Owner in general. This
procedure comprises, in summary, the following phases:
1. Design of acceptance testing: During this phase the first thing is to determine the
acceptance criteria of the system. The Table below presents the most important
categories of criteria that arise from the types of tests that may be conducted during
the system acceptance testing.
Table 618: Categories of Information System Acceptance Criteria
Criteria Category Description
Attachment to the
Requirements
This criterion refers to the extent that the system satisfies the
business goals, specifications and requirements set forth.
Usability The facility of use (or usability) of a system determines how
well a user may understand it and utilise its different
functions.
Data Volume & Stress
Capacity
Determines the capacity of a system to function normally
when used at maximum stress limits with regard to the data
volume and overload of its resources.
Performance Determines the performance of a system with respect to
predefined targets and non functional requirements. The
most important factors defining the performance of a system
is the response time, distribution and efficient use of its
resources, frequency of errors and the data receiving rate
and results production rate.
Security & Control This criterion refers to the existence and proper function of
the security and control procedures of a system so as to
ensure data integrity, confidentiality and security.
Recovery This criterion refers to the recovery capability of a system
following an unexpected failure of the hardware or software.
Procedures &
Documentation
Refers to the precision in the documentation of the functions
and use of the system and the extent that the automated
processes are working properly as an integral part of the
entire system.
Next, there must be determination of the acceptance conditions that is the
conditions under which it is possible to accept every subsystem/ application delivered
by the Contractor and successfully pass the acceptance testing procedure. To
determine the acceptance conditions of every subsystem the following factors are
also taken into account:
Subsystem complexity and how critical is its mission (percentage of error
tolerance).
Careful, systematic and adequate selection of the acceptance criteria.
Definition of the proper, in number and range, test cases and test scenarios in
order to ensure a sufficient evaluation of the acceptance criteria.
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The results of the performance of the acceptance testing (i.e., number of
errors and weight of each error).
For each one of the selected acceptance criteria there is definition of the test cases
which shall be executed to ascertain the satisfaction of the criterion. Each test case
defines the input data, expected results/ output, the conditions and partial steps for
the execution of the test case. The test cases which are governed by a rational
context and sequence may be grouped into test scenarios. If two or more
subsystems communicate with each other or the results/ output of the one are input
data to the other, then there are also test scenarios defined which test these cases
covering in this way more than one subsystem.
Finally, there must be determination of the test data which will be used to execute the
test cases and test scenarios which must cover the entirety of the possible cases.
2. Preparation for acceptance testing: During this phase there is preparation of all the
information/ data required to start the execution of the system acceptance testing,
that is the installation of the test environment, appointment of the system acceptance
test group and the preparation and set up, where required, of the data that will be
used during the execution of the test cases.
3. Performance of acceptance testing: During this phase the acceptance test
scenarios are executed, potential problems are recorded and actions to resolve them
are suggested. In general the acceptance test scenarios are divided in two major
categories:
The user acceptance test scenarios, which refer to the functionality (functional
and non functional requirements) that the system offers to the user and
The IT (information technology) staff acceptance test scenarios, which refer
to the processes performed by the IT staff related to the system, such as
procedures for set up, start up, resources management and system performance,
back-up, system recovery, etc.
The results from the acceptance testing are incorporated into the system acceptance
testing report. The purpose of this report is to provide a complete picture of the
system under delivery and the extent that it satisfies the acceptance criteria set forth.
This report is prepared by the users and the IT staff who participated in the testing
and is delivered to the Project Manager who, once he reviews it, prepares his own
proposal which he submits to the Steering Committee. If any errors have appeared
during the execution of the acceptance tests, the Contractor must prepare and submit
to the Project Manager a proposal which shall comprise: The list of errors to be
resolved, the time schedule for the resolution and the proposed date to repeat the
acceptance testing procedure.
4. Evaluation of results and system acceptance: During this phase the Steering
Committee, based on the report of the system acceptance testing results, the
proposals of the users and of the Project Manager, the acceptance criteria and
conditions, proceeds with the evaluation of the entire acceptance testing procedure.
Based on the evaluation results, the Steering Committee shall rule regarding the
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temporary or final acceptance of the system and draft the temporary or final
acceptance protocol.
In a case where the terms of the contract provide for a pilot operation period of the system,
then, once all of the tests and training of the personnel of the pilot installations are
completed, the pilot operation commences which lasts for the period set forth in the terms of
reference. During this period the system is installed and operates in a test environment or/
and under actual working conditions at selected installation sites.
During the pilot operation period the Contractor is required to:
Verify and update the test scenarios throughout this period.
Conduct the final functionality control tests, additions/ modifications, integration, pilot
use etc., with a view to verify the normal operation and intercombatibility of the
system applications.
Resolve the user problems and assists them with the operation of the applications.
Improve the applications
Correct and manage errors
Update the system documentation
In a case of serious problems that make the use of the Information System
impossible, the Contracting Authority is entitled either to proceed with the termination
of the Contract (see paragraph 6.5.7 "Contract Termination") or to set to the Contractor a
reasonable deadline for the rectification of the problems and the resumption of the pilot
operation period.
In a case where the contract provides for pilot operation, the final acceptance of the
system is made following the successful completion of the pilot operation.
Following the final acceptance of the system the warranty period commences. In
case where faults or defects or lack of properties appear during the warranty period,
the Contracting Authority shall inform about this the Contractor, who shall be obliged to
rectify immediately such faults or defects.
6.6.3.4 Acceptance of Works Project in whole or in part
When the entire Project has essentially been completed and any Testing for
Completion provisioned in the contract has been conducted successfully, the
Contractor is required to provide the Engineer with a relevant notice accompanied by
his written commitment that he will complement during the Defects Liability Period,
with due diligence and willingness, any remaining/ unfinished work and a copy to the
Contracting Authority. The notice along with this commitment is considered as a request by
the Contractor to the Engineer in order to issue the Acceptance Certificate in relation with the
Project.
The Engineer must, within 21 days (or as many days as specified in the contract)
from the date of receipt of the notice:
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either issue the Acceptance Certificate to the Contractor with copy to the
Contracting Authority by stating the date in which, in his opinion, the Project had been
essentially completed pursuant to the contract.
or give written instructions to the Contractor defining the works which, in his
opinion are required to be executed by the Contractor before this Certificate is issued.
The Engineer must also notify the Contractor regarding any defective work that
shows up in the Project following the issue of such instructions which (work) affects
the actual completion of the Project. Within 21 days (or as many days as specified in the
contract) from the completion of all the works defined pursuant to the above and the repair of
all defects by the Contractor, the Engineer must issue the Acceptance Certificate.
It is noted that the Contractor is entitled to request and the Engineer must issue an
Acceptance Certificate
21
for:
any Section for which a separate Completion Time is specified in the Tenders
Annex,
any substantial part of the Permanent Works that has been completed to the
satisfaction of the Engineer and is in use or has been occupied by the Contracting
Authority, in a different method of use or occupation from the one provisioned in the
contract, or
any part of the Permanent Works which the Contracting Authority has selected to
use or occupy before the completion (being understood that such occupation is not
provisioned in the contract or is not agreed upon with the Contractor as a temporary
measure).
If any part of the Permanent Works has been substantially completed and any
Testing fot Completion provisioned in the contract has been conducted successfully,
then the Engineer may issue the Acceptance Certificate regarding this part of the Permanent
Works before the completion of the entire Project and, upon the issue of this Certificate, it will
be considered that the Contractor has assumed to complete, during the Defects Liability
Period, any work remaining on this part of the Permanent Works.

6.6.4 6.6.4 6.6.4 6.6.4 Risk management Risk management Risk management Risk management
Risk management is an ongoing process commencing at the stage of drafting and
submitting the Project Fiche for funding (see Chapter 1 1.5.3.5 "Risk
Identification & Assessment"), continues through the tendering procedure and the

21
The Acceptance Certificate that will be issued for any Section or part of the Permanent Works
before the completion of the entire Project shall not be considered as certifying the completion of any
ground or surface which requires restoration or upon which shall be installed additional base, asphalt
or other layers, unless this is explicitly mentioned in the said Certificate.
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Project planning and implementation phase (see Chapter 7, 7.4.7 "Development of Risk
Management Plan" and 7.5.7 "Risk Management") and finishes upon the completion of
the Project with the contract closure.
The concept of Contract Management is indissolubly linked with risk management. The risks
that may arise during the execution and management phase of the contract may be due
either to inability of the Contractor to fulfill his contractual obligations (e.g., non satisfactory
performance, key members of his staff are concurrently engaged in other contracts, his
business interest is turned towards another direction or his financial status is deteriorating
following the award of the contract) or to inability of the Contracting Authority to effectively
manage the contract (e.g., lack or insufficient specialised staff, delays in the payments of the
Contractor, lack of experience in the management of similar contracts), or factors beyond the
control of the two parties (e.g., conditions of force majeure, significant changes in the
legislation or at the political level).
Depending on the type of contract, the distribution of risks between Contracting Authority and
Contractor differs accordingly. For example in cases of work contracts implemented through
a Public Private Partnership (PPP), the Contractor (private operator) usually assumes the
risks associated with the construction, financing, operation, management and ongoing
maintenance of the project, while the risks left for the State are, for example, the changes in
government policy and in the legislation.
However, even in the case of risks that have been "transferred" to the Contractor, the
Project Manager (or the Engineer in the case of public works) is required to
monitor and ensure that the Contractor has established and enforces procedures
aiming to reduce the likelihood of risk appearance or to limit the impacts in case that
these risks arise. Also, the Project Manager (or the Engineer) should collaborate with the
Contractor throughout the term of the contract to identify any new risks and define the proper
actions to handle them, observing the agreed Risk Management Plan (see Chapter 7, 7.4.7
"Development of Risk Management Plan" and 7.5.7 "Risk Management"). Although it is
desirable to have a relationship based on mutual trust, honesty and communication, when
the Contracting Authority begins to intervene to a great extent with the internal procedures of
the Contractor, it is possible that the Contracting Authority re-assumes the risk that it had
"transferred" to the Contractor. The possibility of re-assuming the risk, is directly associated
with the capacity of the Contracting Authority, and more specifically the Project Manager (or
the Engineer), to realise what the Contractor is capable of handling and what he is not, in
order to be able to reach a proper balance between active involvement ("hands-on") and
neutral position ("hands-off") in the risk management of the contract.

6.7 6.7 6.7 6.7 D DD DISPUTE ISPUTE ISPUTE ISPUTE R RR RESOLUTION ESOLUTION ESOLUTION ESOLUTION
6.7.1 6.7.1 6.7.1 6.7.1 Dispute Resolution Methods Dispute Resolution Methods Dispute Resolution Methods Dispute Resolution Methods
The disputes over contractual issues that may appear between the Contracting Authority and
Contractor during the exGecution of the contract are an undesired condition, which demands
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for cost and time in order to be managed. The relationships of the two parties that are usually
built through great effort and over extended periods of time suffer the appearance of gaps or
they are totally ruined. If the disputes sustain for a long time, then there is a significant
increase in the cost for both contracting parties, the achievement of best value for money is
affected and any advantages that the contract may return to the Contracting Authority as well
as to the Contractor in the end, are nullified. This is the reason why a particularly great effort
must be put to create a good working relationship which will ensure a frequent and effective
communication as well as preventing the development of any sort of controversy/ dispute
between Contracting Authority and Contractor.
Given that, even if the Contracting Authority has invested in the development of
a good collaboration relationship with the Contractor, no one can exclude the
possibility of disputes from arising; great care must be taken so that the contract
concluded with the Contractor includes provisions to maintain this good relationship,
as well as provisions regarding the dispute resolution methods that will be enforced,
their escalation and their enforcement procedures.
Escalation range of dispute resolution methods
The resolution of disputes comprises a series of processes that are aimed at the settlement
of any type of disagreement/ dispute that may arise between Contracting Authority and
Contractor. The methods/ techniques for dispute resolution are characterised by two key
parameters:
The degree of involvement of the parties in the decision: The dispute may be
resolved exclusively between the two parties without any third party involved or
through a third party intervention of or by court decision.
The degree of formality: The dispute resolution procedure may be informal or totally
formal.
These two parameters are revolving around a common axis, that is, the greater the degree of
consent of the parties in the final decision, the less formal the method of resolving the
dispute and vice versa.
So, on the one end there is the method of amicable settlement characterised by a climate
of cooperation, informal procedures and the absolute control of the final decision by the two
parties. In the other end, there is the litigation or the arbitration. These are formal
procedures executed within a climate of controversy, involve third parties in the final
decision making and this decision is final and immediately enforceable.
The Figure below presents the entire range of the internationally employed dispute resolution
methods and the comparative position of each one of these with reference to the degree of
formality and involvement of the parties in the decision.
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Figure 61: Escalation Range of Dispute Resolution Methods

6.7.2 6.7.2 6.7.2 6.7.2 Description of Dispute Resolution Methods Description of Dispute Resolution Methods Description of Dispute Resolution Methods Description of Dispute Resolution Methods
6.7.2.1 Amicable Settlement
Amicable Settlement is the most common form of dispute resolution between
Contracting Authority and Contractor and the one preferred in the majority of cases.
This is a discussion/ negotiation process between the parties involved with a view to find
a commonly accepted solution for the disputes that have arisen and one which satisfies
both parties. The resolution through amicable settlement presumes that the Contracting
Authority as much as the Contractor are willing to proceed with mutual concessions in order
to bring about an accord (win - win situation).
Amicable Settlement as a method of dispute resolution is characterised by the following
advantages:
Speediness: The disputes are resolved within a short period of time.
Low Cost: It is the method of dispute resolution with the lower cost as it does not
requires the involvement of a Third party, something which applies in the other
methods and which burdens the parties involved with additional costs.
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Secrecy: The contract information and the disputes of the two parties are not
disclosed to third parties.
Maintenance of the relationship between Contracting Authority and Contractor:
The amicable settlement is based on the intention of both parties to resolve their
disputes in cooperation and ensure the continuity of the Project to the benefit of the
Contracting Authority as much as that of the Contractor. From this point of view the
amicable settlement allows the preservation of the good relations between the two
parties.
Control over the procedure and examination of several potential solutions: The
non participation of a Third party in the amicable settlement process ensures its
absolute control by the Contracting Authority and the Contractor. In addition and
given the fact that the solution must be towards the direction of ensuring a benefit for
both sides, the two parties shall examine the entire spectrum of potential solutions.
6.7.2.2 Alternative dispute resolution methods
Mediation
Mediation is the dispute resolution method in which a properly qualified mediator,
neutral towards both parties, helps them to negotiate and conclude to a
commonly accepted solution. It is usually chosen in cases where the amicable
settlement between the two parties has been interrupted, failed due to lack of
experience in the negotiations technique or when the progress rate of the amicable
settlement is quite low. During the mediation the Contracting Authority and the Contractor
play a particularly active role in trying to discover the solution that is most beneficial to them.
Exactly because the approach here is also a conciliatory one, the probability that the parties
are able, following the resolution of the dispute, to maintain their relations is high.
The role of the mediator is to facilitate the communication and negotiations
between the Contracting Authority and the Contractor and not to choose side in
favour of one or the other. He/ She is entitled however to ask questions to both parties
related with their position over the dispute each time in order to ascertain their objectivity in
the assessment of the strong and week points of their position as well as that of the other
party. The mediator must also direct the Contracting Authority and the Contractor to
concentrate in the quest for a creative resolution of the dispute by focusing their attention to
the future and discourage them from insisting with the presentation of past events in an effort
to consolidate their legal rights.
The mediator is not necessarily required to have knowledge on the issue and the subject of
the dispute. However, he/she should have knowledge of negotiation techniques and great
experience in their application.
Mediation is a flexible process that does not include any absolutely specified or
standardised steps. Before it begins it would be expedient for both parties to sign a mediation
agreement which will regulate the procedure to be followed and specify who the mediator will
be. In general, the actions to be executed are as follows:
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Preparation: Each party prepares a brief report in which he presents his attitude
towards the dispute. This report, along with the necessary accompanying documents
is forwarded to the mediator and the other party, at least a week before the mediation
begins.
Kick-off meeting: This is attended by the mediator and the two parties. During the
mediation the Contracting Authority as well as the Contractor present a summary of
their position regarding the dispute and its resolution.
Person to person meetings with each party separately: The person to person
meetings are confidential and depending on their development there may be a need
for additional meetings with representatives from both parties.
Achieving accord: When the two parties conclude to a commonly accepted solution
of the dispute, the terms of the agreement are written and signed by both parties.
Mediation usually goes through a stage in which the likelihood for the two parties to
come to an agreement seems to be very small. Because, however, practice has
proven that things are overturned and usually the mediations lead to a result, the parties
involved should not be disappointed from the start but rather insist on their goal.
Mediation as a method of dispute resolution is characterised by the following advantages:
Speediness: Mediation usually comes to a result within a few days from its start with
the maximum period being one month.
Low Cost
The mediator is likely to cause new and different dynamics in the course of
negotiations and reheat the relations between Contracting Authority and
Contractor.
Conciliation
Conciliation is a method of dispute resolution similar to the mediation. Their difference lies in
the fact that in case of conciliation, the third party, apart from directing and facilitating the
talks/ negotiations between Contracting Authority and Contractor is also entitled to suggest a
solution.
Neutral Evaluation
Neutral evaluation is employed as a method to resolve disputes referring to legal issues.
Each party deposes in writing to a neutral evaluator, who is usually a retired barrister or
judge, a general review of the case and information regarding the evidence of proof
and the testimonies he would present before the court if litigation had been chosen.
The neutral evaluator examines the position of each party and renders his/ her opinion
on what he/ she assesses to be the conclusion of the trial, had the dispute been referred
there for resolution. This assessment may set the basis for the resolution of the dispute or to
start off new negotiations between Contacting Authority and Contractor.
Arbitration
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Arbitration is a method for resolving disputes where the two parties agree to accept and
enforce the solution that will be indicated by a thirty party, i.e., the arbitrator.
Arbitration is considered to be an aggressive method of resolution. In order to be enforced it
is required that either there is a relevant provision in the contract or that a concord is signed
between the two parties a posteriori.
Arbitration as a method of dispute resolution presents the following advantages and
disadvantages:
Advantages
The parties to the disagreement choose the arbitrator, who is a specialist on the
subject/ topic of the disagreement.
The process guarantees the resolution of the problem.
Disadvantages
A time consuming and high cost process
The arbitration decision is binding and cannot be contested by judicial means
The relationship between Contracting Authority and Contractor is ruined
The solution that will be adopted depends on a third party.
Litigation
The litigation (or refernce to justice) is chosen as a method to resolve disputes when efforts
to find a compromising solution between the two sides have failed. This is a time consuming
process requiring a serious preparation by both parties (finding arguments, evidence of
proof, documentation of views) before they appear in court with their solicitors.
The litigation as a method to resolve disputes presents the following advantages and
disadvantages:
Advantages
The court rulings are binding but there is always another instance of jurisdiction.
Therefore in case that one of the two parties disagrees with the ruling issued, it may
appeal to a higher court.
If the Contractor is unwilling to cooperate in order to find a solution, the reference to
trial is the only way to settle the disputes.
Disadvantages
A time consuming and high cost process
The relationship between Contracting Authority and Contractor is ruined
The solution that will be adopted depends on a third party.
In the Table below there is a summary presentation of all the possible methods to resolve
disputes and their basic characteristics.
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Table 619: Dispute Resolution Methods and their characteristics
Name Frequency in
use
(internationally)
Aggressive/
amicable
Speediness Cost Third party
involvement
Role of the
Third party
Communication
- Meetings
Decision Binding of
decision
Amicable
Settlement
Very high Friendly Varies Low N/A N/A Meetings
between the two
parties and
negotiation to
find a commonly
accepted
solution
Decision made
jointly by
representatives
of each party
Not binding (at
least not in the
sense of the
arbitrator's or
courts ruling)
Mediation High Friendly High Low Mediator Promote &
facilitate
communication
of two parties
Initial
meeting of
mediator
with the
team of
each party.
Individual
meetings of
Mediator
with the
team of
each party.
Decision made
by the
representatives
of two parties
and not by the
mediator
The terms of
decision are
recorded and
signed by reps
of both parties
and the
mediator.
Conciliation Medium Friendly High Low Mediator Promotes &
facilitates
communication
of two parties as
well as
suggests
specific solution
Initial
meeting of
mediator
with the
team of each
party.
Individual
meetings of
Third party may
suggest
solution, but
decision is
made by the two
parties.
The terms of
decision are
recorded and
signed by reps
of both parties
and the
mediator.
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Name Frequency in
use
(internationally)
Aggressive/
amicable
involvement
Role of the
Third party
Communication
- Meetings
Decision Binding of
decision
Mediator
with the
team of each
party.
Neutral
Evaluation
Low Friendly High Low Evaluator,
usually
retired
solicitor or
judge
Studies the
views and
documentation
of each party
and renders
opinion on likely
court ruling had
there been trial.
Meeting of two
parties' reps with
the evaluator is
not necessary.
Once evaluator
issue rule, the
two parties can
use it to come to
solution.
Evaluator's
view is not
binding.
Arbitration High Aggressive Quite low High One
arbitrator or
two - each
one
appointed by
one party
and one
umpire
appointed by
the
arbitrators.
Arbitrator or
umpire
assumes to
resolve the
dispute
Meetings of
arbitrators with
reps of each
party.
Final ruling
issued by the
arbitrator or
umpire.
Final ruling is
binding.
Litigation High Aggressive Low High Court - each
party's
solicitors
Solicitors
assume
defence of each
party and the
court reviews
the case in
A trial is held
where two
parties are
represented by
their solicitors
Ruling issued by
the court
There is
another
instance of
jurisdiction
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Name Frequency in
use
(internationally)
Aggressive/
amicable
involvement
Role of the
Third party
Communication
- Meetings
Decision Binding of
decision
order to
determine and
enforce
solution.

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6.7.2.3 What is currently applicable in the Republic of Cyprus
Pursuant to what is applicable in the Republic of Cyprus today, should there any
dispute arise between Contracting Authority and Contractor related with the contract
or as a result thereof or if any dispute arises from decision, opinion or instruction of the
Project Manager (or the Engineer in case of public works), then the Contracting Authority or
the Contractor accordingly notify the other party with copy of the notice to the Project
Manager (or the Engineer). From the moment of that notice, both parties must make
every possible effort in order to settle their dispute amicably within the next 56 days
(unless otherwise specified in the contract).
Any dispute for which no amicable settlement has been achieved within 56 days
(unless otherwise specified in the contract) from the date of service of the above notice,
is resolved conclusively by choosing litigation or arbitration.
In cases where the arbitration is chosen as a method to resolve disputes, pursuant to the
provisions of the Arbitration Law (ch. 4) the disputes are settled by two arbitrators, one
appointed by each party, and a umpire appointed by the two arbitrators. It is pointed out that
the two parties are entitled to agree jointly that the reference to arbitration is conducted by
only one arbitrator.
The procedure is conducted before the arbitrators and the umpire acting jointly, at a place
and time usually defined by them. During the arbitration process the parties have the same
rights and obligations. The principle of equality is observed and the parties are invited to
attend the discussions, develop their allegations and produce their evidence. The umpire
guides the discussion.
It is pointed out that during the procedure before the arbitrators and the umpire the two
parties are not required to limit themselves only to the use of the allegations and arguments
that they would be likely to use before the Project Manager. In addition, they may call on
witnesses and experts, which may be examined under oath or by confirmation.
The arbitration decision must be drafted in writing and hand signed by the arbitrators
and it must state a) the first and last name of the umpire and of the arbitrators, b) the
place and time of its issue, c) the first and last names of those who attended the arbitration
process, d) the agreement for arbitration on which it was based, e) justification/ rationale and
g) the pronouncement. The arbitration decision cannot be contested by judicial means.
It is binding and final for the litigants.
The arbitration decision may be annulled in whole or in part by judicial ruling
22

only for the following reasons 1) if the arbitrator or umpire has demonstrated poor
behaviour or mishandled the case, 2) when the arbitration was conducted illegally, 3) when
the arbitration decision was issued illegally. The court has also the power by the force of the
article 9 of the Arbitration Law to provide remedy when the arbitrator is not impartial or when
the dispute being referred raises an issue of malice.

22
By the County Court or any judge thereof who has jurisdiction over the issue.
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In addition, the arbitrator or umpire may, and are required if the Court so order, refer to the
Court by memorandum a) any legal issue that arises in the course of arbitration or b) the
arbitration decision or any part thereof, in the form of special case for the court to rule on.
The expenses of the arbitration and arbitration decision are left to the discretion of the
arbitrators and the empire, which may order to whom, by whom and in what way they will be
paid.
In cases where the Contracting Authorities (if the amicable settlement fails) choose litigation
as a dispute resolution method, those competent to rule on the appeal are the County Courts
and as long as one of the litigants is not satisfied by the court ruling, he may refer to the
Supreme Court.
6.8 6.8 6.8 6.8 C CC CONTRACT ONTRACT ONTRACT ONTRACT C CC CLOSURE LOSURE LOSURE LOSURE
6.8.1 6.8.1 6.8.1 6.8.1 Actions for the contract closure Actions for the contract closure Actions for the contract closure Actions for the contract closure
The contract closure is an administrative procedure, which is aimed at consolidating that both
parties (Contractor and Contracting Authority) have fulfilled their contractual obligations and
there are no unexecuted tasks or other types of pending issues.
During the contract closure procedure the Project Manager (or the Engineer in the
case of public works) should:
Check that all products have been delivered and accepted (case of supply contract),
all works have been completed and accepted (case of building works or civil
engineer's works), all services have been rendered and their deliverables have been
accepted (case of service contracts).
Check that the initiation and completion Reports (case of supply contracts) or the
interim and final Progress Reports (case of service or public works contracts) have
been submitted and have been accepted.
Check that all interim payments as well as the final payment have been effected and
that the Performance Guarantee has been returned to the Contractor.
Check that all issues that resulted during the execution of the contract have been
dealt with and there are no open issues.
Ensure that all of the rights, including copyrights, and other intellectual and industrial
property rights that were ensured during the execution of the contract are devolved to
the ownership of the Contracting Authority.

See to the return to the Contracting Authority of its assets that were made available to
the Contractor in the context of execution of the contract and check that these have
not suffered damages. In the same context, he also handles issues of equipment and
license disposal (e.g., software) which were used by the Contractor during the

Check that all of the data like charts, diagrams, drawings, specifications, plans,
statistical data, calculations, operation and maintenance manuals (service and public
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works contract) and any other relevant document or material acquired, collected or
drafted by the Contractor during the execution of the contract have been submitted to
the Contracting Authority, otherwise sees to their collection.
Complete the filing of the material related with the execution of the contract like:
Contractual documents, plans for the implementation of the contract scope (activities
schedule, resource plan, cost plan, risk management plan, issue management plan,
etc), communication and reporting plans, deliverables, correspondence, requests for
changes and claims, invoices, payment receipts. All files are kept by the Contracting
Authority for as long as provisioned in the legislation depending on the type of
documents (e.g., accounting files and entries must be kept pursuant to the
Accounting and Fiscal Guidelines for a period of 5 to 10 years).
Notify all stakeholders that the contract has been completed
Release the resources (human resources, machinery, equipment, materials and
infrastructures) of the Contracting Authority that were utilised in the execution of the
contract.
Provide the Contractor with a Good Performance Certificate as long as it is requested
by him.
6.8.2 6.8.2 6.8.2 6.8.2 Evaluation of the contract management procedures Evaluation of the contract management procedures Evaluation of the contract management procedures Evaluation of the contract management procedures
Despite the fact that the execution of the contract and performance of the Contractor are
evaluated throughout the implementation of the Project (see section 6.6.1), the contract
closure comprises the right time on the one hand, to assess the overall success of the
Project implemented (see section 7.6.2) and the contract management procedures, and on
the other to record systematically any weaknesses/ deficiencies in the provisions of the
contract.
In order to evaluate whether the contract management procedures were
successful, the Project Manager (or the Engineer) may use the Checklist below:
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Checklist 67: Questions for the evaluation of the contract management procedures
Questions Yes/ No Comments
23

Was the response in the communications with
the Contractor prompt?

Were all notices, approvals, decisions and
consents given to the Contractor in writing?

Did the Contracting Authority furnish the
Contractor with any information or/ and
documentation that were necessary for the
execution of the contract?

Was there a climate of cooperation between
the Contracting Authority and Contractor?

Were there any violations of the Code of Ethics
ascertained by the staff of the Contracting
Authority that participated in the contract
management?

Was any replacement of the staff of the
Contractor implemented pursuant to what is
set forth in the contract?

In a case where one of the members of the
Contractor's Project Team was replaced, did
his replacement have at least equivalent
qualifications and experience?

Were the deadlines for the acceptance of
deliverables observed on the part of the
Contracting Authority?

Was there any modification of the contract
made pursuant to what is provisioned in it and
in the legislation regarding the execution of
public contracts?

Was there a check made before making any
changes in the contract that these did not
distort the competition substantially?

Were the payments to the Contractor made
pursuant to what is provisioned in the
contract?

Were there any delayed payments made to the
Contractor resulting in the Contracting
Authority obligated to pay interest on these
payments?

Was there termination of the contract caused
due to liability of the Contracting Authority?

23
In this column the Project Manager may describe which contract management procedures were
applied successfully and which not. In addition, he may present proposals and practices that could be
applied in similar projects in the future in order to ensure optimum contract management.
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Questions Yes/ No Comments
Were there any disputes between the
Contracting Authority and Contractor?

In case there were disputes between
Contracting Authority and Contractor, were
these resolved by amicable settlement?

In case the disputes were not resolved by
amicable settlement, were the procedures
provisioned in the contract enforced for their
resolution?

Were there any problems noticed during the
execution of the contract for the resolution of
which the contract lacked the relevant
provision?

Going through the questions of the aforementioned list, the Project Manager (or
Engineer) has the opportunity to clarify whether the problems that appeared during
the management of the contract are due to weaknesses in the procedures/ tools/ techniques
utilised, lack of required experience and of the appropriate competencies of the staff
participating in the contract management or finally due to inadequacy or ambiguity in the
provisions of the contract. The results from this critique are suggested to be recorded in
order to be possible to use as "lessons learned" in the drafting and management of similar
contracts in future.
6.8.3 6.8.3 6.8.3 6.8.3 Checks Checks Checks Checks during the completion of co during the completion of co during the completion of co during the completion of co- -- -funded Projects funded Projects funded Projects funded Projects
In a case of Projects co-funded by the Structural Funds or the Cohesion Fund (CF),
once the Project Completion Report is submitted by the End Beneficiary (or the Implementing
Agency in case of CF), the Intermediate Body performs an on site check to certify the
completion of the physical and financial subject of the project, as well as its operational
result, bearing in mind the approved description of the Project and the information recorded
in the Integrated Information System (IIS), that is it verifies that,
the deliverables mentioned in the completion report are in accordance with the
invoices or/ and Experts' reports (where applicable),
the terms set forth in the letter of funding have been adhered to
an adequate and reliable accounting system/ share has been observed (in case of
Projects co-funded by the Structural Funds)
The Intermediate Body signs statement regarding the compliance of the Final Beneficiary (or
the Implementing Agency) with its obligations, which accompanies the Project completion
report. The Managing Authority after reviewing the compliance statement and the completion
report and making sure that all of the procedures have been observed, enters the project
completion in the IIS.
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6.9 6.9 6.9 6.9 P PP PROCEDURES FOR THE ROCEDURES FOR THE ROCEDURES FOR THE ROCEDURES FOR THE T TT TRANSISTION INTO RANSISTION INTO RANSISTION INTO RANSISTION INTO P PP PRO RO RO RODUCTIVE DUCTIVE DUCTIVE DUCTIVE O OO OPERATION PERATION PERATION PERATION
The acceptance of the products and deliverables of a contract is normally a milestone for
their commissioning to productive operation. The responsibility is now assumed by the
business unit responsible for the operation and maintenance of the final project
outcome/ product while the Contract Management Team is limited in taking care the control
of contract completion and closure.
In cases where the contract scope involves the development of an Integrated
Information System that will be utilised to execute all of the work electronically, the
completion of the acceptance testing marks the commencement of Pilot Operation.
In the Pilot Operation phase the Contract Management Team (Project Steering
Committee and Project Manager) continues to have the responsibility to
monitor the Contractor and see to the repair of any errors or the restoration of omissions
that will arise from the pilot operation but at this time now the users of the project owner
enter into the game".
During the pilot operation period of an information system, the following are checked, verified
and adjusted:
The installation of the equipment
The settings, parameterising and adjustments of the system
The system fine tuning to improve the performance
The completion of the subsystems
The availability of parts of the system hardware or software
The system response time
Any other parameter affecting the system operation and performance.
Any problems that may appear or interventions that seem to be necessary during pilot
operation must be handled appropriately by the Contractor before the start of the productive
operation period.
For the system productive operation to commence, the Steering Committee must
have finally accepted the system. Furthermore, all the actions included in the
Checklist below must be completed:
Checklist 68: Actions that must be completed until the start of productive operation of an
Integrated Information System
All existing hand - written or/ and electronic data have been collected or/ and migrated into the
database of the new system
The operation manuals have been completed and approved
The installation sites have been configured properly for the effective operation of the system
(room for the Main Frame, space for printers, PCs etc) as well as front office posts (if applicable)
All the adjustments in the procedures have been made so that they are in absolute agreement
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with the specifications based on which the information system was developed
All of the printed materials and forms that will be used for the output of e.g., decisions, letters,
statements, invoices etc. depending on the scope of work of the Organisation that will utilise the
system have been supplied
All the awareness actions for the acceptance of the system and management of change have
been implemented
All the employees have been trained in the system operation
The public has been informed about the development and use of the information system and
the changes that this will bring about in their transactions with the Organisation
A support system on site has been organised for the users during the first days of productive
operation of the system
A Help Desk has been organised and staffed with trained personnel, which apart from providing
support shall also record the questions and then process them to issue a list with the most
frequently asked questions (FAQ)
It is noted that while the Contracting Authority has a certain information system
available which will be replaced by the information system under supply or
development, it may apply a parallel operation for a specific period (e.g., in the order of
two months) of the two systems. Parallel operation ensures the Contracting Authority with
respect to the fact that even if there are problems or omissions with the new system, the data
from the transactions arent lost and furthermore its work does not stop but it is operating
normally. In addition, there is facilitation in the control and identification of problems
(troubleshooting) since the two system streams must come to the same results. However, it
must be noted that operating two systems in parallel requires commitment and use of more
resources at a cost that shall be borne by the Contracting Authority.
In cases where the Integrated Information System involves an Organisation
with a broad range of activities and thus quite complex in nature (consists of
several subsystems and applications characterised by stand-alone operation) its
commissioning into productive operation may be performed gradually. For example, in
case of the e-procurement system the first application that could be installed is the one for
the publication of the Prior Information Notice, Periodic Indicative Notice (N.11(I)/2006),
notice of the existence of the qualification system (N.11(I)/ 2006) and contract notice. In a
second stage the application for the publication of the tender documents and provision of
clarifications and supplementary information on the tender documents could be
commissioned into productive operation. In a third stage, the application for receiving the
expression of interest and tenders from the interested economic operators could be
commissioned into productive operation and in a fourth stage the application for the award of
the contract and informing the economic operators about the results.
The step-by-step commissioning of the Integrated Information System into productive
operation (illustrated in the diagram below) gives the Project Owner the possibility to
gradually migrate from the existing to the new status while it further helps the users with
better assimilation of the training and their gradual familiarisation with the system operations.
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Figure 62: Step-by-step commissioning of information system into productive operation

The gradual introduction of the Information System presumes the design and drafting of a
detailed Migration Plan. The Migration Plan is usually drafted by the Contractor and agreed
upon with the Contracting Authority. Its contents must include:
Table 620: Contents of Migration Plan
Action Plan and implementation schedule for the organisational and functional changes required
each time a new functionality is inserted
Plan and program for the users training
Action Plan and schedule for data loading and migration of data required for the operation of the
new applications
Plan for the parallel operation of hand - written and electronic processes (provided that at any
given moment some procedures shall be executed manually and some others electronically)
In cases where the Project Owner has also a peripheral structure (branches)
which are physically planned in different locations the Integrated Information
System is usually commissioned into productive operation initially at a central
location and then it is rolled out to the branches. Characteristic examples of such
Organisations are the Tax Services, Police Stations, Hospitals, Social Security Operators
and Banks.
Figure 63: Information system roll out to the branches of an Organisation

The main advantage of the Information System Roll out is that it allows the gain of
experience from the previous facilities and thus provides the possibility for continuous
improvement of the procedures required.

The basic characteristics of a System roll out are as follows:
At any given moment a branch of the Organisation/ Agency/ Authority operates with
the Information System while another does not. Given that usually the branches of an
Organisation communicate and cooperate between them, a detailed study of the
communication and data exchange method is required.
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At any given moment and while the Project is still in progress two
administration structures coexist. One involves the management of the
contract, which is in progress and implemented by the Steering Committee, Project
Manager and Project Team, while the other structure is related with the
Organisational Structure of the Organisation/ Agency/ Authority that has taken
over the responsibility to operate the system (e.g., Informatics Directorate).
These two structures must cooperate very well between one another and exchange
information to optimise the roll out and identify errors or problems which may
subsequently be avoided.

In order for the roll out of an Information System to be conducted smoothly the
Contractor must draft a detailed Roll Out Plan and agree upon it with the Project
Manager and the Steering Committee. Given, though, that the Roll out Plan affects the
operations of the Project Owner, it must be approved by it.
The Roll out Plan must anticipate and specify the actions required to prepare each branch in
order to start the system operation, the time schedule within which these must be executed,
as well as the critical factors to its success. More specifically, the Roll out Plan must include
provisions for the following actions:
Table 621: Indicative Contents of Roll Out Plan
Equipment installation
Software and applications installation
Network installation and operation to enable the communication of the branch with the central
server
Data collection and migration
Configuration of the branch areas for installing PC terminals and ensuring ergonomics
Training for branch Managers, directors and staff
Management of pending issues before the commencement of system operation
Informing the transacting public that the branch may be out of service for certain days in order to
prepare it for the new operation mode
Publicity and information of the interested parties
On site support for the first few days of productive operation (e.g., two weeks)
The roll out as a methodology for the application of a new operational mode in an
Organisation/ Agency/ Authority with branches in different geographical areas may
be utilised also in a case where the contract scope refers to the design and
application of a new organisational and operational structure.
The requirements in this case are:
Preliminary Actions which include:
o Adjustment of procedures
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o Preparation of training
o Establishment of a new mechanism to monitor the results of the application of
the new organisation and operation method.
Preparative actions to integrate the branches, which include:
o Selection of the order of integration of the branches in the new operational
mode and informing them
o Adjusting the organisation plan of the branch to the new operational mode and
correspondence of the staff to the new work positions
o Detailed training in the new operating mode
o Preparation/ Configuration of physical planning and installation of equipment/
hardware
o Managing pending issues
Actions for the on site application of the new operating mode, which include:
o On site support of the branches during the application of the new operating
mode
o Collection of data from the operation of the branches at the integration phase
with regard to the effort made and the degree of observance of the
interventions, as well as to the final result itself.

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