Execution of major capital projects requires a significant financial commitment and involves complex contractual agreements with numerous suppliers. However, many organizations routinely do not adequately mobilize the resources needed to ensure all contractual obligations are administered – and all commercial terms are realized.
The commercial performance of suppliers is typically not monitored in real time against every contractual obligation. Project resources often focus primarily on meeting schedule. Those resources can be insufficient to analyze spend data due to existing role expectations, workload, and organizational turnover. However, Contract Compliance and Administration expertise are essential for effective project execution and cost containment.
An Effective Process
Revenew’s process includes activating Contract Compliance and Administration expertise in close coordination with existing project execution roles. Key suppliers are identified, and contract due diligence is performed in coordination with knowledgeable client stakeholders. This enables effective identification of key performance indicators (KPI’s) for immediate performance monitoring.
An in-depth review of all contractual commercial terms is completed, and line item billing data of both payers and suppliers is reconciled and analyzed. All components of each invoice line item are reviewed and compared with commercial terms.
We closely interact with clients and suppliers – on-site at key locations – to identify exceptions and implement corrective actions. Typical staffing includes Contract Compliance and Administration specialists in alignment with the scope of the suppliers/spend and the project timeline.
Return on Investment
- Demonstrated recoveries of over $3 million in the first year for major projects
- Erroneous supplier spends recovered both retrospectively and in real time
- Low-risk engagement with minimal budget and resource requirements
- Reduced risk and containment of future costs
- Improved supplier relationships and performance for ongoing and future work
Case Study
Revenew’s Contract Compliance and Administration expertise was added near the midway point of a major capital project that included design and construction of a large power plant. Budgetary and timeline targets had been exceeded significantly prior to our involvement. In close coordination with our client’s project team, over 20 key suppliers were identified for performance monitoring with the goal of identifying cost recovery and containment opportunities for immediate corrective action.
Our project manager and compliance experts interacted regularly with client stakeholders and key suppliers – both on-site and remotely – throughout the remainder of the project. Recovery opportunities and corrective actions were identified in real time. Findings were primarily associated with cost-based pricing validation, personnel classification, labor cost build-up, payroll tax reconciliations, incorrect mark-up/margin, and third-party charges.
We improved our client’s ability to ensure contract terms were met as we facilitated reporting, settlement, and payment collection with each supplier. Revenew’s process also included regular reporting to senior leaders and finance. Tracking of total spend, recoveries, and ROI were improved for the long term. Ultimately, our client achieved significant cost recovery and containment results – quickly and at a high return on costs – with no impact on their project schedule.
Results
- Over $3 million in recoveries achieved in one year
- Over 500% return on costs
- Over 20 suppliers closely engaged and monitored, resulting in improved relationships and commercial performance for the remainder of the project
- Nearly 1% of reviewed spend was recovered, and additional process improvements implemented with each supplier engaged