by Chimbu Vazhoor, Director Global Client Solutions, Wrench Solutions
In Engineering, Procurement, and Construction (EPC) projects, contracts are more than legal frameworks; they are the foundation for delivery accountability, performance tracking, and risk allocation. Despite their central role, contract management practices in most large-scale projects remain heavily manual, document-centric, and reactive. In an environment where even minor delays or disputes can cascade into multimillion-dollar impacts, the limitations of traditional contract administration are increasingly unsustainable.
As project owners, contractors, and consultants grapple with rising complexity, cost pressures, and the demand for faster delivery, Artificial Intelligence (AI) is emerging as a transformative force in Contracts Management. When applied thoughtfully, AI can provide continuous contract awareness, monitor commercial risk in real-time, and enable data-backed decisions – ushering in a new era of proactive project governance.
The Current Challenge: Siloed, Static, and Reactive Contracts Management
Traditionally, contract management revolves around isolated documents – main contracts, subcontracts, purchase orders, change orders, and correspondence – scattered across shared drives, emails, and enterprise systems.
This creates several persistent issues:
- Key obligations and entitlements are tracked manually or overlooked entirely.
- Change notifications and claims are often delayed or missed, reducing recoverability.
- Correspondence and instructions remain disconnected from contractual context.
- Legal, commercial, and execution teams frequently work in silos, leading to fragmented decisions and avoidable disputes.
This manual, reactive approach leaves project teams exposed to risk, delays, and financial leakage.
What’s needed is a smarter, integrated approach; one that brings contracts to life and embeds them in day-to-day decision-making.
The Solution: AI-Driven Contracts Management
AI in Contracts Management is not simply about digitizing documents; it’s about creating an intelligent, always-on system that understands contractual language, monitors project performance in context, and guides timely, compliant action. This requires developing Agentic capabilities that can be trained to handle the complexities involved in this key business function.
As illustrated in the figure above, such a group of Contracts Agents will typically integrate three key functions:
1. Structuring Unstructured Data
Using advanced Natural Language Processing (NLP) and machine learning, AI can ingest and interpret a wide range of contractual documents:
- Main contracts, subcontracts, service orders
- Special conditions, schedules, annexures
- Variations, claims, technical correspondences
- Other communications – Letters, instructions, emails, and meeting minutes
- Contract securities and insurances
Once ingested, the system extracts and structures key information such as clauses, obligations, entitlements, payment terms, and time bars. It tags responsibilities by party, timeline, and relevance to project phases, while linking terms to work scopes, schedule activities, or cost items.
This creates a contractual knowledge graph; a structured, searchable representation of rights and responsibilities, aligned to the project’s operational framework.
2. Real-Time Monitoring with Forecasting – A Contractual Watchtower
Once contracts are machine-readable and structured, the AI system can be designed to act as a “watchtower,” continuously scanning for triggers, non-compliance, and risks across project activities. As detailed in the next section, AI can also utilize the project schedule to forecast potential risk events to drive proactive mitigation insights. Here’s a few examples to illustrate the capability;
- When a subcontractor misses a milestone that impacts liquidated damages, the system raises alerts. With project schedule linked forecasting, AI can even forecast this potential event to trigger insights to initiate proactive avoidance decisions.
- When a variation instruction is issued, the AI highlights applicable notice periods and entitlement clauses.
- When correspondence contains terms that could impact contractual liability or claims, it surfaces them for early review.
- In the event of project delays, a bond/bank-guarantee could be coming up to its expiry date, where AI can initiate a timely alert for action.
By linking real-time schedule and cost data to contract clauses, the system ensures commercial implications are identified early, not during post-facto audits.
3. Contextual Recommendations – From Insight to Action
Beyond monitoring, AI systems can offer context-aware recommendations, enabling teams to take timely and informed action:
- Suggesting whether a delay notification is needed, and referencing applicable clauses
- Identifying when a change constitutes a variation and recommending supporting documents
- Advising on back-charge conditions or subcontractor non-performance handling
- Drafting initial notices, letters, or claims based on prior examples and contractual tone
These AI-driven recommendations are always presented for human review, but they accelerate the process significantly, turning reactive document handling into proactive contract enforcement.
Integration with Project Controls and Execution Data
The full potential of AI in Contracts Management is realized when integrated with core project execution systems:
- Project schedules provide context to delay-related clauses
- Cost control systems link variations and claims to budget impacts
- Electronic Document Management Systems(EDMS) and workflow tools surface relevant documents or approvals linked to commercial decisions
- Procurement and construction data help map actual performance against contractual obligations
This interconnectedness ensures that contracts are not interpreted in isolation, but in light of live project realities resulting in more accurate risk visibility, faster decisions, and defensible actions.
Typical Use Case Scenarios in EPC Projects
In practical terms, AI-enabled Contracts Management transforms how commercial and legal risks are managed throughout the project lifecycle. Consider the following use cases:
- Variation and Change Order Claims: If engineering delays from the client impact downstream construction, the system highlights the affected activities, applicable clauses, and relevant communication. It recommends a claim path within the contractual notice period, backed by evidence, and auto-generates a draft claim letter.
- Subcontractor Compliance Tracking: For a subcontractor repeatedly failing inspection criteria, the system flags the deviation, links it to performance and payment clauses, and recommends potential back-charges or contract enforcement actions.
- Early Warning Systems: When progress deviations approach thresholds that trigger penalty clauses or impact critical milestones, the AI alerts the team. It provides historical context and suggests immediate commercial interventions, such as issuing delay notices or seeking extensions of time (EOT).
- Claim Defense and Dispute Support: In disputes or audits, the system can recreate timelines of correspondence, notices, and approvals, mapped to contract terms, helping validate positions and reduce legal overhead.
Benefits Across the Project Stakeholder Chain
When implemented thoughtfully, AI-driven Contracts Management offers substantial benefits to all parties in an EPC environment:
| Stakeholder | Benefits |
| Owners | Improved visibility into contractor performance, risk posture, and entitlement claims; proactive cost control |
| EPC Contractors | Timely alerts on risks, reduced exposure to unclaimed entitlements or penalties, accelerated commercial decisions |
| Subcontractors & Vendors | Clearer visibility of obligations and due process for claims or disputes |
| Legal & Commercial Teams | Centralized, searchable audit trails; reduced manual workload; faster document turnaround |
| Project Controls Teams | Better alignment of schedule/cost changes with contractual frameworks |
Human Engagement Enhanced by AI, Not Replaced
It is important to note that AI does not replace the role of seasoned contract managers, legal counsel, or commercial professionals. Rather, it acts as an intelligent assistant, handling the burdensome tasks of tracking obligations, mining documents, and surfacing risks, so that experts can focus on judgment, negotiation, and strategy. Digitizing the process would help avoid human omissions and interpretational subjectivity.
By making contracts searchable, relatable, and operationally embedded, AI reduces the gap between contractual design and project delivery realities.
Conclusion: From Passive Documents to Active Governance – Fire-fighting to Fire-prevention
Contracts should no longer be passive reference documents used only during claims or closeout. With AI, they become active tools of governance, guiding decisions, flagging risks, and supporting performance throughout the lifecycle of a project.
In a world of increasingly complex, multi-party capital projects, AI-powered Contracts Management represents not just a technological evolution, but a strategic shift in how the industry safeguards commercial outcomes and enforces delivery discipline. As stakeholders across the EPC value chain look to minimize disputes, protect margins, and adopt a #ZeroToleranceToDelays mindset, intelligent contracts management is no longer optional – It is essential.
