What is a project management agreement?
Project management agreements are legal documents that outline the budget, resources, liabilities and termination clauses for a project.
Once the agreement is signed by the company working on the project and their client, it acts as a helpful guide for both parties to understand the service agreement as it explains any liabilities, payment obligations, and project requirements.
Why you need a project management contract
A project management agreement is an important document for both parties involved to sign before any work starts.
Here's the reality—no company or client should be involved in managing a project that's decided over a handshake. A written project management contract does more than finalize timelines and lay out expectations for the work that will be done (although that's important, of course.) It protects both parties if there are damages, disputes or misunderstandings once the work starts.
If there are any disagreements about anything—whether it's how much the contractor should get paid or what expenses the client has agreed to pay—the project management contract will have the answers in black and white.
Let's take a look at the must-have elements that make up a legally binding project management contract.
What should be included in a project management agreement?
Detailed descriptions of the work
A project management agreement should outline each party's roles, responsibilities, and expectations once the project begins.
The contract should include basic details identifying both parties, including names, business entities, registered addresses, and phone numbers. Then, write a detailed description of the project's purpose and what deliverables the customer can expect in the project's timeframe.
The more detailed your project description is, the less chance of any scope creep occurring once work starts.
Schedule and appointments
The project management contract has to specify the start and completion date of the project.
It is advisable to break down the project into manageable deliverables and assign milestones to give your client an idea about how work will progress. A better schedule also gives you room for effective tracking and monitoring of delays.
Payment details
It's important to include payment details and expectations in any project management contract.
This part of the agreement should outline project management fees and how the work will be priced. The contract also needs to detail whether the project is a fixed contract (known as lump sum contracts that are charged as a one-time service) or if it'll be a recurring project where the client pays either by the hour (using timesheets) or a retainer fee.
Booking and travel expenses
If any travel or booking expenses fall outside the payment schedule, the contract must stipulate which party is responsible for paying for them.
It should also be clear whether or not the project management company needs to have expenses pre-approved by the client.
Liabilities
This is the section of the project management contract template where the company completing the work should include clauses that limit their exposure to legal disputes or liability in cases of damages or loss during the project.
Project managers should also check that their insurance (for their employees and resources) is adequate to protect them for the project's duration.
Cancellation/termination clause(s)
Cancellation and termination clauses are essential elements of a project management agreement as it covers both parties financially if one pulls out of the contract.
The clause outlines how far ahead either party can back away from the agreement, how much notice they must give, and if they're obligated to pay a cancellation fee.
Other factors
Don't forget to include other essential small print clauses in your project management contract, like confidentiality clauses, competitive engagements, and ownership and licenses.
These pieces of a project management contract aren't usually the pieces either party focuses on. Still, they are vital (legally) if something happens, such as misusing copyright licenses or sharing information without content.
Simple project management contract template
Project management companies can spend a lot of time creating a contract from scratch (or paying lawyers an eye-watering amount of money to write one for them).
We've solved this problem for you by creating a (legally binding) project management contract template that includes essential clauses and details to protect both parties.
Here's a simple project manager contract template for you to use:
What's the benefit of using Bonsai, instead of editing a template yourself?
Bonsai's project management contract has been approved by legal experts and is fully customizable, making it easy to change important elements to suit the needs of your next project.
Busy project managers already look to software to help them get their work done, so Bonsai's ready-made templates should be no exception. They can take the stress out of creating a legally binding contract and make it easy to change details like project pricing, invoice dates, and expenses with a couple of clicks.
And the biggest benefit is that instead of spending hours creating a project management contract template yourself—it's all done for you.
Want to use a Bonsai contract for your next project? Sign-up now to create a free project management contract that ticks all the legal boxes!
How to create a project management contract with Bonsai?
If you are a project manager, there are two options to create a project management agreement with Bonsai.
You can either download a simple project management contract PDF, or use our contract generator to customize and send a legally binding contract straight to your client's inbox.
Bonsai's contract generator allows you to make changes to liabilities, confidentiality clauses, and invoice dates. Once you're happy with all the T&Cs, just click "create contract" and it'll be on its way to your client!
Project management agreement FAQs
What are the different types of project management contracts?
There are three main types of project management contracts: Fixed Price Contracts (FP), Cost Reimbursable Contracts (CR), and Time and Material Contracts (T&M).
What is the difference between project management and contract management?
The goal of project management is to manage, oversee, and achieve the project's stated goals. On the other hand, contract management is managing a contract between the two parties involved in a project (i.e., the contractor and the client.)