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Legal Programme Management
8 September 2006 (Some Credits: PMI PMBOK, ESI International) 1
The Contract Management Process Teamwork: Roles & Responsibilities Global Contracting Concepts & Principles Contracting Methods The Pre-Award Phase Contract Pricing Arrangements The Award Phase The Post-Award Phase Conclusion - Using Global Best Practices
8 September 2006 (Some Credits: PMI PMBOK, ESI International) 2
The Contract Management Process
8 September 2006
(Some Credits: PMI PMBOK, ESI International)
What is Contract Management?
• The process of planning, forming and administering agreements to buy or sell goods and services from or to another party The art and science of managing contractual agreements throughout the contracting process
Seller/ Prime Contractor
(Some Credits: PMI PMBOK, ESI International)
8 September 2006
An agreement between two or more (competent) parties or persons that creates an obligation to do or not do a particular thing A contract has two aspects: Document: Written manifestation of an agreement between parties Relationship: The personal or professional commitment that forms the understanding between people who enter into agreements, either oral or written
8 September 2006 (Some Credits: PMI PMBOK, ESI International) 5
Contracts Are: Sources of business: For sellers Sources of goods and services: For buyers Risk management tools: For both buyers and sellers Projects: That must be managed by people from both the buyer’s and seller’s organisations 8 September 2006 (Some Credits: PMI PMBOK. ESI International) 6 .
ESI International) Quality 7 .Contracts Are Projects Contracts are Goal-oriented Coordinated and interrelated activities Of finite duration For stated consideration Unique Time Contracts must be managed and performed to stated Cost quality standards 8 September 2006 (Some Credits: PMI PMBOK.
The Four “P”s of Contract Management People Privity Privity Roles & Roles & Responsibilities Responsibilities Authority Authority Solicitation Solicitation Planning Planning Procurement Procurement Source Source Planning Planning Selection Selection Solicitation Solicitation Contract Contract Administration Administration Contract Contract Closeout/ Closeout/ Termination Termination Process Accountability Accountability Improved Improved Business Business Performance Performance Superior Superior Project Results Project Results Contract Management Customer Customer Satisfaction Satisfaction Reasonable Consideration CR Contracts FP Contracts T&M Contracts Performance 8 September 2006 (Some Credits: PMI PMBOK. ESI International) Price 8 .
Contract Closeout/ Termination9 Phase II: Award Phase Phase I: Pre-Award Phase Phase III: Post-Award Phase Contract Management Process 8 September 2006 (Some Credits: PMI PMBOK. Source Selection 5. ESI International) . Solicitation 4. Solicitation Planning 3. Procurement Planning 2.Phases of Contract Management 1. Contract Administration 6.
significantly affect the results of your business! Because an improved understanding of contract management can produce superior project results and greater customer satisfaction 8 September 2006 (Some Credits: PMI PMBOK. ESI International) 10 .Why Care About Contract Management? Because the decisions made and actions taken both before and after the contract is awarded.
Teamwork .Roles and Responsibilities 8 September 2006 (Some Credits: PMI PMBOK. ESI International) 11 .
ESI International) 12 .The Concept of Agency Authority Authority Buyer Agent Agent Seller Buyer Agent Agent Seller Agent Agent Subcontractor Privity Privity No Privity 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 13 .Who Is in Charge? • Project Manager – Responsible for ensuring the coordinated undertaking of goaloriented projects – Overall responsibility for execution of the work • Contract Manager In charge of: – contractually specified tasks for completion of the work – contract deliverables not related to the SOW specifications or product descriptions 8 September 2006 (Some Credits: PMI PMBOK.
Who Is in Charge? (Contd. ESI International) 14 .) Contract managers and project managers Authority Responsibility Accountability Sources of conflict Precontract actions Seller selection Pricing arrangements and contract terms and conditions Specification of requirements Control of contracts with other party 8 September 2006 (Some Credits: PMI PMBOK.
Global Contracting Concepts and Principles 8 September 2006 (Some Credits: PMI PMBOK. ESI International) 15 .
Offer 3. Acceptance (agreement) Consensus ad idem 5. Competent parties 2. 8 September 2006 4. ESI International) 16 .Essential Elements of a Contract 1. Consideration (bargained for exchange) Legality of purpose (Some Credits: PMI PMBOK.
What Is a Breach? Failure. to perform any promise that forms the whole or part of a contract Remedies for breach Compensatory damages Liquidated damages Specific performance Other actions (waiver. ESI International) 17 . forbearance) Nonpunitive damages 8 September 2006 (Some Credits: PMI PMBOK. without legal excuse.
ESI International) 18 .Contract Ts & Cs Define the rights and responsibilities of the parties to the agreement Term: An enforceable promise that addresses a specific subject Condition: A phrase that either activates or suspends a term Note: Contract managers must be aware of all terms and conditions 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) .Examples of Common Ts & Cs • • • • • • • • Acceptance Duration Change Management Delivery Dispute Resolution Choice of Law Force Majeure Intellectual Property Rights • Confidentiality • Invoicing • Payments 8 September 2006 • Liquidated Damages • Points of Contact (Authorised Representatives) • Pricing & Discounts • Product Quality • Scope of Work/Services • Taxes • Termination • Warranty • Indemnification • Limitation of Liability 19 (Some Credits: PMI PMBOK.
Global Contracting Concepts & Principles (Contd. ESI International) 20 .) 8 September 2006 (Some Credits: PMI PMBOK.
from the point of view of an impartial third party knowledgeable of the facts 8 September 2006 (Some Credits: PMI PMBOK. ESI International) 21 .Contract Interpretation Objective To ascertain the purpose of the parties.
Contract Interpretation (Contd. ESI International) 22 .) First Rule: Intent of the Parties Parol Evidence Rule Secondary Rules Order of Precedence or Whole Instrument Express Language Rules of Statements Conduct of the Parties Custom in the Trade Prior Course of Dealings Contra Proferentem Rule 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 23 .Contracting Methods 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 24 . Frame/Master/Universal/ General Purchase Agreements Dealer/Distribution Agreements Single-source negotiation Sole-source negotiation 8 September 2006 (Some Credits: PMI PMBOK.General Contracting Methods Competitive Simplified • Purchase cards • Imprest funds or petty cash • Auctioning Formal • Sealed Bidding • 2-Step Sealed Bidding • Competitive Proposals • • • • Non-competitive BOA.
000. using a frame SFC One-off supply of goods and/or services. ESI International) Other Agreement Type 8 September 2006 Above N2.000 and below. using bespoke contract or non-frame SFCs.000.000 25 .VNL Contracting Methods Contract Type Activity Description Value Limit Minor Requisition Simplified low value transactions N100. (Some Credits: PMI PMBOK. N2.000 and below to be issued by Procurement Division Unlimited Purchase Order Supply of goods and/or services which do not require intricate testing before acceptance or which can be accepted upon physical inspection Frame Agreement Supply of goods and/or services in more than one instance under similar originating terms and conditions.
The Pre-Award Phase 8 September 2006 (Some Credits: PMI PMBOK. ESI International) 26 .
Procurement Planning (Contd. how. what. ESI International) 27 . how much and when to procure Input Scope statement Product description Procurement resources Market condition Other planning output Constraints Assumptions Tools & Techniques Make-or-buy analysis Expert judgment Contract types selection Risk Management process Contract Ts & Cs Output Procurement Management Plan Statement of Work 8 September 2006 (Some Credits: PMI PMBOK.) Involves the buyer’s consideration of whether.
ESI International) 28 .Solicitation Planning Involves preparing the documents needed to support the solicitation Input Procurement Management Plan Statement of work Other procurement planning output Tools & Techniques Standard forms Expert judgment Output Procurement documents Evaluation criteria Statement of Work updates 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 29 . RFI.) Involves obtaining information (bids and proposals) from prospective sellers on how project needs can be met Input Procurement documents Qualified seller lists Tools & Techniques Bidders conferences Advertising Output Solicitation that leads to the submission of bids or proposals Types of solicitations: RFP. ITT. IFB. RFI&Q 8 September 2006 (Some Credits: PMI PMBOK.Solicitation (Contd. RFT. ITB. RFQ.
ESI International) 30 .Contract Pricing Arrangements 8 September 2006 (Some Credits: PMI PMBOK.
Business Objective To negotiate a contract type and price (or estimated cost and fee) that will result in reasonable seller risk and provide the seller with the greatest incentive for efficient and economical performance 8 September 2006 (Some Credits: PMI PMBOK.Type of Contract . ESI International) 31 .
ESI International) 32 .Factors in Selecting Contract Types Marketplace and competition Type and complexity of the requirements Urgency of the requirement Seller’s technical capability Administrative costs to both parties Size and amount of the contract Capability of seller’s accounting system 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 33 .Categories & Types of Contracts Categories Fixed-Price Types of Firm-fixed-price Contracts (FFP) Fixed–price with economic price adjustment (FP/EPA) Fixed-Price-Incentive (FPI) Cost-Reimbursement Cost-Reimbursement (CR) Cost-plus-incentive fee (CPIF) Cost-plus-award fee (CPAF) Cost-plus–fixed fee (CPFF) Cost–plus-a-percentage-ofcost (CPPC) T&M Time-andMaterials (T&M) 8 September 2006 (Some Credits: PMI PMBOK.
Risk Types of Contracts FFP FP FPI CR CPIF CPAF CPFF CPPC Fixed-price Cost-Reimbursement Risk T&M Low High Buyer Seller Performance Measurement High Low Less More 8 September 2006 Buyer Seller (Some Credits: PMI PMBOK. ESI International) More Less 34 .Range of Contract Types and Performance Measurements Vs.
ESI International) 35 .The Award Phase 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 36 .Source Selection (Contd.Award Phase .) Source selection is the process of applying evaluation criteria to bids or proposals to select a supplier Input Tools & Techniques Output Evaluation criteria Evaluation standards Proposals Organisational policies Contract negotiation Weighting system Screening system Independent estimates Contract or Walk Away 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 37 .Weighting Selection and weighting of attributes must reflect buyer’s needs Three general categories Management .Fair and reasonable price 8 September 2006 (Some Credits: PMI PMBOK.Features and functionalities of the product Price .Attributes or qualities of seller as an organisation Technical .
ESI International) 38 .Evaluation Standards Relate to attribute values Compare the proposals received to set evaluation criteria Three approaches Absolute standards Minimum standards Relative standards 8 September 2006 (Some Credits: PMI PMBOK.
VNL Contract Drafting & Execution Process Flow .
ESI International) 40 .The Post-Award Phase 8 September 2006 (Some Credits: PMI PMBOK.
Contract Administration The principal objective of contract administration is to ensure fulfillment of contractual obligation by all parties lnput Contract Work results Change requests lnvoices and payments Other tasks Contract administration policies Tools&Techniques Contract analysis and planning Pre-performance conference Performance measuring and reporting Payment system Change control system Dispute management System (Some Credits: PMI PMBOK. ESI International) Output Documentation Contract changes Payment Completion of work 8 September 2006 41 .
ESI International) 42 .Reasons for Non-Compliance The six great excuses: ‘I never saw the contract’ ‘I didn’t have a chance to read the contract’ ‘I didn’t understand the contract’ ‘I thought the contract was wrong’ ‘That’s not what the contract says!’ ‘What contract?’ 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) .Main Tasks of Contract Administration • Read and analyse the contract • Evaluate organisation’s ability to comply • Obtain commitments • Develop a Contract Administration Plan • Conduct internal and external pre-performance (or kick-off) conferences • Initiate compliance activities • Prepare schedules 8 September 2006 • Track • Report • Ensure timely invoice and payment • Document decisions and events • Manage contract changes • Monitor contract performance • Resolve contract disputes • Close or terminate the contract 43 (Some Credits: PMI PMBOK.
ESI International) 44 . acceptances Progress and surveillance reports lnvoice and payment records 8 September 2006 (Some Credits: PMI PMBOK.Records and Files for Buyers & Sellers Official copy of contract and modifications Conformed working copy of contract Correspondence file. and suspenses Telephone log Record of deliveries. log or index. inspections.
ation ESI International) 45 .Change Management: The 7 Principles Authorisation Written Confirmation Estimation & Approval Change Management Compensation Identification 8 September 2006 Change Impact Notification Document(Some Credits: PMI PMBOK.
fit & function • Direct and Indirect Observation – site visits (direct) – progress reports (indirect) 8 September 2006 (Some Credits: PMI PMBOK. ESI International) 46 .Performance Monitoring • Ensure Quality – conformance to requirements – Form.
ESI International) .Performance Monitoring (Contd.) • Inspections • Rules of Acceptance – In-process inspections – Pre-final inspection – Final or closeout Inspection – ‘strict conformity’ or ‘perfect tender’ – material and immaterial breaches – fundamental breach – substantial conformance 47 8 September 2006 (Some Credits: PMI PMBOK.
ESI International) 48 .Contract Closeout Contract closeout involves both product verification and administrative closeout lnput Completion of work Contract documentation or Termination notice Tools&Techniques Compliance verification Contract documentation Contract closeout checklist Termination Output Product or service completion Acceptance and final payment Contract closeout or termination documents Documented lessons Iearned 8 September 2006 (Some Credits: PMI PMBOK.
action is complete 8. All products and/or services required have been provided to the buyer 2. Any required contract audit is now complete. All outstanding subcontracting issues have been settled. Documentation adequately shows receipt and formal acceptance of all contract items 3. The final invoice has been submitted and paid 8 September 2006 (Some Credits: PMI PMBOK. Any buyer–furnished property has been returned to the buyer 5. All actions related to contract price revision and changes have been concluded 6. If a partial or complete termination was involved. 9. 4. 7.Sample Contract Closeout Checklist Sample Contract Closeout Checklist Yes N/A No 1. No claims or investigations are pending on this contract. ESI International) 49 .
5. assessments Simplify standard contract Ts & Cs Permit oral presentation of proposals Employ highly skilled contract negotiators Hold pre-performance conferences Adopt a uniform solicitation. Opportunity 8 September 2006 • • • • • • • 3. 8. Use a Contract Management Methodology Commit to a contract Management Professional Development Programme (e.Conclusion . with ESI Intl.Using Global Practices 1. NCMA. 7. proposal or contract format Use ADR methods to resolve disputes Develop and maintain a bestpractices and lessons-learned database 50 (Some Credits: PMI PMBOK. 4. NAPM) Establish a list of pre-qualified suppliers Take advantage of e-commerce or EDI Use corporate p-cards Adopt value-based pricing where sensible Use universal sales agreements Conduct Risk vs. ESI International) . 2.g. 6.
ESI International) 51 .Thank You 8 September 2006 (Some Credits: PMI PMBOK.
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