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Transcript of 203 Walker
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Session 203
April 23, 2007
2:50 3:50 pm
Holly K. Walker, CPCMCorporate Learning Solutions and
Contract Mgmt. Consultant
Introduction to
Commercial ContractingUnderstanding
The Basics
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Commercial Contracts
Contracts help to build relationships between
buyers and sellers
Contracts attempt to allocate risks and
responsibilities between the parties The professional purchasing/contract manager
can build a bridge between the customer and
supplier.
The purchasing/contract manager mustunderstand and balance the needs of the
contracting parties
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Elements of a Contract
Competent Parties
Consideration
Lawful Purpose
Certainty of Terms
Offer
Acceptance
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Contracts- Written Vs. Oral
A contract is a promise between parties
Contracts maybe written ororal
If the following are present (on a scrap of paper,
or even oral), a contract may exist:The parties
The goods
Time at which the transaction will occur
Gaps will be filled in by UCCor UNCISG or civil
law
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Different Legal Systems
Common Law
Civil Law
Islamic Law
Communist law
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Laws Governing Contracts
THE PARTIESTOAN AGREEMENTARE, BY
MUTUAL CONSENT, usually FREETOCHANGETHE RESULTOFTHE LAW FOR PURPOSESOF
THATAGREEMENT.
Uniform Commercial Code
United Nati
ons
Conventi
on
onthe International Sale of Goods
(CSIG)
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First Steps- BuyerIdentify Possible NeedsNew service
offeringExpand market share
Become more cost effective
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Next Steps - Buyer
Identify and Analyze Requirement
Functional
Performance
Design
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Buyer: Pre Contract Activity
Establish evaluation criteria
Attributes of interest
Price/quality/deliveryReputation of seller
Standards
Weighting
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Match customer requirements to applications,assess opportunities and prepare to assist the
customer in the development of the RFP.
Seller: Pre- RFP Activity
Review opportunity Review own
capabilities
Assess and prioritize
opportunities Influence design of
customer RFP
Review need fordevelopment work
Provide input to customer
on how your company can
provide assistance
Create necessary third
party agreements
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Pre-Contract Activities- Seller
Make Preliminary Bid/No Bid Decision
How are we different from competitors
Can we make th
ose di
fferences strengths?How much will it cost to win?
What are the risks?
Are the potential benefits, worth the costs?
Do
we have the pro
duct po
rtfo
lio
?Can we meet the needs of this customer?
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Contract ManagementContract Management
ResponsibilitiesResponsibilities Actively participate on the proposal team
Identify customer required terms and conditions
Identify and assess financial impact of customerterms and conditions
Obtain input from all affected organizations
Determine customer acceptance criteria
Propose sellers terms and conditions of
response- if appropriate
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Develop contracts that contain clear
deliverables and contractual obligations
and standard terms and conditions, while
identifying and mitigating all risks.
Contract Formation
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Contract Formation
Prepare negotiation
plan
Negotiate major
issues Prepare draft
contract
Negotiate minor
issues
Review and
approve contract Obtain contract
signature
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Contract Standards
Most major companies developstandard contract forms, proceduresand clauses
These standards allow contracts to beprocessed more quickly, cost effectivelyand with reduced risk
Standards als
ohelp t
oassure thatagreements entered into are aligned
with the companys business objectives
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Usual Contentious
ClausesPricing and Payment Terms
Liquidated Damages/Penalties
Liability/Indemnification Terms
Warranties (Scope and Durati
on)
Intellectual Property Ownership
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Successful Contract
NegotiationInvolves thorough preparation and
planning
Effective team planning
Sharp negotiation skills
Understanding the other partys goals
Documentation of agreements
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Buyer and Seller: ContractBuyer and Seller: Contract
AdministrationAdministrationEnsure that all contractual obligations are metthrough communication among all necessaryparties; manage contract disputes through
negotiation/resolution and review lessons learnedthroughout performance and at contractcompletion.
Communicate Contract Authorization
Plan Contract Administration
Manage Contract performance
Review Contract Completion
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Buyer and Seller: ContractBuyer and Seller: Contract
AdministrationAdministrationCommunicate contract authorization and necessary informationCreate contract administration plan and distribute as necessary
Contract Obligations Matrix
Responsibility Assignment Matrix
Manage contract performance:Correspondence control
Manage contract changes
Prepare final acceptance package
Ensure all contractual obligations have been met
Monitorfinancial and operational performanceReview contract completion
Close-out
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Buyer and Seller: Managing
Contract Performance Anticipate problems and take appropriate action
Observe performance and progress and resolve
problems
Manage disputes
Manage contract changes
Resolve payment discrepancies
Escalate unres
olved disputes
Confirm that all contract obligations have been
met
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Sources of Risk in Contracts
Technical Risks
Political and Commercial
Financial and
Economic
Contract Terms and Conditions
Behavioral Risks
Project Organization
Scope and Schedule Risks
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The ContractA
well written agreementanswers who, what, where,
when, and what to do if.