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Contract & Tender Management
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Contract & Tender Management

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Minimise Risk Exposure

Minimise Risk Exposure

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Contract & Tender Management Contract & Tender Management Presentation Transcript

  • Contract & Tender Management Minimise Risk Exposure Anand Subramaniam
    • “ A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools. I love deadlines. I like the whooshing sound they make as they fly by ."
      • - Douglas Adams
  • Highlights
    • Contract – Elements & Form
    • Contractor’s Risk
    • Contract Administration Cycle & Changes
    • Termination & Rights
    • Negotiations & Award
    • Tender - Articles
  • Contract – Elements & Form
  • Elements of a Contract
    • Mutual agreement
    • Consideration
    • Contract capability
    • Legal purpose
    • Form provided by law
  • Contract Form
    • Completion contract
    • Term contract
  • Contractor’s Risk
  • Contractor’s Risk FFP CPFF Contractor’s Risk HIGH LOW LEGEND FFP FIRM FIXED PRICE CPFF COST PLUS FIXED FEE
  • Firm-Fixed-Price Contract (FFP) 0 % 0 % 100 % 100 % Contractor’s Risk Customer’s Risk Risk Sharing Meter RISK LOCATION
    • Maximum risk with contractor
    • Higher negotiated profit margins
    • High likelihood of scope changes
  • Incentive Contracts
    • Additional profits are possible by lowering cost
    • Customer and contractor share cost savings
  • Fixed-Price Incentive Fee Contract (FPIF) 0 % 0 % 100 % 100 % Contractor’s Risk Customer’s Risk Risk Sharing Meter RISK LOCATION
    • Contractor can earn additional profits
    • Contract has a ceiling on price (or cost) paid
    • Price (or cost) ceiling at point of total assumption
  • Cost Plus Incentive Fee Contract (CPIF) 0 % 0 % 100 % 100 % Contractor’s Risk Customer’s Risk Risk Sharing Meter RISK LOCATION
    • Contractor can earn additional profits
    • All costs are reimbursed (cost run-ups)
    • A “floor” and “ceiling” exists on profits
  • Cost Plus Award Fee Contract (CPAF) 0 % 0 % 100 % 100 % Contractor’s Risk Customer’s Risk Risk Sharing Meter RISK LOCATION
    • All costs are reimbursed (cost run-ups)
    • Negotiated range of possible profits
    • Customer determines profit paid at completion
  • Cost Plus Fixed Fee Contract (CPFF) 0 % 0 % 100 % 100 % Contractor’s Risk Customer’s Risk Risk Sharing Meter RISK LOCATION
    • All costs are reimbursed (cost run-ups)
    • Fee is fixed (in $$$ not %) irrespective of costs
    • Contractor is motivated for early completion
  • Cost Plus %age of Cost Contract (CPPC) 0 % 0 % 100 % 100 % Contractor’s Risk Customer’s Risk Risk Sharing Meter RISK LOCATION
    • Costs incurred may be unlimited
    • Contractors can maximise profits
    • Scope changes may be frequent and unlimited
  • Contract Risk Summary RISK LOCATION FFP FFE FPIF CPIF CPAF CPFF CS C CPPC 0 % 100 % Contractor’s Risk 0 % 100 % Customer’s Risk Risk Sharing Meter
  • Contract Administration Cycle & Changes
  • Contract Administration Cycle
    • Change management
    • Specification interpretation
    • Adherence to quality
    • Warranties
    • Subcontractor management
    • Production surveillance
    • Waivers
    • Contract breach
    • Resolution of disputes
    • Project termination
    • Payment schedules
    • Project closeout
  • Types of Changes
    • Administrative change
    • Change order
    • Contract modification
    • Undefined contractual action
    • Supplemental agreement
    • Constructive change
  • Clauses of Constructive Changes
    • Defective specification with impossibility of performance
    • Erroneous interpretation of contract
    • Over-inspection of work
    • Failure to disclose superior knowledge
    • Acceleration of performance
    • Late or unsuitable owner or customer furnished property
    • Failure to cooperate
    • Improperly exercised options
    • Misusing proprietary data
  • Order of Precedence
    • Specifications (first priority)
    • Other instructions (second priority)
    • Other documents, such as exhibits, attachments, appendices, SOW, contract date requirements list [CDRL], etc. (third priority)
    • Contract clauses (fourth priority)
    • The schedule (fifth priority)
  • Termination & Rights
  • Reasons for Termination
    • Elimination of the requirement
    • Technological advances in the state-of-the-art
    • Budgetary changes
    • Related requirements and/or procurements
    • Anticipating profits not allowed
    Convenience of the Customer
  • Reasons for Termination (Contd.)
    • Contractor fails to make delivery on scheduled date.
    • Contractor fails to make progress so as to endanger performance of the contract and its terms.
    • Contractor fails to perform any other provisions of the contract.
    Default Due to Contractor’s Actions
  • Contract Administration Rights
    • Reject the entire shipment
    • Accept the entire shipment (barring latent defects)
    • Accept part of the shipment
  • Negotiations & Award
  • Negotiation Factors
    • Compromise ability
    • Adaptability
    • Good faith
  • Negotiation Planning
    • Develop objectives (i.e., min-max positions)
    • Evaluate your opponent
    • Define your strategy and tactics
    • Gather the facts
    • Perform a complete price/cost analysis
    • Arrange “hygiene” factors
  • Negotiation Objectives Buyer Seller Min Min Objective Objective Max Max Price
  • Award Contract
    • Negotiate a contract type and price that will result in
      • reasonable contractor risk and
      • provide the contractor with the greatest incentive for efficient and economic performance
  • Tender Articles
  • Definition & Principles
    • Article - Definitions
    • Article - Notices and Written Communications
    • Article - Eligibility
    • Article - Type of Contract
    • Article - Equality of Participation
    • Article - Derogation
    • Article - Competition
    • Article - Service Contracts
    • Article - Design Competition
    • Article - Technical Specifications and Standards
    • Article - Notices and Written Communications
  • Tender Dossier & Invitation
    • Tender Dossier
      • Article - Requests for Clarification
    • Invitation to Tender
      • Article - Notice of Invitation to Tender
      • Article - Pre-selection of Tenderers
      • Article - Direct Agreement Contracts
  • Instructions
    • Article - Performance Period
    • Article - Origin of Supplies
    • Article - Contents of the Tender
    • Article - How to Price the Tenders
    • Article - Tender Guarantee
    • Article - Currency of Tender
    • Article - Currency of Payment
    • Article - Variant Solutions
    • Article - Subject of the Contract and Contract Language
    • Article - Co-operation with Third Parties
    • Article - Training in Installation and After Sales Service
    • Article - Tender Validity Period
    • Article - Tendering Expenses
    • Article - Language
    • Article - Pricing of Tenders
    • Article - Period of Validity
    • Article - Pre-tender Visit
    • Article - Signing of Tenders
    • Article - Independence of Tenderers
    • Article - Variations in Quantities Ordered
    • Article - Performance Guarantee
    • Article - Number of Original and Copies and Signing of Tenders
  • Tender - Submission & Examination
    • Submission
      • Article - Closing Date for the Submission of Tenders
      • Article - Withdrawal and Amendments
      • Article - Formalities for Receipt of Tenders
      • Article - Time Limit
      • Article - Sealing and Marking of Envelopes
    • Examination
      • Article - Opening of Tenders
      • Article - Evaluation of Tenders
      • Article - Annulment of the Tender Procedure
  • Award of Contract
    • Article - Notification of the Award of Contract
    • Article - Signing of the Contract
    • Article - Communications to Unsuccessful Tenderers
    • Article - Selection
    • Article - Preparation of Contract Document
    • Article - Performance Guarantee
  • Contract Documents
  • Include Documents / Samples – viz.,
    • Technical Specifications
    • Applicable Legal & Fiscal Requirements
    • Appendix
      • Model Tender Guarantee Form
      • Evaluation Criteria
      • Tenderer Qualification Form
      • Certificate of Ownership
      • Supply and Service Contracts
      • Financing Options
      • Tender Form
      • Special Conditions
      • Bank Guarantee
    • “Those people who think they know everything are a great annoyance to those of us who do.”
    • - Isaac Asimov
    • Good Luck
    • http://www.linkedin.com/in/anandsubramaniam