Various procedures of procurement and contracts

1. PROCUREMENT & CONTRACT MANAGEMENT
Presented By : Irfan Ghalib
Director – SCM
Dt : 30th May
2023

2. SEQUENCE
 Procurement
 Defining Contract
 Contract Management
 Stages of Contract Management Process
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3. OBJECTIVES
 To highlight the processes preceding contract award such as
procurement planning, selection of contractors etc.
 To focus on the Contract Management activities carried out
during the period from the award of contract to contract
completion
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4. WHAT IS PROCUREMENT ?
 Procurement is acquiring goods/services from an outside source
 The process to obtain products or services from market supply in
order to smoothly run the production and business activities
 The act of sourcing and purchasing goods, services, or raw
materials for a business from vendors or suppliers
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5. OUT SOURCING – A DECISION
 Fixed and recurrent costs reduction considerations
 To focus on core business
 To access and get benefit of skills and technologies
 To acquire flexibility in operations
 To increase accountability
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6. WHAT IS A CONTRACT ?
 An agreement between two or more parties creating obligations
enforceable or otherwise recognizable as law
 For a contract to be enforceable, the parties must agree on the
same terms, conditions, and subject matter
 Contracts must be clearly written communicating the terms and
conditions/obligations/promises
 The terms, conditions, and obligations must be consistent
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7. CONTRACT MANAGEMENT
Contract management is part of the Procurement Process,
 That enables both parties to meet their obligations in order to
deliver the objectives required from the contract
 Building a good working relationship between customer & provider
 Art and science of managing a contractual agreement during the
contracting process
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8. CONTRACT MANAGEMENT
 Managing contracts as a part of legal documentation of forging
work relationships with customers, vendors, or even partners.
 Negotiating the terms and conditions in contracts
 Certifying compliance with the terms and conditions
 Documenting and agreeing on any changes by both the parties
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9. CONTRACT MANAGEMENT
 Systematic and efficient planning, execution, monitoring, and
evaluation of contracts
 An approach to optimize performance and managing risks
 To ensure that both parties fulfill their contractual obligations
 To deliver the ultimate goal of achieving value for money (vfm)
 A key driver to achieving results on the ground
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10. OBJECTIVES OF CONTRACT MANAGEMENT
 To ensure product/service is sold at an agreed-upon price
 To assess whether product/service conforms to specified quality
standards
 To ensure product/service is delivered timely, at the right place,
and correct quantity
 To ensure that vendor management is cost-effective
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11. CONTRACT MANAGEMENT PROCESS
 Procurement planning: determining what to procure and when
 Solicitation planning: documenting product requirements and
identifying potential sources
 Solicitation: obtaining quotations, bids, offers, or proposals
 Source selection: choosing from among potential vendors
 Contract administration: managing the relationship with the vendor
 Contract close-out: completion and settlement of the contract
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13. PLAN PROCUREMENTS
Procurement planning involves identifying the production needs
best met by using products or services from market, deciding
 Whether to procure
 How to procure
 What to procure
 How much to procure
 When to procure
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14. PLAN PROCUREMENTS
 Defining the requirement
 Development of the procurement statement of work,
specifications, and work breakdown structure
 Laying out the major milestones and the timing/schedule
 Cost estimating, including life-cycle costing
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15. PLAN PROCUREMENTS
 Determining whether qualified sellers exist
 Identifying the source selection criteria
 listing of possible project/procurement risks Developing a
procurement plan
 Developing a procurement plan
 Obtaining authorization and approval to proceed
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16. PROCUREMENT RISKS
 Technical: Specifications open to misinterpretation, vague wording
 Delivery Schedule: Unrealistic delivery time
 Warranty : Technology/nonstandard solutions
 Resources: Availability, skill levels, inadequacies
 Financial: L/C , Payment plans, inflation, currency exchange, bonds
 Force majeure: Permits/licenses, political stability, legislation
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17. Contract Implementation – 3 D Approach
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18. CONDUCTING THE PROCUREMENT
 Evaluating/confirming specifications
 Confirming qualified sources
 past performance of sources
 Producing the solicitation package
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19. SOLICITATION PACKAGE
 Bid documents standardized
 Listing of qualified vendors
 Proposal evaluation criteria
 How change requests will be managed
 Supplier payment plan
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20. PROPOSAL EVALUATION SCORING
 Understanding of the requirements
 Overall bid price
 Technical superiority
 Management capability
 Previous performance
 Financial strength & Production capacity
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21. REQUEST SELLER RESPONSES
 Advertising: Sealed bids, no negotiations
 Negotiation
 Request for information (RFI)
 Request for quotation (RFQ)
 Request for proposal (RFP)
 Invitation for bids (IFB) & Small purchases
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22. SELECTING APPROPRIATE SELLERS
 Evaluation criteria: time, cost, expected management team of the
project, and previous performance history
 Contract award strategy: price-based/best-value
 Perform a complete price/cost analysis
 A negotiation process
 Major factors of negotiations
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23. CONTRACT SELECTION CRITEREA
 Overall degree of cost and schedule risk
 Type and complexity of requirement (technical risk)
 Extent of price competition
 Urgency of the requirements & Performance period
 Contractor’s responsibility (and risk) & Concurrent contracts,
Extent of subcontracting
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24. CONTRACTUAL ARRANGEMENTS
 Fixed price or lump sum
 Fixed price with re-determination
 Fixed price with economic price adjustment
 Cost and cost sharing
 Fixed price for services, material, and labor
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25. CONTRACT ADMINISTRATION
 Contract maintenance and change control with cost monitoring
 Ordering and payment procedures
 Management reporting
 All parties understand who does what, when, and how
 The contract documentation reflects the arrangement, and
changes to it carefully controlled
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26. CONTRACT ADMINISTRATION FUNCTIONS
 Change management & Specification interpretation
 Adherence to quality requirements & Inspections and audits
 Warranties
 Performance reporting, and Contractor performance Report Card
 Records management
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27. TYPICAL CAUSES OF CONTRACT CHANGES
 Defective specification with impossibility of performance
 Erroneous interpretation of contract and Over inspection of work
 Acceleration of performance
 Failure to cooperate
 Improperly exercised options
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28. WAIVERS
 Breach of contract
 Claims administration
 Resolution of disputes
 Payment schedules
 Project termination
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29. REASONS FOR TERMINATION
 Elimination of the requirement due to Technological advances
 Budgetary changes
 Default due to contractor’s actions
 Failure to make delivery on scheduled date
 Failure to perform any other provisions of the contract
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30. CONTRACT CLOSURE
 Documented verification of the output duly accepted by the buyer
 Debriefing the seller on their overall performance
 Documenting seller’s performance as reference
 Identifying room for improvement on future contracts
 Archiving necessary documentation &
 Identifying best practices
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