The document discusses procurement and contract management. It begins by defining procurement as acquiring goods or services from outside sources. It then discusses defining contracts, contract management processes, and the key stages of contract management including planning, solicitation, selection, administration, and closure. The objectives of contract management are ensuring the product or service is delivered on time, at the agreed price and quality standards. The document provides details on each stage of the contract management process.

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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