PROCUREMENT & CONTRACT MANAGEMENT.pptx

Various procedures of procurement and contracts

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

2. SEQUENCE Procurement Defining Contract Contract Management Stages of Contract Management Process 2

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 3

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 4

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 5

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 6

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 7

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 8

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 T o deliver the ultimate goal of achieving value for money ( vfm ) A key driver to achieving results on the ground 9

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 10

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 11

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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 13

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 14

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 15

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 16

17. Contract Implementation – 3 D Approach 17

18. CONDUCTING THE PROCUREMENT Evaluating/confirming specifications Confirming qualified sources past performance of sources Producing the solicitation package 18

19. SOLICITATION PACKAGE Bid documents standardized Listing of qualified vendors Proposal evaluation criteria How change requests will be managed Supplier payment plan 19

20. PROPOSAL EVALUATION SCORING Understanding of the requirements Overall bid price Technical superiority Management capability Previous performance Financial strength & Production capacity 20

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 21

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 22

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 23

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 24

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 25

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 26

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 27

28. WAIVERS Breach of contract Claims administration Resolution of disputes Payment schedules Project termination 28

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 29

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 30

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32. Q & A 32