(Solution) CIPS FIDIC Terms and Conditions PDC
- This report evaluates the terms and conditions that are applicable in a contract management process to improve its implementation.
- By referencing FIDIC organisation terms and conditions, their effectiveness in mitigating issues with time, unethical, quality, costs and performance management has been evaluated.
- These terms and conditions are grouped into the goods quality, guidelines of goods and services inspection, communication, and time extension.
- Part of the analysis involves the evaluation of performance measures essential to improve management and monitoring of the stakeholder’s involvement in the contract process.
- At the end, battle of forms has been evaluated, which involves failure to agree on set terms and conditions.
- To solve this, short-term rule and long-term rule and Lord Deming could be adopted.
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Description
Solution
Table of Contents
2.0 Contract Types and Management 5
3.0 Overview of FIDIC terms and conditions in procurement and supply department 7
4.0 Importance of FIDIC terms and conditions (general construction) 9
4.1 Managing Risks of Poor Quality. 9
4.2 Managing the Risk of Time. 10
4.3 Managing Increased Costs 11
4.4 Managing Unethical Practice. 12_Toc34942108
4.5 Ensuring Monitoring and Management of Performance Measures. 12
5.2 Solving Battle of Forms in Terms and Conditions. 14
6.0 Conclusion and Recommendations 14
Appendix 1: Terms and Conditions. 17
Executive Summary
In contract management, the common issues affecting their implementation include risk of poor quality, an extension of time, costs increase, and unethical practices. Through a focus on the FIDIC organisation, this report has evaluated the extent to which their terms and conditions are applied to mitigate these issues. Apart from the problems identified, how their terms and conditions are used in ensuring an address of the performance measures through appropriate management and monitoring has been reviewed. After this analysis, the FIDIC battle of forms has been reviewed followed by conclusions and relevant recommendations.
From the review of findings and organisation terms and conditions, it is evident that they are critical for FIDIC operations. Their terms and conditions are classified into sourced quality, losses, performance standards, goods rejection, and the time used to deliver the goods and services. To harness their contracting process, they have established a purchasing order which is used to regulate goods delivery. In order to solve the problem of time, FIDIC ensures that their goods are delivered in the required timelines. To mitigate poor quality, terms and conditions require an upfront assessment of the goods before effecting the payments. In regard to the goods supplied without meeting their standards, the organisation has a right of rejecting them or requesting for them to be replaced in accordance with the warrant requirements. Regarding costs increase without an ideal regulation, these are managed by considering how they approach the issue of liability, indemnity, and issuance of insurance cover.
Taking into account the recommendations on the required improvements in contracting, different strategies have been provided. Part of recommendation includes highlighting the areas where the contracting process is negatively influenced and suggesting possible strategies that can be used. Also, there is a need to set a clear contracting agreement process to avoid conflicting views hence mitigating the issue of battle of forms. This also has a positive implication in ensuring that they are identified in the entire process of contracting. Also, FIDIC organisation is supposed to improve on the level of awareness for their staff in following the ideal contracting approach and improving overall competency level in the contract management process. This is on top of strengthening their contracting department to be able to monitor suppliers and standards of goods supplied.
1.0 Introduction
In modern organisations operations, there is a wide array of contracts. These contracts are subjected to rules of contract law, which are the terms and conditions. According to CIPS (2020a), terms and conditions are a very critical factor of contract development, assisting in minimizing the contractual risks and the exposure in doing business. Through strict adherence to terms and conditions, it is possible to leverage from the guidance of the purchasing and supply process, which include contract development and conduct of involved professionals. The advantage of this is mitigating any potential challenge that could occur risking the overall quality, timely delivery, among other legal constraints.
The selected organisation in this assessment is FIDIC. It is an international federation of consulting engineers playing the role of consulting engineering and construction. As noted in FIDIC (2020), FIDIC contracts have consistently been developed in the last 50 years established as an international standard for the consulting industry. Their operations are globally recognized in multiple jurisdictions on all project types. Their core source of success is informed by their capacity to harness a balanced approach to the roles and responsibilities of their leading players and allocation and management of faced risks. Hence, their general terms and conditions are very critical as they form the basis of the thousands of successful projects they have implemented globally. The overall FIDIC contracts are characterized by different guidance presented in their terms and conditions, which include examples of the areas where special provisions are offered in a particular project.
The position of the author in the organisation is a senior contracting officer who is tasked with the responsibility of ensuring that all the contracts are compiled and their purchase process being legally bidding. The learner also provides that there is adequate monitoring of the qualification status of different suppliers involved in the issuance of tenders. The author is experienced with handling different contract documents, which are important in the contracting process and facilitation of the various terms and conditions.
2.0 Contract Types and Management
Contract management is defined in CIPS (2019) as a process of systematically and efficiently managing contract creation, execution, and analysis to maximize operational and financial performance and to minimize risk. For the management of contracts to be effective, there ought to be a high level of flexibility on both sides and willingness to adapt to the terms of contract for reflecting the changing circumstances. It is essential to appreciate that problems could arise, which could not have been foreseen at the time of awarding the contract. For an appropriate scoping, planning, implementing, management, and reviewing of a contract, a lifecycle can be followed (see figure 1).
Figure 1: Contract Management Lifecycle
Source: CIPS (2019)
As illustrated in figure 1, FIDIC ensures that they follow the 12 phases, which allows that they consolidate all resources and activities to achieve their intended goals. The process of management is inclusive of integrating all key performance indicators with all stakeholders being included in their operations. Apart from this cycle, FIDIC adopts different terms and conditions to promote the level of interaction of both internal and external stakeholders. It is hence possible to adhere to different terms and conditions, potentially guiding all involved stakeholders in their engagement.
There are different stakeholders engaged with different roles played as directed by their contract. They are expected to demonstrate high-level competence in terms of communication to be able to appreciate the main points of the contract. The contracts, as illustrated in appendix 1 are equally structured in a manner that they do not affect the obligations of people in an entity. These terms and conditions are also used in identifying the extent in which FIDIC offers payments and incentives to their different suppliers, which could be hindering a successful completion of a contract. Through the use of a supplier relationship management model CIPS (2020b) which ensures a promotion of stakeholders’ interests to improve on their credit profile.
3.0 Overview of FIDIC terms and conditions in procurement and supply department
The terms and conditions focused on are the FIDIC Contract Agreement used for contract. The relevant sections of the terms and conditions of this contract have been presented and summarized in appendix 1. The contract includes all terms and conditions of executing and completing a project in accordance with the contract and remedying defects that could occur. These terms and conditions are all-inclusive in the FIDIC organisation and all departments affected by their implementation.
General Provisions: these are the terms and conditions that touch on the contract, parties and timeline and completion, money and payments, and works and goods.
Performance security: FIDIC organisation owns a contractor who is tasked with the role of giving the parent company a guarantee by the ultimate parent of the contractor and deliver a guarantee to the employer on the data of the contract and engage an employer representative. This is protected by the use of a performance bond.
Delivery time and provision of goods– this is primarily categorized into the delay damages and suspension of work. Irrespective of these factors, FIDIC organisation ensures that all goods are delivered on time as guided in the employer representative.
Suspension of work: In the event of any suspension, the contractor is liable for protecting, storing, and securing the work done against any form of deterioration, loss, and damages.
Communication: the overall process must be communicated in writing, printed, or electronically with all information on the contracts being presented and delivered.
Warranty Period: a contractor is punishable in case of breach of contract warrant, negligence, willful misconduct, fraud, misrepresentation, or violation of the law.
Compliance with Laws: contractor is mandated to provide all forms of notices, facilitate payment of taxes, duties and fees obtaining permits, licenses, and approvals as highlighted in the laws in line with execution and work completion.
Quality of Goods: Changes to the quality and other pending characteristics of any item of work must be communicated in detail.
Liens and Encumbrances: depending on the laws of a country, the plant and materials would become the property of the employer at whichever in the earlier of the following times, free from liens and other encumbrances.
All the identified terms and conditions are implemented based on the set legal contract terms and other roles (see figure 2);
Figure 3: Roles of a Legal Contract
4.0 Importance of FIDIC terms and conditions (general construction)
The importance of terms and conditions in an organisation are informed by the need to offer a clear description of the relationship of involved parties in the contracting process. According to Akinsiku and Akinsulire (2012), to avoid issues with the completion of a project, there is a need for stakeholders to be conversant with terms and conditions to carry out their roles effectively. In FIDIC organisation, the terms and conditions are easier to understand and appropriately guide in addressing all challenges that could influence a successful project completion.
4.1 Managing Risks of Poor Quality
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- Within six months, PS&M personnel will be provided with chances for capacity building through partnerships with educational institutions to gain knowledge and skills for implementing category management.
- The PS&M would become more motivated in the long run by providing recognition and benefits for pursuing category management implementation.
- Within a year, an effective change management strategy would be pursued, focusing on tracking the change and spotting change resistance
1.0 Introduction
1.1 ADNOC Organisation Background
In this report, the organisation of focus is Abu Dhabi National Oil Company (ADNOC). This is for understanding the impact of contract terms and conditions on distribution of risk and power with their suppliers. This is an organisation which began its operation in 1971 and today is ranked as the leader in diversified energy group which is owned by Abu Dhabi Government (ADNOC, 2022). The organisation network of holistically integrated business has based their operations across the entire energy value chain assisting their capacity for meeting overall demands of the consistently changing energy markets. For remaining competitive, the organisation has allocated $15 billion for advancing and accelerating lower-carbon solutions, investment in new energy solutions and decarbonisation technologies for lowering their carbon intensity with 25% by 2030 and successfully facilitating their NetZero by 2050 target. The company has a network of fully operational companies that operate throughout the entire hydrocarbon value chain, handling tasks including exploration, production, processing, storing, refinement, and supply in addition to manufacturing a wide range of petrochemical products. I work as a Contract Engineer for ADNOC Offshore, one of the company's divisions. The offshore division of ADNOC is responsible for the delivery and development of oil and gas resources in the waters surrounding Abu Dhabi. With OPEX and CAPEX, ADNOC Offshore spends over 3,000 million dollars annually. The organisation structure is as illustrated in figure 1; Figure 1: ADNOC Organisation Structure1.2 Identified Category Management
The deployment of the iSourcing system, a technology-focused procurement procedure, was chosen as the category management in this study. The need for oil and gas has significantly expanded in the modern era since the Covid-19 epidemic. As a result, ADNOC is forced to spend money on equipment to help them process and refine more oil and gas products. In light of this, the team leader's responsibility is to see that an iSourcing system is in place and can be utilised to purchase the new machines that the company needs to upgrade its operations. Locally in UAE, regionally in the Middle East, and internationally in Western nations, this would apply. This project aims to produce a report outlining the implementation of the change approach. This is done while ensuring the team members and leader have the necessary abilities to carry out the plan successfully. Implementing the new category management strategy is the kind of change being sought. The learner will be the team leader throughout the full category management process since a team has been chosen to oversee the deployment of iSourcing. The practical approach would be utilising various tools and strategies that demonstrate leadership and best practices in change management, along with a focus on the category management data from the ADNOC firm.2.0 Change Management Approach
2.1 Introduction of the Required Change Process
In its Procurement Supply and Management (PS&M) budget, ADNOC had allocated roughly 10 million UAEis before the COVID-19 epidemic. Up to 5,000 domestic and foreign providers are currently utilised in this. Because of the significant financial allocation in PS&M, the ADNOC sourcing method is crucial to their operations in this scenario. Logistics, equipment, and facility administration are all purchased separately by the organisation, all of which fall under the organisation's primary spending categories of computers and technical systems. As a result, they lack a centralised system that would allow all departments to be involved in aiding the procurement procedure (CIPS, 2020). The Burke-Litwin Model (Coruzzi, 2020) can pinpoint the internal and external factors that contributed to the identified change. This model ranks the many change drivers according to their importance and provides evidence of each one in figure 2; Figure 2:Drivers of Change Model When taking into account the ADNOC organisation and indicated change, these elements have the following effects, as stated in Table 1: Table 1:Summary of the Drivers of Change in ADNOC Organisation| Factors of change | Explanation |
| External environment | Supply chain networks have been significantly impacted since COVID-19. ADNOC's ability to replenish stock, equipment, and machinery has been affected. Therefore, ADNOC would participate in strategic alliances by including diverse actors and intermediates in the complete value chain through iSourcing |
| Individual and oganisational performance | ADNOC's investment in iSourcing would reduce PS&M turnover, everyone's performance, and supply chain network satisfaction. |
| Leadership | To ensure iSourcing success, the PS&M will lead and manage efficiently. This inspires and guides other organisations to iSourcing success. |
| Mission and strategy | The achievement of ADNOC's aim to provide high-quality oil and gas products would be ensured by the deployment of iSourcing. The justification for this is to quickly and effectively engage highly qualified vendors. |
| Organisation culture | Implementing iSourcing would promote the collaborative and teamwork-oriented organisational culture of ADNOC. This is due to the platforms offered by iSourcing that provide suitable options for teamwork and collaboration. |
| Task requirements and individual skills | Employees at ADNOC lack the knowledge and skills necessary to deploy iSourcing. This deficit might be filled by offering possibilities for professional advancement. Implementation of the change would be successful. |
| Employee motivation | This report's proposal suggests that providing monetary and non-monetary rewards is necessary to encourage people to adopt iSourcing. This is for employing remarkably contemporary systems of practice. |