(Solution) CIPS Module Title Developing Contracts in Procurement and Supply- PDC
Executive Summary
The significance of the set of terms and conditions chosen from XXX organisation has been assessed in relation to its impact on the organisation. This pertains to the domains of potential hazards related to subpar quality, time delays, escalated expenses, and unethical conduct in effective administration. In addition, the monitoring and administration of essential performance measures have been taken into consideration by utilising the selected terms and conditions. The terms and conditions can be found in appendix 1 of this report. Ultimately, the concept of “battle of the forms” has been chosen as the most effective approach to reaching a mutual agreement that aligns with an organisation’s own terms and conditions. The terms and conditions selected in XXX are utilised in the General Conditions of Purchase, which are standardised T&Cs employed in procuring services for the organization. This applies regardless of the quantity of resources utilised in the order, the associated risks, and the specific requirements.
The findings in this report demonstrate that their terms and conditions are successful in guaranteeing the provision of high-quality services to XXX. This involves improving the supply process in a timely manner while ensuring that ethical considerations are properly addressed. An optimal approach also includes utilising these terms and conditions to address performance concerns and assess progress. In order to address the issue of conflicting terms and conditions in the “battle of the forms,” the terms and conditions of various suppliers are compared and analysed beforehand to ensure that they are aligned and consistent. In order to fulfill the desired objective of the report, many analytical methods such as the Mendelow Matrix, risk register, contract management cycle, and assessment of the value and impact of vulnerability and risks were employed, following the guidance provided by the CIPS Module Notes.
Based on the results and conclusions, several recommendations might be derived. These include:
- Expand the terms and conditions by adding additional clauses to make them more comprehensive.
- Verify that the suppliers selected have prior experience in providing comparable services to prevent battle of the forms.
- Include provisions in the terms and conditions that align with relevant KSA legislations to enhance their applicability.
- Conduct a benchmark analysis on top-performing organisations in the oil and energy industry in the KSA to enhance their terms and conditions
- Enhance the expertise of the PS&M teams to effectively manage the terms and conditions without encountering significant difficulties.
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Description
Solution
Table of Contents
1.1 XXX Organisation Background. 5
3.0 Application of Terms and Conditions in XXX Company Selected Contract 7
3.1 The Risks of Poor Quality. 7
3.2 Risk of Extension of Time. 9
3.3 Risk of Increased Costs. 10
3.4 Risks of Unethical Practices. 11
4.0 Relevant Performance Measures Monitoring and Management. 11
5.1 Ensuring Agreement implemented under organisation terms and conditions. 14
6.0 Conclusion and Recommendations. 15
Appendix 1: Summary of the Terms and Conditions. 22
Figure 1:Summary of Kraljic Matrix Analysis. 6
Figure 2:Condition or warranty reasons. 8
Figure 3:Mendelow Matrix Stakeholders Analysis. 12
Table 2:Summary of a Risk Register. 8
1.0 Introduction
1.1 XXX Organisation Background
XXX organisation is identified as a world’s largest integrated energy and chemicals organisations developing value across hydrocarbon chain and delivery of social and economic benefits. This is to the people and communities international relying on the critical energy supplied. The organisation mandate is to play a leadership function in energy transition. This is with their target being achievement of a net-zero economy while at the same time solving world sustainability challenges. This is with their mission including responsibly offering the world with dependable and sustainable energy in an environmentally responsible manner. Their values are categorised into pioneering, impactful, collaboration, transparency and responsibility. This is while enhancing an integrated energy and chemicals organisation, working in a safe, sustainable and reliable manner. This is the organisation working on ensuring that they pursue strategic growth strategy for international recognition in tandem with the Saudi Arabia (KSA) Vision 2030 intended to initiate dynamic economic growth and promote KSA reputation in the international market in future.
2.0 Terms and Conditions
The terms and conditions specified by XXX Company are General Conditions of Purchase used in procurement of different products and services. This is utilised to authorise personnel in fulfilling their responsibilities. XXX Company engages in a range of efforts to sustain its operations in the energy and chemicals business as a whole (Jrad, 2023). They are also used to implement follow-up tactics based on inspections and audits at XXX Company, with extensive network of pipelines transporting crude oil, condensate, natural gas, and NGL to processing facilities, domestic customers, and export terminals. The Ras Tanura Refinery, spanning 5 square kilometres, operates around the clock with 1,800 employees (XXX, 2024). Hence, for all the maintenance works which are done in XXX Company, the terms and conditions are blanket terms and conditions. Maintenance activities carry significant risks and have substantial value, which justifies the implementation of terms and conditions.
For identifying the extent in which the contract terms and conditions are important for XXX Company, the Kraljic Matrix can be used (Overvest, 2024). This represent strategic tool applied by PS&M professionals in identifying and minimising supply risks. It also assists procurement and supply chain experts in identifying and mitigating supply management risks by categorizing the purchasing portfolio and tailoring purchasing tactics.
Figure 1:Summary of Kraljic Matrix Analysis
Source: (Overvest, 2024)
Critical- Maintenance services in XXX are crucial and so require a careful balance of power in their interaction with suppliers. Risk management is guided by a balanced power dynamic between buyers and providers.
Leverage- Given the low level of risk, the buyer has a dominant role in this situation. The buyer’s responsibilities include managing logistics and sourcing IT solutions from XXX, which has several alternative vendors. XXX possesses comprehensive purchasing power when it comes to issuing tenders, setting cost targets, and making substitutions.
Bottleneck- Within XXX, this category encompasses products and services that are susceptible to price increases and have limited alternative vendors available.
Routine– Implementing systems contracting and e-Procurement solutions is necessary in XXX to provide training services to its employees. These factors are essential for the success of an organisation in its operations.
In a nutshell XXX Company’s Critical Segment contract to control risks has an international image. This standardises and manages their availability.
3.0 Application of Terms and Conditions in XXX Company Selected Contract
3.1 The Risks of Poor Quality
According to Agarwal (2023), quality in contracts refers to the ability to consistently deliver contract-related products, services, and outcomes that meet or exceed established quality standards throughout the contract duration. In XXX Company case, for the Work Service Order, tracking and documentation is pursued for monitoring quality of the contract. The Key Performance Indicators in XXX ensure an evaluation of cycle times and company’s revenues management. In regard to quality, the terms and conditions highlight;
The terms and conditions are a warranty, not a contract. For the contractor, failure to provide the General Service Conditions in accordance with the specified quality and defect-free lead to contract termination. A summary of the condition and warranty evaluation is as illustrated in the following;
Figure 2:Condition or warranty reasons
Source: Kurt et al. (2021)
A risk register is typically employed to manage risks, identifying both their impact and likelihood, as illustrated in the following table;
Table 1:Summary of a Risk Register
Source: Okudan et al. (2021)
| # | Date raised | Description | Likelihood | Impact | Severity | Owner | Mitigation Action |
| 1 | Aug 2023 | The work management scope was not clearly identified | Medium | Low | High | PS&M teams | Set clear metrics of performance of the contract implementation |
| 2 | Oct 2023 | A maintenance program of corroded tanks failed to have an appropriate project design | High | High | High | Accounts department | Ensure that storage tanks are managed appropriately |
| 3 | Dec 2023 | Terms and conditions did not stipulate all roles of the contractor | Low | Medium | Medium | Project coordinator | Pursuing workshops intended to improve the contracts roles. |
| 4 | Feb 2024 | Deliverables of a maintenance program was not aligned with XXX Company | High | Medium | High | PS&M | Part of terms and conditions expanded to include clauses of time and alignment with company goals |
The summary of the risk register in table 1 shows a recent project of maintaining a corroded storage tanks, due to the aggressive nature of crude oil and its components. It is clear that the contract terms and conditions need improvement for appropriate adoption in managing risks. In order to manage quality issue, the terms and conditions note;
XXX Company also works with insurance firms to avoid cost problems, as stated in the terms and conditions. More harmonisation with KSA government rules is needed to align terms and conditions to statutory implied provisions.
3.2 Risk of Extension of Time
According to Lim (2024), in the context of contract implementation, time is of the essence, hence, it is crucial to ensure
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