(Solution) CIPS New Developing Contracts in Procurement and Supply -PDC
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Description
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Executive Summary
In this second assessment, through a focus on Royal Commission for Alula (RCU) organisation, contract terms and conditions have been evaluated. The evaluation has focused on the effectiveness of these terms and conditions in;
- Ensuring management of risks of poor quality, extension of time, costs increase and unethical practices
- Making sure appropriate performance measures are monitored and managed
Also, as part of this report, the battle of forms have been evaluated with the best practice in ensuring management of these battle of forms identified. This has also been reflected in this assessment recommendation for ensuring organisation own terms and conditions are used. Apart from quoting the relevant terms and conditions, a set of tools have been used (specifications analysis, risk register, Mendelow analysis among others). For instance, by using standardisation valuation model, the importance of the contract in context of RCU has been identified. Further, through Mendelow analysis of different stakeholders, the relationship with contracts has been established. Further, by using a risk register, the best practice in managing the risk of extension of time has been evaluated.
In this assessment, it has been established that the RCU contract terms and conditions have been instrumental to avoid many risks which could at the end lead to issues with the organisation ability to deliver high quality services to their customers. This is since they inform on performance, costs, risk management, quality levels and indemnity. Specifically, in the COVID-19 pandemic where there has been a significant disruption of their supply chain, the use of terms and conditions has been instrumental for their success. For battle of forms, RCU has its terms and conditions to offer protection from the vendor or supplier.
From the findings obtained in this assessment, various recommendations are relevant and entail;
- The importance of strictly abiding on terms and conditions of the contract by PS&M team need to be emphasised
- Expand their KPIs and SLA’s for broadening their terms and conditions
- Benchmarking with other organisations to ensure at all times, their terms and conditions are up to date with happenings in business environment
- For every category of spend by the organisation, a separate set of terms and conditions would be established
- Engage attorneys in drafting of their terms and conditions to ensure they are aligned with Saudi Arabia laws
Table of Contents
1.1 Organisation Background. 4
1.2 Identified Terms and Conditions 5
2.0 Evaluation of the Selected Terms and Conditions in RCU.. 6
2.2 Risk of Extension of Time. 10
3.0 Performance Measures Monitoring and Management. 13
5.0 Conclusion and Recommendations. 17
Appendix 1: RCU Terms and Conditions (T&Cs) Summary. 21
Figure 1:Different RCU Strategies. 5
Figure 2:RCU Mendelow Stakeholders Analysis. 6
Figure 3:Contract Lifecycle Management 7
Figure 4:RCU Risk and Impact in their contract 8
Figure 5:Warranties and Conditions Compared. 9
Figure 6:Contract Implementation in RCU Phases. 12
Figure 7:Ethical Behaviors in RCU.. 14
1.0 Introduction
1.1 Organisation Background
Royal Commission for AlUla (RCU) is highly ranked as a successful organisation managing natural and historical locations based in North- West Saudi Arabia (KSA). The success of their mandate is to ensure that KSA premier as a good destination for nature, culture management and heritage (RCU, 2022). The foundation of RCU is from the KSA Vision 2030 with their output approximated to range from SAR 120bn for KSA GDP development as at year 2035 (RCU, 2021). This is intended to improve the KSA economy by the input of AlUla organisation. Their commitment scope is influenced by achievement of excellence and appropriate positioning to work with institutions international by involving different players. The organisation practices is summarised in figure 1;
Figure 1:Different RCU Strategies
As evidenced in RCU (2022a findings identifying that the KSA government has in full made an investment of approximately $2 billion. This is as a seed capital to develop AlUla historical areas of growth. Further, more than $3.2 billion similarly include investment in public-private partnerships to prioritise infrastructures for projects success as at 2023 year. The rationale of this is what RCU (2022) including AlUla operating upto 25,000 kilometres square inclusive of lush Oasis valleys, Sandstones mountains and traditional cultural heritage sites.
1.2 Identified Terms and Conditions
A blanket or a standard terms and conditions (T&Cs) have been selected used by RCU different spend categories (see appendix 1). Considering the varying categories and sub-categories of RCU spend terms and conditions are applicable to guide their relationship with suppliers. RCU as a first party, suppliers and second d party and different stakeholders have risks and power distributed as guided in T&Cs. The power and level of interest as illustrated in figure 2 Mendelow Matrix is used to define the risks distribution among the different stakeholders.
Figure 2:RCU Mendelow Stakeholders Analysis
High Power; Low-Interest- RCU is yet to integrate technology in their T&Cs which need to be done. This is to improve their capacity to achieve value for money outcomes. This is with suppliers relations improved.
Low Power and High influence- The administration of RCU have a major role to play in the T&Cs implementation. They link RCU with the KSA government laws for successful integration.
High power; high influence- Procurement and Supply Management (PS&M) as first party are mandated to impact the relations of all stakeholders. The T&Cs implementation is dependent on their input.
Low power; low interest- The management teams and legal department has not much power as evidenced in the T&Cs. Their core mandate is ensuring facilitation of the content of the T&Cs aligned with organisation core strategy of success in tourism sector.
Further, based on the identified relationship with different stakeholders, the T&Cs are mandated to ensure risks management is appropriate. They are reflected in contract management cycle and guided by terms and conditions. As evidenced in CIPS (2022), by dictating the relationships of different parties in a contract, the success of the contract is achieved. Any essential negotiation is pursued with changes I the contracts set as a priority. In the entire contract management cycle (see figure 3), the T&Cs are relevant which manage entire risks in their work environment.
Figure 3:Contract Lifecycle Management
2.0 Evaluation of the Selected Terms and Conditions in RCU
For RCU, in their contracts, the identified terms and conditions are important to stipulate how they relate with parties engaged. The scope of their relationship is on risks sharing and value/impact. As evidenced in CIPS Notes 2022, by using the vulnerability and relative value or impact model, the terms and conditions impact to suppliers relationships is identified (see figure 4);
Figure 4:RCU Risk and Impact in their contract
Functional– This is characterised by high vulnerability and risk but low value and impact. As such, part of the T&Cs include a highlight of all the issues to be solved by the product and the supplier is supposed to provide that. The T&Cs protect the organisation in terms of quality and safety levels/controls.
Performance– This is characterised by both high vulnerability and risk and high relative value in impact. For RCU, procuring services such as IT systems, logistics and facilitation belong to this category. The specifications are drafted in the T&Cs, creativity embraced in their development with supplier taking the specification risk.
Conformance– Very few of the RCU sourced products and services have low vulnerability and risk and high value or impact. Hence, apart from instances of time extension and force majeure, the T&Cs do not anticipate this.
Detailed– This has a high relative value/impact and low relative value. Hence, despite of the risks being minimal, the T&Cs highlight the extent in which protection from harm related to losses, claims, costs, accident and injuries are protected.
2.1 Risk of Poor Quality
As defined in Cao and Gao (2018) the quality in contract identify the overall technical requirements in a contract which relate to quality of product/services. Hence, it involve the vendor/supplier/contractor ensuring that the provided goods and services are conforming with the contractual requirements. For RCU, the quality determinants entail being valid, acceptable, capacity and legal. The T&Cs note that;
Hence, this is considered a warranty since there is an opportunity granted to the supplier/vendor to re-perform services for correcting the quality issues. As shown in figure 5, it is the comparison of the conditions and warranties which position this legislation as a warranty. This is owing to the requirement of RCU as the first party to take the costs but in condition.
Figure 5:Warranties and Conditions Compared
Since quality is a critical factor, the T&Cs also offers a provision of use of risk register to monitor and analyse incurred risks. Adopting the definition of Kudszus et al. (2020) a risk register is a table of projected risks allowing tracking of identified risks and any core information regarding to its use. In regard to this, RCU T&Cs note that;
An example of RCU risk register is procurement of personal protection equipment (PPEs) for all employees after the emergence of COVID-19. A summary of the risk register is as illustrated in table 1.
| Risk ID | Date identified | Description of the Risk | Likelihood of the risk occurring | Impact of the risk occurring | Severity | Owner | Mitigation Action |
| A | 7TH Sept 2021 | The metrics of the PPEs equipment not identified | High | High | High | Buyer/RCU | Entire gaps would be managed in the terms and conditions of the contract |
| B | 5th June 2022 | The timelines and other deliverables were not noted | Medium | High | High | PS&M in RCU | There is a need to have an elaborate rules of engagement |
| C | 9th July 2022 | PPEs source and the materials used in their manufacturing not expounded | Low | High | Medium | Supplier | Part of the agreement would need to include stipulations of the source and terms of engagement |
| D | 10th Sept 2022 | Service Level Quality Agreements (SLA’s) and also Key Performance Indicators (KPIs) unclear | Medium | High | High | RCU | This can be integrated in the T&Cs being used by the organisation |
Owing to the importance of ensuring that the T&Cs developed by RCU are in line with the KSA laws by the virtue the organisation operate as a public sector organisations, this need to be improved. Despite of the T&Cs only focusing on the issue of taxation, they are also relevant in covering the issues of quality of the contract implementation.
There is more that need to be done by possibly engaging law experts to align the T&Cs of RCU with the KSA government procurement laws and other regulations.
2.2 Risk of Extension of Time
Adopting the definition of Lee et al. (2020), in a contract implementation, extension of time is granted in an event the work progress s impacted by excusable delaying event. Extension of time become a risk when what CIPS (2021) identify as Clin Vs Walter Lilly & Co court of appeal ruling prevails. In the ruling, it highlighted on the need for having an elaborate risk allocation in contracts which is more relevant particularly after emergence of COVID-19 pandemic. For RCU T&C’s, they note that;
Hence, as evidenced in the RCU terms and conditions, they cannot be classified as warranty since they offer a provision of the contract termination for failing to adhere to the contract T&Cs. The 15 days provided in the contract is intended to ensure that the supplier is reporting on an occurrence which lead to delaying the contract in line with the agreed timelines. There are instances where environmental issues/challenges affect the capacity of an organisation to successfully implement a contract. In Hansen (2020) report evaluating if COVID-19 outbreak is a force majeure event, these had been noted to be occurrences past the management of an organisation in their operations. Specifically, the contract terms and conditions note that;
Hence, as evidenced in the contract, occurrences such as COVID-19 pandemic which has affected majority of the contract implementation in RCU is even linked with the KSA laws. However, the PS&M teams lacks sufficient knowledge and understanding on the relevance of the Force Majeure concept and its relevance in the context of their contract. This need to be appropriately managed to eliminate this gap which limit success of RCU contract adoption. This need to be integrated in the RCU Contract implementation phases in figure 6;
Figure 6:Contract Implementation in RCU Phases
2.3 Risk of Increased Costs
As evidenced in Heravi and Mohammadian (2021) the cost overruns risk is as a consequence of prevalent of badly written conditions of contracts. Nevertheless, there are broadly prevalent circumstances which are integrated for prioritising on aspects which impact or potentially impacting a specific contract. In terms of costs, RCU terms and conditions note that;
Further, for RCU, they integrate Key Performance Indicators (KPIs) which are meant for ensuring that a clearly agreed pricing is used for the contracts. Often, this has contributed to challenges with the PS&M since they have remained hellbent on when these contracts could be altered. This inform the need for harnessing the awareness level of the contracts and how different occurrences could inform on the contract changes on costs. As evidence in Alebrahim vs BM Design London Ltd [2020] EWHC 3393 (TCC) case which involved a contract for refurbishment of a residential property, the contractor had increased the estimated costs initially (Creedy et al., 2010). The court of law noted that the employer can only pay for the trade price items and not any price which is not agreed upon. Further, in this case, the RCU terms and conditions note that,
Hence, there is no instances where the buyer/RCU can incur any further costs which were not initially stipulated in their contract implementation terms and conditions. Through a gain sharing however, there are liens and encumbrances which are noted to be adopted aligned with a country regulations where they operate in KSA.
2.4 Risks of Unethical Practice
Adopting the definition of Grabowski et al. (2019)……….
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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. |
Since the COVID-19 pandemic, ADNOC has struggled. Flechsig et al. (2022) say delayed service delivery and internal process automation reduce efficiency. Thus, integrating internal procedures, evaluating vendors, and monitoring the sourcing process with iSourcing will benefit ADNOC. A successful and efficient supply chain would result—in situational leadership to handle all everyday situations. Mulyana et al. (2022) define this as improving cost reduction, client satisfaction, and complex and critical processes. The ADNOC organization's automation and flexibility would improve. This involves learning, teamwork, and smart buying. Those fighting against iSourcing face massive supply chain challenges. Yevu et al. (2021) projected network security, system reliability, and persistent unauthorised access difficulties for ADNOC. This would hurt ADNOC's reputation with stakeholders, make persuading clients hard, and alienate supply chain actors. Transformational leaders may remedy this by creating enduring, positive change in their followers and moulding ADNOC PS&M followers into leaders.
2.2 Strengths, Weaknesses, Opportunities, and Threats (SWOT) of the Change Management
Additionally, it is crucial to comprehend the Strengths, Weaknesses , Opportunities, and Threats associated with the present strategy and the new category strategy for the change implementation to succeed. To do this, CIPS (2022) recognizes SWOT analysis as influential in capturing various decisions taken and would aid in guiding and educating category management. Table 3 illustrates the SWOT Analysis; Table 2:SWOT Analysis In conclusion, as shown in Table 1, while the existing strategy has strengths such as giving opportunities for comparison, transferring risks, and extensive evaluation, it is time-consuming and expensive. Using iSourcing makes it feasible to provide chances for risk transfer, pricing comparisons between suppliers, and finding the best items. Furthermore, it ignores sustainability-related aspects essential to contemporary procurement strategies (Hazaea et al., 2022). To equip staff members with the necessary abilities to use the new system, ADNOC must pursue security measures and ongoing capacity development. To handle the interference, a leader must promote the consultative approach in the sourcing process. To continuously acquire new skills and information, relevant L&D plans have been granted.2.3 Process of the Change Management
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