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Terms and conditions help the organisation ensure relevant performance measures are monitored and managed
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Description
Question:
Practitioner Corporate Award
Assessment Code: PDC
This assessment tests the learning outcomes and module content of:
Module: Developing Contracts in Procurement and Supply
Task
Using a set of your organisations (or one with which you are familiar) terms and conditions, explain how the terms and conditions help the organisation ensure that:
- The risks of poor quality, extension of time, increased costs and unethical practice are managed effectively
- The relevant performance measures are monitored and managed.
You should use a full set of terms which includes appropriate schedule content and relevant appendices.
Outline the concept of the “battle of the forms” and explain how you could ensure that any agreement is carried out under the organisation’s own terms and conditions.
Guidance for candidates Your work should consist of 3,000 words.
Solution/Answer
Table of Contents
1.0 Introduction. 4
1.1 Organisation Background. 4
2.0 Contracts Management and Development 4
3.0 XXX Organisation Procurement and Supply (PS&M) Terms and Conditions. 5
4.0 XXX Terms and Conditions Application. 7
4.1 Risk of Poor Quality. 7
4.2 Extension of Time. 8
4.3 Increased costs 9
4.4 Unethical Practices 10
4.5 Performance Measures Monitoring and Management 11
5.0 Battle of Forms 13
5.1 Introduction of Battle of Forms 13
5.2 Solving Battle of Forms Issues 14
Traditional Approach. 14
Lord Denning’s Strategy. 14
6.0 Conclusion and Recommendations 15
6.1 Conclusion. 15
6.2 Recommendations. 15
References 17
Appendices 19
Appendix 1: XXX Contract Terms and Conditions 19
Executive Summary
In this report, an evaluation of XXX organisation terms and conditions has been evaluated. This is in terms of their impact on making sure that poor quality, time extension, costs increase, and unethical practices effective management in the organisation. Apart from this, appropriate performance measures and management in a company’s operations have been evaluated. To achieve this, XXX organisation in Saudi Arabia (KSA) industrial cleaning sector has been assessed. The selected contract is the sourcing of boiler retubing, including materials supply with a contractor executing the work.
From an evaluation of the contract, XXX procurement of the identified spend category is defined by appropriate terms and conditions. The rationale of this is ensuring management of entire issues faced. The areas of focus in the contract are; Personnel issues, Indemnity, Insurance and risks, Confidence, Quality issues, Performance levels, and suspending contract/ force Majeure. Also, through a reference on the different findings sourced from the analysis, it notes that terms and conditions evident in the procurement and supply department are important for guaranteeing organisation success. The rationale is that the terms and conditions influence managing costs, profitability, and organisation performance in the industrial sector.
At the end of this report, a Battle of Forms evaluation has been conducted, which lacks mutual agreement of terms and conditions in implementing the contract. To solve the battle of forms, XXX organisation best practice is to ensure they are flexible in terms and conditions while shelving their hard positioning.
Based on the outcomes of this report, the various recommendation which can be provided are;
- Maintaining clear records on the level in which various parties adhere to their terms and conditions to ensure effective handling of claims
- To adopt Lord Denning’s strategy to reassure all engaged stakeholders in an agreement on the basis of the developed terms and conditions of a contract
- Apply elaborate KPIs and reports for guiding a successful contract management implementation
- Capacity development of the procurement and management team to have an improved understanding of the entire contents in their terms and conditions
1.0 Introduction
The aim of this assessment is to evaluate contract terms and conditions. In terms of the contract terms and conditions, this contributes to managing the risk of poor quality, time extension, costs increase, unethical practices, and performance management. According to CIPS (2016), in contract management, their terms and conditions are important to guarantee the selection of the right individuals to execute it and the scope of engagement among the different stakeholders. As a result, Muhammad et al. (2019) has recommended for modern organisations to be successful in their contract management, creating relevant terms and conditions is instrumental. The rationale of this is to guarantee increased flexibility, accessibility, transparency, consistency, and customising their contract management.
1.1 Organisation Background
XXX organisation is a leading Saudi Arabia (KSA) organisation in industrial cleaning. In its vast business portfolio, XXX provides industrial maintenance, chemical cleaning, waste management, and steam blowing for refineries and petrochemical plants. Over the years, the organisation has mastered providing integrated service platforms of technologies, systems, products, and services for their industrial and public sectors. Lately, the organisation has invested in hazardous materials management, waste management and recycling, municipal waste management, and wastes to energy conversion. As a result, the organisation has introduced boiler retubing as a category of spend. This is one of their core spend categories from their $20 million annually in CAPEX, Services, Sup contracting, hiring, and materials. Hence, the organisation executes immense contracts to guarantee the organisation sustainable practices that are mandated for achieving sustainable global business strategies. In this report, the contract selected is boiler retubing, inclusive of the supply of material and a contract for doing the work.
2.0 Contracts Management and Development
In CIPS, contracts are identified to have existed from when society began to prevail, particularly in business, verbally trading, communication, and goods and services (CIPS, 2021). Also, CIPS identifies a contract as being anchored on guaranteeing various stakeholders’ engagement in contract development and guaranteeing rights, managing risks, and entire responsibilities. Hence, the purpose of a contract establishes its terms and conditions and its execution environment. According to CIPS (2018), it notes that different terms and conditions in a contract are based on the cycle of contract management. The relevance of the cycle is ensuring various suppliers and buyers adhere to contractual obligations in line with negotiations and future change practice. As illustrated in figure 1, CIPS (2018) identify the terms and conditions as being applicable in aligning procurement teams and external business environment through different stakeholders facilitation in executing such a contract.
Figure 1: Contract Management Cycle
Source: CIPS (2018)
3.0 XXX Organisation Procurement and Supply (PS&M) Terms and Conditions
The P&SM in XXX organisation has the sole role of crafting terms and conditions which guide stakeholders in implementing such contracts. The terms and conditions are grouped into various categories as summarised in table 1;
| Categories of Terms and Conditions | Description |
| Products and services | A seller makes sure they are executing core mandate as directed by XXX purchasing order, on-site delivery, and appropriate timelines |
| Set standards | Standards set by XXX are dependent on the contractor skills, carrying out due diligence, safe practices, meeting future demands |
| Timely products and services provision | Seller is mandated with a core function of offering timely good and services as defined in their purchase order |
| Products and services rejection | Seller assumes the entire liability of goods or services returned due to their failure to meet specific set standards with a requirement of refund |
| Transfer | Terms and conditions in the contract require their transfer to seller strictly on time with pay issued |
| Deliver and manage loss risks | Seller in a contract has the mandate of provision of goods/services promptly in their site with full costs being for the seller |
| Compliant to set legislations, tax, and permit | The seller ought to provide sufficient notices, taxation, all fees, license, and KSA legislation |
| Confidentiality | XXX safe from the other party disclosing confidential information in their execution of the contract |
| Intellectual property | The entire stakeholders in a contract are safe from infringement of their intellectual rights, license, and mainstreaming entire materials by the seller |
| Liens and Encumbrances | The entire mandate is passed to the seller for leveraging on entire claims, liens, and any charge with potential security issues noted |
| Indemnity | Stakeholders in a contract are offered protection from any form of harm due to evident loss, claim, incurred cost, accidental occurrence, and injuries. |
| Termination | The Force Majeure is a provision in the XXX operations when there are evident threats to get insolvent, bankrupt, and environmental problems as organisation operate in the cleaning sector |
Table 1: A summary of XXX Contract terms and conditions
Source: XXX Internal documents
4.0 XXX Terms and Conditions Application
4.1 Risk of Poor Quality
XXX terms and conditions guarantee high-quality procured boiler retubing. In procurement, Grandia and Meeham (2017) identify quality as a critical factor determining a contract execution success. Based on the set standards in XXX terms and conditions, this influences the quality set in such a contract. The terms note that “Vendor agrees that before starting the performance of the Contract, it shall, as applicable, have implemented and documented a quality assurance program meeting the requirements of ISO 9001 or an internationally recognized standard of the same level appropriate to Vendor s industry”. Failure to meet the set requirements demand XXX to request a chargeback from the contractor when these stipulations are not achieved.
In CIPS, an emphasis exists on the necessity for organisations to maintain a high-quality level evidenced by a description, costs, and varying phenomena. Many organisations are nevertheless unaware of the KPIs, quality specifications, and guarantees (CIPS Notes, 2018).
Figure 2: Contract and Quality requirements
Also, the terms and conditions provide an appropriate threshold or KPIs that note the existence of poor quality. The terms and conditions indicate that “If for any reason Vendor is uncertain as to whether the Products to be supplied by it will comply with any of the above, it must promptly and before dispatch inform Buyer in writing with full details of the possible non-compliance for consideration.” Hence, XXX terms and conditions of ensuring that they have a clear threshold on quality expectations with non-compliance being put into account.
4.2 Extension of Time
In XXX organisation, their contracts are implemented in three distinct phases: pre-contract, contract execution, and post-contract. In all three phases, rights, risks, and roles are prioritised. For XXX safety from any uneventful risk in the selected contract, their terms and conditions highlight various suppliers’ role for their safety from the extension of time. Their terms and conditions highlight that “Buyer shall have the right, at any time up to six (6) years after completion or cancellation of any Order”. Therefore, through a reference on the XXX terms and conditions, they harness time reduction on products and services provision by reducing entire costs and risk management. There are instances where the contract can be suspended due to the failure of extension of time. The contract highlight that “Buyer may suspend performance of the Contract if any corresponding contract relating to the Order between Buyer and a third party is suspended for whatever reason.” Hence, this is an indicator that the extension of time is directly influencing the scope of implementing a contract. The selected contract execution in XXX is actively directed by detailed and clear terms and conditions in its overall contract phases.
4.3 Increased costs
CIPS (2020) report notes the need for terms and conditions to guide appropriate liability management and consequential losses for avoiding cost overruns. Specifically, in XXX contract terms and conditions, they support this view by noting that “Unless otherwise stated on the face of the order or in the Special Terms and Conditions, the Contract price shall be inclusive of the costs of delivery DDP (named location) (as defined in Incoterms 2010) to the Place of Delivery”. This means that at the signing of a contract, all the costs of the products are services are appropriately understood and cannot be changed at any point of the contract. In specific, the terms and conditions note that “In the event, Vendor has incurred or will incur costs and expenses, and where these costs and expenses are or will be recharged to Buyer by Vendor as part of the purchase price of this Order.” In line with the KSA legislation, all the costs are supposed to be handled by the vendor or the seller on behalf of the XXX organisation.
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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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Solution
Executive Summary
This assignment aims to explain how a change process while guaranteeing that the team leader and members can implement it by leverage on the skills and capability possessed. This evaluation has focused on a new category management strategy by ADNOC. Through a focus Abu Dhabi National Oil Company (ADNOC), the best practice in change implementation has been evaluated. The selected category of spend is sourcing for Information Technology (IT) system as part of their operations. Although they now have a system that enables suppliers to sign up and participate in procurement, they still need to update their sourcing strategy. ADNOC intends to improve its sourcing strategy by investing in the appropriate technology. A team selected from the PS&M would enable the deployment of this category under my guidance. To achieve the objectives of this report, various change management techniques, as well as leadership training to give leaders the skills they need to execute category management, have been used. This is relevant to drawing meaningful conclusions from both quantitative and qualitative data.
The outcomes demonstrate that for the category management to be successful, the team must possess the necessary change management abilities. This presupposes that the leaders have total control over applying category management. These skills include the ability to embrace diversity and incorporate a range of sources. The success of adopting category management will also depend on the capacity of the assigned team to embrace innovation as a skill. The best practice also involves involving leaders in determining how the change will impact various stakeholders based on their influence and level of authority during the change process. This would make it possible to implement the best transformation strategy comprehensively.
Ultimately, the observations and conclusions result in the development of several ideas, including;
Assessing the change's supporters and detractors is also crucial. The Lewin Force Field Forces (Gaivoronskaya et al., 2021) should consider these factors. Figure 3 shows that change-supporting variables were 12 and 8, respectively. The adjustment is appropriate in this case.
Figure 3:Summary of Forces for and against Change
- 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. |