contract management note

- Contract: + Legally enforceable promise made between parties + Agreement that binds parties to contract + Contracts can be written, verbal or behavior ~ Contract = Agreement + Enforcea

- Agreement: involves the proposal or offer by one party and acceptance of the same offer

by the other party

- Contract:

+ Legally enforceable promise made between parties

+ Agreement that binds parties to contract

+ Contracts can be written, verbal or behavior

~ Contract = Agreement + Enforceable at Law

- Elements of Contract: offer -acceptance -constderation

+ Offer:

* communication of intention to be bound by a promise to do/ not do

contain core terms and conditions

must be firm and irrevocable

offer is still in force

* same terms as the offer

unconditional acceptance

must be communicated to the offeror

+ Consideration: is the price given in exchange for goods or services under a contract,

or a promise to do (or not to do) something in return The price is usually money —

* Only enforce if both sides are getting something

“Must be something of value in the eyes of the law

- Contract is void and null when:

Against the laws

Against the principal of an agreement

Not satisfy the form of contract (based on the applicable laws)

Out of authority to engage

- Types of business relationships on contract:

~ Transactional

+ Short term contract

+ Arm’s length contract (giao dịch độc lập)

“ Administered: Part of a larger system in managing activities

“ Corporate:

+ Vertical integration contract

+ Long term contract

- Types of contract:

“+ Fixed - price contracts: price is fixed during the contract duration

+ Firm Fixed Price

+ Fixed Price Incentive Fee

+ Fixed Price with Economic Price Adjustments

- Limited Flexibility: Changes to the

project scope may be challenging

and costly

- Quality Concerns: There may be

pressure to compromise on quality

to meet the fixed price

Advantages | - Predictable Revenue: The seller - Cost Certainty: Buyers know the

knows the fixed amount they will total cost upfront, aiding budgeting receive, providing financial stability | ~ Reduced Financial Risk: Risk of ae cost overruns is transferred to the

- Incentive for Efficiency: motivation ller

selle

to complete the project efficiently to | _ Clear Expectations: Well-defined

maximize profit and cost control scope and deliverables provide

- Clear Scope: Well-defined scope | clarity

helps prevent scope creep

Risks - Cost Overruns: If costs exceed the | - Limited Flexibility: Changes to

the project may incur additional

* Cost reimbursable contracts (chi phi tăng Lên được cộng vào)

+ Cost Plus Fixed Fee

+ Cost Plus Incentive Fee

+ Cost Plus Award Fee

Advantages - Compensation for Effort: Sellers are

reimbursed for actual costs incurred

- Flexibility: Changes to the project

can be accommodated without major

financial impact

- Profit Margin: Sellers receive a

predetermined fee on top of

reimbursed costs

- Flexibility: Changes to project scope can be made without extensive negotiations

- Transparent Costs: Buyers

have insight into actual costs, promoting transparency

- Adaptability: Suitable for projects with evolving or unclear requirements

Risks

- Profit Uncertainty: Profit depends

on the negotiated fee, and it may be

subject to buyer approval

- Cost Overruns: Sellers may need to

absorb cost overruns if not agreed

upon in the contract

- Perceived Lack of Incentives:

Buyers may think the seller lacks

motivation for cost control - Cost Uncertainty: The total cost

is not known until the project is completed

- Potential for Overbilling:

Buyers must monitor costs to

ensure they are reasonable

- Dependency on Seller Performance: Buyers rely on the seller to efficiently manage costs

“ Time and material contracts: hybrid contract

Advantages | - Compensation for Actual Effort: - Flexibility: Changes to the

Sellers are paid for actual hours worked | project can be easily

and materials used accommodated

- Flexibility: Can accommodate changes - Transparent Billing: Buyers

; j ; have visibility into costs more easily than fixed-price contracts - Adaptability: Suitable for

- Transparent Billing: Buyers have projects with evolving or visibility into the hours and materials unclear requirements

used

Risks - Profit Margins: Profit is tied to billable | - Cost Uncertainty: The total

negatively

- Potential for Scope Creep: May face

challenges in controlling scope changes

- Client Oversight: Buyers may closely

monitor hours and question charges

cost is not known until the project is completed

- Potential for Overbilling:

Must monitor costs to ensure

they are reasonable

- Dependency on Seller Performance: Rely on the seller to efficiently manage costs and hours

Vi du contract Lúc đầu van available, nma sau dé bi null and void — Lý do có thể dẫn đến Là

gi?

Case study page 45

- Contract management: focuses on the contract management activities undertaken during the period from the award of contract to contract completion In a contract, we manage: + Information flow

+ Goods flow

+ Financial flow

+ Relationship

- Why to manage a contract:

+ Closely following & monitoring implementation so that you can take immediate action when problems occur or when situation change

+ Avoiding unexpected costs, delay or poor quality

CHAPTER 2 GENERAL MATTERS

+ Oral agreement: order food

+ Implied by behavior agreement: board a taxi

- Legal consideration of contract:

+ Offer & acceptance: one offers, other accepts

+ Consideration: exchange promise between parties

+ Intention to create legal relationship: both parties agree to legal bind to another + Legal capacity: both parties must be mature and clear thinking

- Classification of contract in law:

+ Void contract: is one that is not legally valid from the beginning

+ Voidable contract: is initially valid but can be voided by one or more parties under certain conditions

+ Unenforceable contract: is one that may be valid, but for legal reasons, a court will

not enforce it

- When a problem happen

1 Resolve the dispute peacefully (offer alternative options, compensation)

2 Court

3 Litigation should be the very last option as it is very costly and time consuming

- Content of the contract:

+ Express term: Statements which are made verbally or writing In most business case it should be made in writing to ensure minimizing uncertainty Implied terms: terms inserted into a contract by law whether or not both parties agree or not

- Terms of the contract

+ Condittons: obligations and actlon tn case of disputes IF tt ts breach - injured can sue for damages and has the right to terminate the contract Warranty: can not justiPy the termination of contract but can sue For damages - contract wiULL continue

Some important key clauses in the contract:

Payment terms

Indemnity & liability clauses

Confidentiality and data protection

Exclusion clauses

Dispute resolution

Governing law/ jurisdiction

Transfer of ownership and risks

Term “defend” in indemnification terms: typically refers to a legal obligation or responsibility assumed by one party to protect, support, or take action on behalf of the other party in the event of certain legal claims or disputes

Product safety: include clause to indemnify the buyer from costs associated with recalls or defects

Product liability: a person injured by products or property owners who experience a loss have the right to sue

Product infringement: an organization may be sued for patent infringement by virtue of its use of patented item even when the item was purchased in good faith

Some term and conditions DEFINITION in contracts:

+ Intellectual property: refers to intangible personal property that has commercial value

Consent to subcontract: approval of subcontractors hired by the prime contractor Claims: right to payment or remedy for poor performance

Limitation of liability: to address loss due to warranty claims or other breaches of contract

Waiver of consequential damages: these relate to lost profits, lost sales and injury

to persons etc

Collusive offers: this prefers to secret agreement and cooperation for a fraudulent purpose

Suspension: this clause is to protect against unforeseen funding problem

Warranties: express and implied

Revocation of acceptance: happen when buyer discover defect after acceptance of goods, if defect substantially impairs the value of goods to buyer

Contractual obligations cannot be transferred

Only benefits can be transferred

- Misrepresentation:

Before a contract is made, parties made statements to induce the others to enter into a

contract which are known as representations

-> A misrepresentation is when an untrue statement of fact or law, false statements, or statement of opinions is made by Party A (or its agent) to Party B, which induces Party B

to enter a contract with Party A thereby causing Party B loss

CHAPTER 3: CONTRACT MANAGEMENT TEAM FORMATION

Why do we need a team?

More flexible and responsive

Easier to conduct and work things out rather than assign to a specific department Enables employees to gain new insights

Increases understanding between inter-departmental members

Types of teams

Problem Solving teams:

+ Advantages: Specialized Expertise, Focus, Efficiency

+ Disadvantages: Limited Scope, Lack of Diversity:

Self-managed work teams

+ Advantages: Autonomy, Morale, Flexibility

+ Disadvantages: Lack of Experience, Conflict due to autonomy

Cross-functional team: Made up of individuals from different departments often within the same hierarchical level

+ Advantages: Diverse Perspectives, Collaboration, Comprehensive Solutions + Disadvantages: Coordination Challenges, Time-Consuming

Virtual teams: made up of members that are physically apart but connected as a team through modern informatics technology and are highly task oriented

+ Advantages: Geographic Flexibility, Cost Savings, Global Talent

+ Disadvantages: Communication Challenges, Team Building, Time Zone Differences

Factors affecting team performance

Common purpose Specific goals Team efficacy Conflict levels Social loaffing

_ Project sponsor: provide resources and give permission to the project

_ Project manager: Control day-to-day activities of the project

_ Project team: This group carries out the project work, producing the project’s

deliverables They can come from other departments or they can be hired externally

=> This technique is used when Preferred for long-term contracts with high profits Involves personnel and resources from various company functions Decision-making may require collaboration across functions

Gantt chart

This technique show work breakdown structure, time duration for each task and total time

span of the project, broken down into increments

=> Perfect tool for illustrating tasks, their duration and dependencies Visualize task relationships and responsible parties

Pros Cons

1 High-level Overview 1 Lack of Detail

2 Enhanced team productivity 2 Lack of Priorities

3 Effective Time management 3 Complex and Confusing for Complex

4 Simplifies Complex Information Projects

5 Balances Multiple Projects

Critical path technique

_ Precedence Diagram method: activities are represented by nodes, and the relationships between activities are depicted by arrows There are 4 relationships:

Finish-to-Start (FS): Activity B cannot start until Activity A is finished

Start-to-Start (SS): Activity B cannot start until Activity A starts

Finish-to-Finish (FF): Activity B cannot finish until Activity A finishes

Start-to-Finish (SF): Activity B cannot finish until Activity A starts

_ Arrow Diagram method: activities are represented by arrows, and events (milestones) are represented by nodes It uses only Finish-to-Start (FS) relationships

1 Identifies Critical Activities 1 Complex and time-consuming

2 Resource Optimization 2 Assumption of Fixed Durations

3 Effective Time management 3 Difficulty in Changes

4 Dependency Identification:

5 Risk Management

For large contracts: core teams and extended teams

Different contracts require different managers:

a Arm- length relationships require people who are good at applying contract law Co-operative relationships require good people manager

CHAPTER 4 DEVELOPING A CONTRACT

MANAGEMENT PLAN

1 Life cycle of contract

“ 5 stages (Billiate 2005): Conception - Gestation - Birth - Life - Death

“ 8 stages (Hallicopper): Initiation - Planning - Implementation -

Negottatton - Executton - Management - Renewal - CLose-out

+ Negotiating lower prices (tender

submitted for large orders)

+ Multiple supplier/

+ Exploit call option

+ Identify scale and optimize profit

- TYPE OF CONTRACT:

+ Framework contract

+ Call-off contract

- very concrete on “ready to supply G&S

- accompanied with Cost-breakdown

- difficult to terminate contract

Non-critical Items

- standard products with abundant source

of supply

- STRATEGY:

+ Increasing the efficiency on time and

money product purchasing

+ Local supplier

Surf the price

+ Standardized and automated

process to save time and money

- TYPE OF CONTRACT:

+ Spot contract (hop déng giao ngay-

hàng kh cần giao ngay nma giá như

- TYPE OF CONTRACT:

+ Partnership contract

- complex interdependence between parties

- focus on expense or cost

- highly trust between parties

- many integrating terms and conditions

+ Signing long-term contracts

+ Stocking extra/ alternatives to

replace + Cooperation with reliable supplier + Accepting high price if needed

- TYPE OF CONTRACT:

+ Fixed contract + Term contract

giá hàng giao ngay tại thời điểm

offer)

- not complex (basic terms and conditions)

- easy to terminate contract

- extremely tight binding on “ensuring to ready supplying G&S

- grant a privilege to seller

- focus on G&S than on price

- not easy to terminate contract

3 Tendering and contract made by tendering

1 Open tendering

- employed by government

and private sector

- offer in local newspaper

and media

- client is not bound to

accept the lowest or any

offer

2 Selective tendering

Advantages

- allow unknown contractor

to compete for work

- high level of transparency and competition

- no bias, client can obtain

the best bargain possible

- no favoritism/partially in

selecting contractors

- opportunities to receive better price

- tradtttonal method - Famultar to all sectors

- reduce cost of tendering

Disadvantages

- too many contractors with

risk that choosing no prior

experience contractor

= untrustworthy competELELon

- uneconomic/inefficient use

of the source

- public accountability may

be questioned if the lowest offer is not accepted

- time consuming

- less competition and