The following topics will be helpful to review in preparation for the week three quiz. 1. Ways to gain maximum results in an e-procurement environment. E-procurement has had an increasingly important role in business-to-business(B2B) commerce. Web-enabled B2B e-commerce enhances inter-organizational coordination resulting in transaction cost savings and competitive sourcing opportunities for the buyer organization. E-business has radically altered the ways in which firms interact with their suppliers(Phillips 2003). Continued improvements in Internet technology connectivity provide an opportunity to make procurement for goods and services more transparent and efficient. Six forms of e-procurement applications have been noted. Knudsen cites; e-sourcing, e-tendering, e-informing, e-reverse auctions, e-MRO and web-based enterprise resource planning. E-procurement is predicated on being able to deliver a variety of benefits, which include: lower prices, lower transactional costs, better compliance and speedier processing and delivery. E-procurement is done at a much more rapid pace, but still not as fast.
However, e-procurement allows for buyers of commodity products, services, and even some customized business solutions to conduct market research, solicit bids or proposals, analyze offers, place orders, submit invoices, and transmit payment for purchases electronically via numerous methods, including net marketplaces, web portals, private exchanges, vertical exchanges, and horizontal exchanges. E-procurement ranges from older electronic data interchange (EDI) batch-processed simple transactions to more recent net marketplaces involving multiple buyers and sellers exchanging transactions via the Internet, to accelerate both delivery to the buyer and payment to the seller. There are two main approaches to contracting: competitive methods, such as purchase cards, imprest funds, auctioning, net marketplaces, vertical exchanges, horizontal exchanges, web portals, sealed bidding, private exchanges, two-step sealed bidding, and competitive negotiations, and noncompetitive methods, such as purchase agreements and sole-source or single-source negotiations.
2. Phases in the contract management process
The contract management process comprises three common phases: Pre-award Phase, Award Phase, & Post-Award Phase. Also, the phases comprise six major steps for the buyer and six major activities for the seller. * Pre-award phase includes procurement planning, market research, requirements determination, the make-or-buy decision, solicitation, bid/no-bid decision making, and bid or proposal preparation. This phase is vital in creating successful business relationships. The pre-award phase has three major activities or steps for the buyer: Step 1: Procurement planning
Step 2: Solicitation planning
Step 3: Solicitation
Three major activities or steps are also involved for the seller:
Step 1: Presales activity
Step 2: Bid/no-bid decision making
Step 3: Bid or proposal preparation
* Award Phase: Source Selection, Contract Administration, and Contract Closeout or Termination. * Post Award Phase: The steps in the postaward phase are the same for both buyer and seller: contract administration and contract closeout or termination.
3. Contracts vs. Projects
Contract management is principally represented by the three professional associations: National Contract Management Association (NCMA), founded in 1959, focuses on U.S. government contracting and commercial contract management both buying and selling, with about 20,000 members worldwide, the Institute for Supply Management (ISM), founded in 1915, which focuses mainly on commercial purchasing and supply chain management with about 40,000 members worldwide, and the newest, International Association of Contract and Commercial Management (IACCM). * CMs may work in such a matrix organization—supporting many projects—or they may be part of a functional purchasing or contract management organization that supports all contracting requirements companywide. * CMs, however, seldom are in charge of the day-to-day project planning or operation. Yet, as individuals authorized to enter into legally binding contractual arrangements, they may shoulder the responsibility for having critical resources available as needed under tight, often conflicting or unrealistic time frames.
Alternatively, they may be placed in an advisory or support role to PMs who have contracting authority, or they may share responsibility and authority for many tasks typically thought of as contract management tasks, including pre-contract award actions, contract negotiation, and – award actions. Project management is principally represented by the Project Management Institute (PMI) and the International Project Management Association (IPMA). PMI has more than 320,000 members from more than 150 countries worldwide. IPMA’s members are predominantly European. * PMs typically are responsible for ensuring the coordinated undertaking of goal-oriented projects. Often they work in a matrix organization characterized by multifunctional teams composed of product line, professional services, functional area (engineering, manufacturing, systems integration), and geographical area (country, region, plant) representatives. * PMs serve as multifunctional team leaders on one or more projects, shouldering the responsibility for achieving the desired results for these projects. 4. How to build successful partnerships
5. Contract definition
The contract is the means of describing the buyer’s and seller’s obligations and of documenting and enforcing the responsibilities of each party. All managers of contracts, both buyers and sellers, must understand the basic concepts and principles of the contracts they work with and support. Both parties must ensure that their contracts are clear and concise and that they facilitate, not inhibit, communication. First, a contract is a relationship between buyer and seller defined by an agreement about their respective rights and responsibilities. Contracts define an agreed-on relationship between a buyer and a seller. Relationships involve expectations, and that is what contracts are about. When a buyer contracts with a seller to provide products or services, the buyer is essentially melding the seller into its organization. Second, a contract is a document that describes an agreement about rights and responsibilities. In any jurisdiction, a contract is “an agreement governed and restricted by law,” and the applicable law shapes the nature of the contract. 6. Two main approaches to contracting
There are two main approaches to contracting: competitive methods, such as purchase cards, impress funds, auctioning, net marketplaces, vertical exchanges, horizontal exchanges, web portals, sealed bidding, private exchanges, two-step sealed bidding, and competitive negotiations, and noncompetitive methods, such as purchase agreements and sole-source or single-source negotiations.
7. Five main sources of contracting risk
▪ Lack of buyer understanding of its requirements: the buyer does not have a clear understanding of its requirements or cannot express that understanding effectively in terms of specific deliverables or level of effort, an agreement cannot be reached with another party to fulfill those requirements. ▪ Shortcomings of human language and differing interpretations: An inability to express ideas clearly may result in a contract document that does not accurately reflect the intended agreement. ▪ Behavior of the parties: The actions of one or both of the parties after the contract is signed may give meaning to the words of the contract that the parties did not originally intend. ▪ Haste: haste causes many problems.
Because of impatience with the bureaucratic contracting process, project managers often promote haste in contract formation. In the rush to “get on contract,” many ideas are not fully developed or discussed by the parties. As a result, the expectations of both parties may never be fully understood, by themselves or by each other. ▪ Deception is a deliberate defect in the communication process. Self-deception can exist on the parts of both buyer and seller involved in such a strategy. Even when the intention is ultimately to make the buyer happy, the method is deceptive and often leads to trouble. 8. Procurement Documents
The specific function of the project procurement documents is fairly simple but serves an essential purpose in both the organizational element of and the early momentum of the project process. The procurement documents refer specifically to the input output devices and tools that are put into place during the process of bidding and submitting proposals as to the project and the elements of work that make up the project as a whole. Included among the elements of the procurement documents are the buyer‘s invitation to bid, the invitation for negotiations that is extended by the financially responsible party, any requests for information that may be extended from any one party to another, requests for quotations that may have been extended, as well as any individual requests for proposals and the seller’s responses. 9. Differences between punitive and compensatory damages. Using the evidence presented by the parties and rules of law, the court will find an exact amount due (compensatory damages).
In certain situations, parties may agree in advance that if a party is wronged in a specific way, then a specific amount of damages will be due the other party, thereby liquidating the damages in advance. Thus, if the parties include a liquidated damages clause in their contract, the court will determine only whether a party was in fact wronged and entitled to damages. Both common law and civil law allow the parties to the contract to agree on future damages. Punitive damages, unlike compensatory damages, are those damages awarded to the plaintiff over and above what will barely compensate for his or her loss. Punitive damages are based on actively different public policy consideration, that of punishing the defendant or of setting an example for similar wrongdoers.