outcome 1 – negotiating & contracting in procurement · pdf fileoutcome 1 –...

Copyright © 2015Commerce Edge South Africa

All rights reserved

1

Outcome 1 – Negotiating & Contracting in Procurement and Supply


All rights reserved

2



All rights reserved

3



All rights reserved

A specification is a statement of requirements to be

satisfied in supply of product, or service.

Two main types of specifications:

1. Conformance

Buyer details out exactly what the required product,

part or material must consist of. Supplier task is to

simply conform to description provided by the buyer.

2. Performance

Buyer describes what it expects a part or material to

be able to achieve.

Purposes of Specifications

� Specifications must be clear and unambiguous.

� Specifications facilitate:

� Communication between all involved, including

purchaser and supplier.

� Comparison between bids.

Functions of specifications:

� The communication has to be clear and

unambiguous.

� Comparison facilitates a fair and more accurate

supplier’s bid

� A specification is the source document for

contracting.

� Specifications can be divided into two categories:

Conformance specifications tend to be more

technical and rigid.

Performance specifications have a range

parameter: minimum to maximum performance

expectations.

4



All rights reserved

When generating KPIs consider:

� What is to be measured (strategic, operational or tactical).

� Link to purchasing business plan.

� Compliance with 6 point plan.

� Available data source.

� Valid means of measurement.

� Write target.

� Communicate to relevant others.

Characteristics of KPIs:

� Specific – easily understood.

� Measurable – what does success look like or how is it quantified?

� Achievable – otherwise de-motivational.

� Relevant – to core business/service.

� Timed – realistic timescale.

5



All rights reserved

6

Implies Terms� A contract term that has not been expressly agreed,

drafted and included in a contract.� It is ‘implied in the contract’ by law whether or not both

parties agree or not.� If a contract is too detailed, courts will be reluctant to

imply terms, too many gaps may lead to a contract being declared void.

Types of implied terms: Sale of goods act� Fit for purpose� Description on packaging� Passing of title� Sample/brand

Express TermsProvision in a contract that is clearly, directly and unmistakably communicated in written or spoken words and includes:� Exclusion clause� Penalty clause� Liquidated damages� Force majeure� Guarantee� Warranty� Payment terms

Condition� Is a vital term to a contract, breach of which may result in

the other party suing and claiming damages.

� Breaching a condition entitles the other party to sue for damages and terminate the contract if they wish.

� In some cases, the injured party might take the option of affirming the contract and claiming damages.

A condition is an important term in a contract, one that goes to the very root of the contract. If breached, the contract would be in jeopardy.

Breach of the term leads to contract termination and suing for damages by the aggrieved party.

The leading case: In Poussard vs Spiers and Pond (1876), an actress was employed to play the leading role in an operetta for a season. She was unable to attend until a week after the season began and the producers, who had to engage a substitute, refused her services when she eventually appeared. They purported to terminate the contract and sue for breach of contract. The court heard evidence that as the opening night was regarded as very important, the actress’s absence amounted to a breach of condition and so the producers were entitled to terminate the contract.

WarrantyIs a less important term. Breach does not constitute a substantial failure of performance, the injured party may claim damages but cannot reject the contract.



All rights reserved

7



All rights reserved

8



All rights reserved

9



All rights reserved

10



All rights reserved

The “battle of the forms” occurs where there is a stand - off between the supplier and the buyer on whose terms to use.

The general rule is that “the last piece of paper will govern which set of terms should apply”.

The buyer can use the following ways to avoid the ‘ Battle of the Forms’ trap:� Create a set of standard terms and conditions in advance, which will cover all future dealings with

suppliers. It could be the buyer’s or seller’s terms or a combination of both sets. These will form a framework agreement.

� Use of tenders. With the tendering process, it is the buyer who controls the terms and conditions of the contract.

� Web based purchases (e-contracts), the purchaser automatically accepts the seller’s terms and conditions before a contract could be made.

� Buyer to incorporate the “Order Acknowledgement Slip” to be signed by the seller and return to buyer.� A request for quotation is an invitation to treat.

11



All rights reserved

12



All rights reserved

13

Effects of misrepresentation1. Contract becomes voidable

� until injured party elects to rescind2. Innocent misrepresentation

� rescission and indemnity under s2(2) MA� court discretion to award damages if

equitable to do so3. Negligent misrepresentation

� right to rescind but court has power to refuse and award damages instead

� can claim damages under s2(1) MA� onus on the person making false

statement to show grounds for believing it to be true

� damages do not need to be foreseeable 4. Fraudulent misrepresentation

� main remedy is rescission� can also claim damages under tort of

deceit... not under contract.

Rescission1. Main remedy for all types of misrepresentation

� equitable and so discretionary remedy� takes effect when notified to the other

party� releases aggrieved party from obligations� sets contract aside as though never

made2. Injured party may lose right to rescind

� accept some benefit under the contract� affirm the contract in some other way� wait too long before taking action� may not be possible to restore parties to

original position� goods have passed to a third party

Final point… exclusion or restriction of liability or a remedy for misrepresentation

� s3 of MA... any such clause is subject to a test of reasonableness.



All rights reserved

Key points on once-off� It commits both buyer and supplier to all the terms relevant to supply of the specified requirement, in

a specific case. � It only commits the buyer and supplier to purchase and supply of the specified requirement, in a

specific case.

15



All rights reserved

Three options:� To issue call-off orders against the framework with a selected supplier� To run a further mini-competition (competitive tender) between multiple suppliers included in the

framework� To go elsewhere (utilising appropriate contract tender and award procedures)

Examples of framework arrangements� Supplies from a single provider� Supplies from several providers � Consultancy services� Minor works� Major works

16



All rights reserved

Ideal if you are:� a larger organisation (10+ staff, several offices) or� Several smaller organisations able to work together� Have just secured reasonable funding for a large project (or want to show procurement compliance

on a lottery bid)

Benefits of mini-competition� Benefits of consortium purchasing� Multiple suppliers provide choice and competition� Exact requirement can be further refined over and above the basic contract terms.� Achieving best value for money for your specific requirement� Terms and conditions already established, so call-offs can just refer to the agreement.� By following these guidelines, and any specifics detailed in the Buyers’ Guide, you will ensure

adherence to EU Procurement legislation

17



All rights reserved

Examples of service contracts� Goods are tangible or material items, which can be consumed. � Services are actions individuals or organisations perform which confer a benefit, but do not result in

the ‘ownership’ of anything. � Works includes projects such as the construction, alteration, repair, maintenance or demolition of

buildings or structures; the installation of fittings; and so on.

Service level agreements� What services are included ?� Standards or levels of service� The allocation of responsibility for activities, risks and costs.� How services and service levels will be monitored and reviewed.� How complaints and disputes will be managed.� When and how the agreement will be reviewed and revised.

19



All rights reserved

Many kinds of business asset are suitable for financing using hire purchase or leasing, including:� Plant and machinery� Business cars� Commercial vehicles� Agricultural equipment� Hotel equipment� Medical and dental equipment� Computers, including software packages � Office equipment� Renting office space and buildings

Leasing is a contract between the owner(lesser) and the lessee for the hiring of a specific assets. Leasing can apply to any fixed assets and quite commonly used for plant and machinery, office equipment and motors vehicles. Instead of acquiring these assets for itself, the company enters into an agreement with a leasing company whereby the latter purchase the assets in question and then lease them ( rent or hire them) on a long-term basis to the former.

No initial funds are required but there is instead a regular charge for lease payments to be charged in the profit and loss account.

20


outcome 1 – negotiating & contracting in procurement · pdf fileoutcome 1 –...

Documents