slide 1 d2.tfa.cl7.04. manage contractual agreements/commitments this unit comprises three elements:...

MANAGE CONTRACTUAL AGREEMENTS/COMMITMENTS

Slide 1

D2.TFA.CL7.04

Manage contractual agreements/commitments

This Unit comprises three Elements:

Slide 2

Establish contractual agreements/commitments management strategies

Monitor and maintain the performance of contractual agreements/commitments

Complete contractual agreements/commitments and implement review strategies

1

2

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Assessment

Assessment for this unit may include:

Slide 3

Oral questions

Written questions

Work projects

Workplace observation of practical skills

Practical exercises

Formal report from employer/supervisor

Element 1: Establish contractual agreements/commitments management strategies

Performance Criteria for this Element are:

Re-confirm contract requirements with all parties for all contractual agreements/commitments

Establish effective communication and information strategies for all contractual agreements/commitments

Confirm and implement start-up or transition arrangements for all contractual agreements/commitments

(Continued) Slide 4

Document management strategy for the life of individual contractual agreements/commitments

Monitor application of the identified management strategies

Adapt documented management strategies as required

Slide 5

Element 1: Establish contractual agreements/commitments management strategies

Re-confirm contract requirements for all contractual agreements/commitments

Context:

This unit deals with skills and knowledge required to manage agreements and/or commitments and arrangements with businesses where a legally binding contract exists

The business agreements or contracts and negotiations described by this unit are formal and structured in nature and cover significant commercial dealings

Slide 6


Stages in life cycle of contracts:

Initiation

Negotiation

Execution

Management

Finalisation

Slide 7


A Contract:

Arises when two or more parties agree to do something in exchange for something else

May be verbal or written

A legally enforceable agreement

Slide 8


Reasons to maintain contractual arrangements which have been negotiated and/or agreed to:

Preserve positive and credible reputation for the organisation

Sustain the organisational image

Give certainty to business and promises which have been made within the business environment

(Continued) Slide 9


Avoid being sued

Conduct business in an expected and structured manner

Ensure all legal obligations are/can be discharged

Slide 10


Contractual agreements may include:

Contracts – with customers, carriers, suppliers, third party providers, agencies

MOUs and MOAs

(Continued)

Slide 11


In-house option directives

CUAs

(Continued)

Slide 12


Government agreements

LOIs

(Continued)

Slide 13


Licensing arrangements

Marketing agreements

Slide 14


Ways to re-confirm contractual requirements – a combination of the following is best:

Obtain and read copies of all documentation

Talk to those who were involved in developing and/or negotiating the agreements

(Continued)

Slide 15


Speak to legal advisers

Discuss the agreements with management who are currently working with them

Talk with other interested parties

Slide 16

Establish strategies for agreements/commitments

‘Communication strategy’:

Should be one for every contract/agreement

May be supported by a communication plan

Slide 17


Role of communication strategy:

Identify stakeholders

Provide/record their contact details

Describe role of stakeholders

Detail preferred communication option/s

(Continued)

Slide 18


List preferred contact times

Identify organisational personnel who have responsibility for making contact

Provide sample templates to use when communicating

Identify resources available to enable communication to occur

Slide 19


‘Information strategy’:

Should be one for every contract/agreement

May be closely linked to/aligned with the communication strategy

Slide 20


Role of an information strategy:

Facilitate sharing of information

Provide a mechanism through which information is stored

Allow a means by which stakeholders can access relevant information

(Continued)

Slide 21


Manage data and information

Classify/categorise data and information

Underpin operational decisions and actions

Enable required reporting

Slide 22


Need for effective communication and information strategies – to:

Demonstrate transparency in the way the agreement is being managed

Avoid confusion and/or gaps in knowledge

Show a willingness to be engaged with the agreement

Facilitate cooperation of others in the relationship

(Continued)

Slide 23


Provide established and agreed channels of communication

Share relevant and allied information

Provide the basis for scheduling regular contacts

Establish protocols for dealing effectively with other stakeholders

(Continued)

Slide 24


Provide emergency contact arrangements

Establish a diary system for requirements relating to the agreement

Ensure information flow occurs at nominated, critical stages of the contract

Slide 25

Confirm and implement start-up or transition arrangements

Ways to confirm start-up and/or transition arrangements = same as used to confirm/re-confirm contract requirements:

Obtain and read copies of all documentation

Talk to those who were involved in developing and/or negotiating the agreements

Speak to legal advisers

Discuss the agreements with management who are currently working with them

Talk with other interested parties

Slide 26


Start-up arrangements = requirements for a new contract/agreement that has not been entered into before:

Establishing framework that will be used to manage the relationship

Creating necessary administration and operational protocols

Making initial contact with relevant other people

Taking action to investigate and clarify issues which are causing concern

Slide 27


Transition arrangements = requirements for a contract/agreement that has previously been in operation, but:

Has been rolled over for another period

Has been revised

Has changed a provider/contractor

Slide 28


Arrangements may address:

Identification of initial payments required

Provision of required resources

Statement from management giving in-principle support

(Continued)

Slide 29


Designation of roles and attached responsibilities

Creation/revision of scopes of authority attaching to roles

Development of protocols to enable management of issues

(Continued)

Slide 30


Identification of contract/agreement specifics

Determination and establishment of contacts within organisations/stakeholders

Clarification of documentation to be used and protocols for completion and submission

Slide 31

Document management strategy for the life of agreements/commitments

The contract management strategy is an internal mechanism and:

Is generated and developed from within the organisation

Can be determined by those with responsibility for managing the contract

Will reflect history and experiences of the organisation

Varies between organisations and different agreements

Slide 32


Contract management strategy needs to be documented so:

The process of developing a management strategy is formalised

It can be shared with others within the organisation

There is certainty about what is entailed in intended and agreed actions

Evidence is generated regarding rationale/s and deliberations which formed the thinking that underpinned the decision to be part of the contract

Slide 33


Contract registers’ could/should be established to:

Centralise all the agreements, arrangements and contracts an organisation has entered into

Assist with meeting:

• Accountability requirements

• Financial payments

• Reporting schedules

• Delivery timelines

Slide 34


Possible inclusions in a contract management strategy:

Risk management

Activities for managing agreement/commitment throughout all stages of the contract

Protocols to ensure effective and compliant implementation

(Continued)

Slide 35


Actions required to effectively administer the agreement

Relationship management

Governance issues related to the arrangement

Slide 36


Monitoring needs to occur to:

Determine effectiveness/appropriateness of strategy to the individual nature of the contract

Demonstrate to management the professionalism being shown by person who has responsibility for the contract

Demonstrate to others the contract is actively monitored

(Continued)

Slide 37


Help the organisation meet its obligations under the agreement

Ensure other parties perform their obligations under the agreement

Use them as intended when problems arise in the relationship

Provide objective data in relation to the agreement

Slide 38


Ways to monitor contract management strategies include a combination of:

Undertaking scheduled reviews

Talking with other parties on a regular basis

Talking with stakeholders

Determining the reality of the arrangement

Slide 39


It is important to note not every contract management strategy which has been deemed to be ineffective will necessarily be adapted – for example:

Small issues may be ignored

Issues late in the contract may be ignored

Issues may simply be raised verbally with the relevant other party

Slide 40


Where contract management strategy has to be changed actions to achieve this may include:

Review existing contract management strategy

Talk to others who have been involved in managing the contract

Talk to other party/parties

Prepare draft revision of original contract management strategy

(Continued) Slide 41


Circulate the draft revision internally

Revise draft on basis of feedback and comments

Confirm revised version of contract management strategy

Implement revised contract management strategy as planned

Slide 42

Summary – Element 1

When establishing contractual arrangements/commitments management strategies:

Recognise they have a life cycle

Preserve a positive and credible reputation for the organisation

Sustain the organisational image with customers and the general community

(Continued)

Slide 43


Ensure all legal obligations are/can be discharged as agreed/expected

Appreciate the different types of arrangements which exist

Confirm existing arrangements which may exist/apply

(Continued)

Slide 44


Establish effective communication and information strategies

Verify and implement start-up and/or transitional arrangements, as appropriate

Identify and document relevant contract management strategies for each agreement

(Continued)

Slide 45


Establish a contract register

Obtain legal advice where necessary

Apply standard risk management protocols

(Continued)

Slide 46


Demonstrate due diligence, professionalism and ethical behaviour

Establish effective monitoring strategies

Remain flexible and cooperative regarding implementation of the agreement

Slide 47

Element 2: Monitor and maintain the performance of contractual agreements/commitments


Manage relationship with contractors in accordance with organisational policies and procedures

Monitor performance of all contractual agreements/commitments

Meet obligations to contractors

(Continued)

Slide 48

Identify and manage emerging risks throughout the life of all contractual agreements/commitments

Identify contract variations

Manage contract variations

(Continued)

Slide 49


Investigate, resolve disputes, or refer disputes/complaints

Negotiate issues relating to contractual agreements/commitments

Maintain communication on the performance of the contractual agreements/commitments

Maintain information relating to contractual agreements/commitments

Slide 50



Important background information:

Understand all contractual agreements/commitments need to be managed

Appreciate they need to be actively managed

Realise the hard work may occur after the agreement has been finalised and signed

(Continued)

Slide 51


Monitor agreements on an ongoing basis

Recognise many agreements can be subject to changes throughout their life

Accept most relationships are ‘personal’ in nature

(Continued)

Slide 52


Accept this part of the process is internally generated but involves outsiders

Ensure those with responsibility and accountability for managing contracts have necessary authority to act

Realise and accept there are limits to what is meant by maintaining good relations with other parties

Appreciate all contractual relationships must be managed in an appropriate manner which apply to all business relationships

Slide 53


Organisational protocols will provide help and direction to ensure:

Adequate operational and administrative oversight of the contracts

Consistency of actions

Preventative action to be taken when a new threat or altered risk presents itself

Corrective action to be taken when non-performance, sub-standard performance or incomplete is identified

Slide 54


Examples of organisational policies and procedures for managing contractual agreements/commitments:

Establishment of a contract management or review committee

Key performance criteria

(Continued)

Slide 55


Authorisation/s for nominated actions in relation to the agreement

Communication with internal and external stakeholders and other parties

(Continued)

Slide 56


Reporting

Security, privacy and confidentiality

Documentation of contractual arrangements

Slide 57


Reasons to monitor performance of contractual agreements/commitments:

Ensure the organisation receives all the benefits it is entitled to

Ensure the organisation delivers all the products, services and/or payments it is contracted to provide

Address issues arising as soon as they are detected

Slide 58


General objectives in management/administration of a contract need to be aimed at ensuring all obligations imposed are being met:

By all parties

When/by the dates promised

As/to the standard promised

Slide 59


Actions to help ensure objectives in agreements/contracts are being achieved:

Inspecting work performed

Checking payments made

Communicating regularly with other parties about relevant issues

Considering the level of satisfaction the organisation has with what has happened

Slide 60


Under agreements there are usually commitments by the organisation to undertake generic activities such as:

To make nominated payments by given dates

To deliver nominated deliverables to a certain standard by a nominated date

To refrain from action or undertaking for a given period

Slide 61


Additional obligations – to:

Grant access

Share or provide information

(Continued)

Slide 62


Attend meetings

Provide additional help to the contractor

Take action to mitigate any negative impacts on the discharge/performance of the contract

Slide 63

Identify and manage emerging risks throughout the life of agreements

Risk management involves a three-step process:

Risk identification

Risk analysis

Risk control

Slide 64


Risk identification should comprise a combination of the following:

General monitoring of broad business environment as it relates the matters which form the basis of the contract

Specific monitoring of matters which are the focus of the agreement

(Continued)

Slide 65


Checking on work performed as part of the contract

Communicating with ‘relevant others’

Slide 66


Basic sources of risks which need to be managed:

Contract management capability

Contractor performance

Changes in circumstance and/or requirements

Stakeholder relationships

Slide 67


Contract variation:

Is any change/amendment to an existing contract or agreement

May be requested or initiated by any party to an original agreement

Commonly relates to amending dates

(Continued)

Slide 68


Often relates to money initially agreed to as payment for contracted products and/or services

May involve changes to the goods and/or services to be provided

Slide 69


The need for a contract variation will occur:

As a result of direct request from another party to the agreement

As a consequence of monitoring the general environment

From activities involved in monitoring matters which are specific to what is the focus of an existing agreement

(Continued)

Slide 70


Due to issues and problems arising out of the discharge and performance of the contract to-date

Because of accidents, incidents, unavoidable events and unforeseeable circumstances

As a result of checks and inspections which have been carried out on work performed under the contract

(Continued)

Slide 71


Following discussions (as distinct to formal requests) with others

When another party exercises their right to invoke a variation clause

If there are changes to legislation impacting work to be done

In the event new market research data emerges, legitimate stakeholder feedback is received and/or new trends relating to the purposed/intent of the contract have been identified

Slide 72


Depending on nature of the variations (with reference to their size, scope, value, importance and complexity) there can be a need to:

Comply with the contents of the contract

Comply with organisational policies and procedures when there is a need to consider a contract variation

(Continued)

Slide 73


Seek advice from others, where appropriate

Clarify the proposed contract variations

Dissolve existing contracts

Slide 74


Contractual disputes, complaints or issues may be caused by :

Requirements regarding provision of goods and services

Schedules

Price changes

(Continued)

Slide 75


Additional tasking (‘contract creep’)

Complaints from third parties

Frustration

Slide 76


When handling of disputes, complaints or issues:

Respond promptly

Communicate well

Act ethically

(Continued)

Slide 77


Focus on the long-term relationship

Demonstrate a willingness to negotiate

Slide 78


Keys in determining the actual response of an organisation to disputes, complaints or issues:

The size, nature and value of the contract

The potential negative consequences for the business of not responding in an appropriate manner

Policies and SOPs of the organisation in this regard

(Continued)

Slide 79


The nature of the individual contract or commitment

Previous experience (if any) in dealing with the other party

Slide 80


It is essential to understand:

‘Resolving’ problems means fixing them between the parties involved without reference to any external persons or bodies

‘Referring’ problems means resolution has failed and there is a need to involve some external people or agencies/bodies

Slide 81


Standard objectives in relation to contractual issues, complaints or issues are:

Resolve them in-house, between the parties if possible

Resolve them speedily

Only refer issues if common sense does not resolve the problem

Slide 82


(Continued)

Slide 83

Options for managing

disputes/complaints

may include:

Conferencing

Mediation

Arbitration


Slide 84

Options for managing

disputes/complaints

may include:

Negotiation

Resort to contractual agreement

Legal considerations


Context for negotiations:

Negotiations must be conducted in a business-like and professional manner

Negotiations can be the best way of resolving conflict or striking a deal, when the parties involved believe that not reaching an agreement means a loss for everyone

Parties need to be willing to make some concessions

(Continued)

Slide 85


Compromise is an essential element of true negotiation

Not all negotiations reach a successful conclusion

Slide 86


Negotiation can be defined as:

A process in which two or more parties confront a problem and arrive at a solution which best meets the needs of all of them

Slide 87


Factors implicit in negotiations:

Communication takes place in which approval, agreement or action is sought from someone else which may be different to what they first wanted

Many negotiations are conducted not between groups of people but between two individuals representing groups/organisations

Most negotiations result in a less than perfect solution for one, or both, sides



Inherent in negotiation is the concept of ‘give and take’

There are definitely times in negotiations where one party will give more than normal in order to achieve some other perhaps long-term or other goal

Slide 89


Essentials when negotiating:

Undertaking proper preparation

Finding out something out about the person with whom negotiations will be occurring

Adopting a calm, non-emotional approach

(Continued)

Slide 90


Ensuring excellent listening and communication skills are applied

Knowing how to close a deal

Obtaining agreement about what has been discussed, re-cap the salient points, and suggest the next step

Being assertive

Slide 91


Questions which need to be answered before negotiations start:

What are the needs of the organisation?

What does the organisation need to get out of this negotiation?

Where is the point the negotiation process will have to be walked away from?

What are the needs of the other party as they have stated them and/or as has been revealed by research?

(Continued)

Slide 92


When preparing to negotiate:

Obtain all the facts before negotiation starts

Try to ensure more is known about the issue than the other party

Try to determine what information the other party might have

Find out about the needs and wants of the other party

(Continued)

Slide 93


Are both parties dealing with the same set of facts?

What are the assumptions being made by the other party?

Be prepared not to simply believe/accept what the other party says

Slide 94


When negotiating:

Be business-like while remaining as friendly as possible

Try to get initial agreement from all parties as to the agenda of the negotiation

At the same time try to get agreement on what the likely outcome will be

(Continued)

Slide 95


Deal with any issues that can be easily and painlessly dealt with, first

Take notes, refer back to them regularly and try to get agreement notes taken accurately reflect what has taken place

Identify points of agreement and points of difference

(Continued)

Slide 96


Use appropriate language

Be prepared to bargain

Develop options

Slide 97


Possible negotiation topics:

Negotiate contract variations

Negotiate continuous improvement

(Continued)

Slide 98


Negotiate innovations

Negotiate instances of non-compliance

Negotiate consequences arising as a result of non-compliance

Slide 99

Maintain communication on performance of contractual agreements/commitments

Effective strategies include:

Being proactive in the communication process

Using the communication option identified by the other party as their preferred method of contact

Demonstrating willingness to engage in the communication process

(Continued)

Slide 100


Adhering to scheduled contact times

Thanking others in the communication process

Attending meetings

Providing evidence to support communications

Slide 101


When maintaining contact it is important to:

Keep promises made

Involve and include all stakeholders

Adhere to organisational procedures relating to external communication

Comply with industry standards

Slide 102


The most common reasons/needs to file documents are:

For future reference

To facilitate the production of other similar agreements in the future

Compliance with legislated and general professional obligations

Slide 103


Standard industry practice:

Establish a ‘contract register’ to manage contract documents

Provide required facilities

(Continued)

Slide 104


Control access to these documents

Observe internal filing protocols

Notify relevant others

Slide 105


Documents which may need to be included as part of the maintenance process for original contractual agreements/commitments are:

Copy of the original agreement

General supporting documentation

Name and details of management team

Name and contact details of other parties

(Continued)

Slide 106


Relevant plans and schedules

Contract variations

Minutes of meetings

Receipts

(Continued)

Slide 107


Details of payments made

Copies of relevant budgets

Inspection checklists

Applicable standards/criteria

(Continued)

Slide 108


Feedback from stakeholders

Quotations

Reports written

Reports received

(Continued)

Slide 109


Distribution Lists

Reviews and evaluations

Photographic evidence of work performed/problems encountered

Details of negotiations entered into during the agreement

(Continued)

Slide 110


Tender documentation which may have attached to the agreement/contract

Briefing notes

Details of statements made about the agreement

Copies of authorities/revised scopes of authorities established under the agreement by the organisation

(Continued)

Slide 111


Complaints and compliments received

Relevant Codes

Relevant legislation

Underpinning information generated or research by the organisation which gave rise to the agreement

Slide 112


When monitoring and maintaining the performance of contractual agreements/commitments:

Understand the agreements/contracts

Actively manage the agreements/commitments

Adhere to organisational policies and procedures

(Continued)

Slide 113


Maintain confidentialities

Monitor agreements on an ongoing basis

Cooperate with, collaborate with and communicate with stakeholders and other parties

Meet specified obligations when and as promised

(Continued)

Slide 114


Be vigilant about identifying and managing emerging risks

Accept contract variations are always a possibility which need to be requested and/or accommodated

Be proactive in addressing disputes, issues and complaints under the agreements

(Continued)

Slide 115


Negotiate solutions to resolve problems in preference to relying on external referral of issues

Communicate with relevant others in a meaningful way on an ongoing basis

Capture, record and maintain necessary information relating to performances under the agreements

Slide 116

Element 3: Complete contractual agreements/commitments and implement review strategies


Finalise contractual agreements/commitments

Apply management strategies to contractual agreements/commitments

Review strategies used to manage contractual agreements/commitments

(Continued)

Slide 117

Document and explain variances between key performance indicators in the contractual agreements/commitments and actual outcomes

Use review information on provider performances to guide recommendations for improvements to future contractual agreements/commitments

Slide 118

Element 3: Complete contractual agreements/commitments and implement review strategies


Ways to finalise contractual agreements/commitments:

Performance

Tender or attempted performance

(Continued)

Slide 119


Agreement between the parties

Operation of time

Repudiation

(Continued)

Slide 120


Frustration

Substitution

Breach

(Continued)

Slide 121


Operation of law:

• Merger

• Material alteration to written contract

• Death

• Insolvency

• Losing the contract

Slide 122


Management strategies to handle end of agreement include:

Implementing organisational close-out procedures

Reviewing the agreement

(Continued)

Slide 123


Searching for replacement or alternative agreements

Negotiating and executing renewal of the contractual agreements/commitments

Undertaking transition arrangements to a new contract

Slide 124


Management strategies for contractual agreements/commitments need to be reviewed to:

Determine their effectiveness

Identify lessons learned

Work out whether a different strategy should be used next time

Align with standard internal operational protocols

Assist with deciding ‘next step’

Slide 125



Allocate time for the work to be done

Be honest and open

Strive to use objective data

Involve all relevant people

Keys when reviewing:



Document the process

Take it seriously

Realise the next agreement/commitment is, to a great extent, determined by the findings of this review


Focus effort on critical questions:

Slide 128

What worked/succeeded

What failed/did not succeed

Why


Activities in the review process:

Preparing a plan for the review process

Obtaining 360˚ feedback

Analysing contract management

(Continued)

Slide 129


Examining supplier performance

Undertaking a gap analysis of the agreement/commitment

(Continued)

Slide 130


Examining costs and benefits

Reflecting on existing data generated as part of the agreement

Clarifying lessons learned

Slide 131

Document and explain variances

Documentation is required to:

Provide evidence the process was undertaken

Facilitate sharing of information generated as a result of the process

Enable storing of the information

Allow recording of rationale/s behind decisions made and conclusions reached

Conform to internal SOPs

Slide 132


Keys when considering variances:

Measure expected, anticipated, projected or promised deliverables against what actually occurred

Take into account the things which are important to the organisation

Look at the impact of the variance

Seek to understand the reasons that caused all variations

Slide 133


Variances may relate to:

Compliance with timelines for payments

Adherence to dates and/or times for delivery of contracted items

Extent and type of services provided

(Continued)

Slide 134


Level of compliance with promises made

Issued relating to product and service quality

Prices charged or presented for payment for products and services provided

(Continued)

Slide 135


The experience of dealing with the business throughout the contract period

Willingness of the business to meet emerging needs which did not exist when the agreement was first discussed and signed

Preparedness of the business to help address individual organisational problems which cropped up during the contract

Slide 136

Use review information on provider performances to guide recommendations for improvements

Focus must be on provider performance – with attention focussing on:

What the suppliers/providers did well

What they did poorly

Slide 137


Topics to address:

The planning process

Procurement

Information and data

(Continued)

Slide 138


Role of provider audit trails

Measuring outputs

(Continued)

Slide 139


Meeting client/organisational needs

Innovation

Continuous improvement

Slide 140


Recommendations for improvements to future contractual agreements/commitments may be:

Noted on files and contracts in the contract register

Provided as a simple verbal statement

Presented in a formal written report

The subject of a formal face-to-face presentation

Slide 141


When completing contractual agreements/commitments and implementing review strategies:

Seek to bring the agreements/commitments to a mutually-beneficial conclusion

Implement close-out procedures as prescribed by the organisation

Review the agreement involving other parties

(Continued)

Slide 142


Plan the review

Allocate the review process sufficient importance, time and resources

Undertake a gap analysis

(Continued)

Slide 143


Examine costs and benefits

Analyse and explain key variances

Focus on what is important

(Continued)

Slide 144


Look for impacts and the causes of those impacts

Determine next step actions such as further negotiations, renewals or appropriate alternatives

Evaluate contractual management strategies applied

(Continued)

Slide 145


Document findings

Learn lessons for future use

Share relevant information with key stakeholders/other parties where appropriate

(Continued)

Slide 146


Consider organisational performance as well as provider performance

Obtain 360˚ feedback

Rely on valid and objective data/evidence

Slide 147

slide 1 d2.tfa.cl7.04. manage contractual agreements/commitments this unit comprises three elements:...

Documents

required slide

unit deals

slide explaining

management important

document management

number of performance

contract requirements

information strategies