Contract and Commercial Management - The Operational Guide (eBook)

International Management(IACCM) (Autor)

eBook Download: PDF

2011 | 1. Auflage
656 Seiten
van Haren Publishing (Verlag)
978-90-8753-628-2 (ISBN)

Infos

Almost 80% of CEOs say that their organization must get better at managing external relationships. According to The Economist, one of the major reasons why so many relationships end in disappointment is that most organizations 'are not very good at contracting'. This ground-breaking title from leading authority IACCM (International Association for Contract and Commercial Management) represents the collective wisdom and experience of Contract, Legal and Commercial experts from some of the world’s leading companies to define how to partner for performance. This practical guidance is designed to support practitioners through the contract lifecycle and to give both ‘supply’ and ‘buy’ perspectives, leading to a more consistent approach and language that supports greater efficiency and effectiveness. Within the five phases described in this book (Initiate, Bid, Development, Negotiate and Manage), readers will find invaluable guidance on the whole lifecycle with insights to finance, law and negotiation, together with dispute resolution, change control and risk management. This title is the official IACCM operational guidance and fully supports and aligns with the course modules for Certification.

Inhalt

Foreword: By the Board Members of IACCM 6
Preface 8
Acknowledgements 10
CHAPTER 1 Introduction: contract management – a global context 26
1.1 The challenge of choice 27
1.2 Impacts upon contracting 27
INITIATE PHASE 36
CHAPTER 2 Understanding markets and industry 38
2.1 Identifying potential markets 40
2.2 Market segmentation 44
2.3 Competitive analysis 48
2.4 Product definition 49
2.5 Contracts role in PLM 50
2.6 Identifying risks 51
2.7 Matching the agreement to the market 51
2.8 Summary 52
CHAPTER 3 Understanding requirements 54
3.1 Why requirements matter 54
3.2 Early involvement 55
3.3 Defining the role of requirements 56
3.4 Factors driving improved specifications 58
3.5 Increased frequency of volatility and change 59
3.6 Managing inevitable change 59
3.7 Strategic and cultural fit 59
3.8 What goes wrong 60
3.9 Five key milestones 61
3.10 Tools and techniques for ensuring milestones are met 65
3.11 Common causes for delay or failure 71
3.12 Summary 77
CHAPTER 4 Financial considerations – understanding cost and setting charges 78
4.1 Introduction 78
4.2 Bid strategy: why does cost matter? 78
4.3 The role of the contracts professional 79
4.4 Bid strategy: the importance of cost analysis 80
4.5 Contract standards as cost management tools 82
4.5 Contract standards as cost management tools 82
4.6 Contract terms as a cost management tool 83
4.7 Contract terms that can potentially reduce cost 85
4.8 Dependencies 88
4.9 Bid strategy – how to set your charges 88
4.10 Contract terms – differences that may have financial impact 90
4.11 Bid strategy – differences that may have financial impact 91
4.12 Pre-bid phase: cost/benefit analysis 93
4.13 Summary 101
CHAPTER 5 Aligning risk through financial modeling 102
5.1 Introduction 102
5.2 The importance of economic alignment 102
5.3 The basics of financial modeling 103
5.4 The MediaCity case study 103
5.5 Making judgments 105
5.6 Financial model elements 105
5.7 Some basic principles and terms 106
5.8 Pricing mechanisms 107
5.9 Gainshare and shared benefits 108
5.10 Other factors 109
5.11 Summary 109
CHAPTER 6 Routes to market – partnerships, alliances, and distribution and sourcing options 110
6.1 Primary types of contracts used in large businesses 110
6.2 Use of agents and representatives 111
6.3 Local, national and international laws 122
6.4 Identifying potential suppliers and relationships 125
6.5 Evaluating project scope 128
6.6 Options for contracting 130
6.7 Summary 131
CHAPTER 7 Request for Information 132
7.1 Request for Information – Pre-Bid phase 132
7.2 Selecting and assembling the RFI team 133
7.3 Beginning the RFI 135
7.4 RFI content 135
7.5 Change control and support 140
7.6 Experience and stability 140
7.7 Functional, technical and business requirements 140
7.8 Software and hardware requirements 141
7.9 Budgetary pricing 142
7.10 Support 142
7.11 Security requirements and considerations 142
7.12 Review, validation and distribution 143
7.13 RFI conclusion 143
7.14 Alternatives to an RFI 144
7.15 Supplier’s perspective 145
CHAPTER 8 Undertaking a Terms Audit 146
8.1 Reasons for undertaking a Terms Audit 146
8.2 Purpose of a Terms Audit 148
8.3 Consequences of inappropriate terms 148
8.4 When to audit 149
8.5 The warning signs 151
8.6 Understanding impacts 153
8.7 Undertaking a Terms Audit 153
8.8 Sample audit 155
8.9 Summary 156
BID PHASE 158
CHAPTER 9 Bid process and rules 160
9.1 Introduction 160
9.2 Bidding process preliminaries 161
9.3 Bidding vehicles and when to use them 161
9.4 Supplier’s requirements response 164
9.5 Scoring and ranking the suppliers 164
9.6 Managing the RFx process 166
9.7 Evaluating responses – overall score 169
9.8 Supplier notification and the BAFO process 170
9.9 BAFO process and final contract 171
9.10 Supplier award notification 171
9.11 Supplier post-award issues 171
9.12 Summary 172
CHAPTER 10 Request for Proposal preparation and content 174
10.1 Introduction 174
10.2 Defining, managing content and drafting bid requirements 175
10.3 Pricing information (seller only) 184
10.4 Security, health and safety requirements and consideration 185
10.5 Managing the evaluation process (buyers) 185
10.6 Summary 188
CHAPTER 11 Responding to a Request for Information or Request for Proposal 190
11.1 Introduction 190
11.2 Background: the procurement process 190
11.3 Identifying an opportunity 192
11.4 Execution of non-disclosure agreements 192
11.5 Contracts professional involvement 193
11.6 Why have a bid process? 193
11.7 Key elements of a bid process 194
11.8 The role of the contracts organization 197
11.9 Contract management – adding commercial value 198
11.10 The bid goes on 199
11.11 Approvals 200
CHAPTER 12 Request for Proposal management 202
12.1 Introduction 202
12.2 Role of the contracts professional 203
12.3 The RFP document 203
12.4 Supplier selection and RFP distribution 207
12.5 Contract negotiations 212
12.6 Notifying unsuccessful suppliers 213
CHAPTER 13 The influence of laws on the bid process 214
13.1 Introduction 214
13.2 Basic principles 214
13.3 The influence of laws: international summary 215
13.4 The influence of laws: UNCISG 220
13.5 Offer and acceptance 226
13.6 Conditional offers and revocation of offers 228
13.7 Problems with preliminary arrangements 230
13.8 Closing the deal 232
13.9 Pre-contractual negotiations 233
13.10 Arbitration and alternative dispute resolution 236
13.11 Local law: civil code versus common law 243
CHAPTER 14 Costs identification 246
14.1 Cost overview 246
14.2 Activity-Based Costing 247
14.3 Tax consequences 247
14.4 Allocations 248
14.5 Opportunity costs 249
14.6 Cost of poor quality 249
14.7 IT systems costs 249
14.8 Hardware costs 250
14.9 Software costs 250
14.10 Infrastructure costs 250
14.11 Personnel costs 251
14.12 Other costs 251
14.13 Consensus on approach 251
14.14 Credibility of assumptions 251
14.15 Risk assessment 252
CHAPTER 15 Opportunity evaluation 254
15.1 Introduction 254
15.2 Involvement 255
15.3 Preparation 256
15.4 Evaluating the scope 260
15.5 Assessing the risk 264
15.6 Avoiding reference pitfalls 270
15.7 Evaluating the relationship 271
15.8 Judging customer sophistication 273
15.9 Evaluating future opportunity 275
CHAPTER 16 Proposal preparation 278
16.1 Introduction 278
16.2 Is it worth bidding? The four critical questions 278
16.3 Understanding the customer 281
16.4 Understanding the customer – buying criteria 282
16.5 Understanding the competition 283
16.6 Reviewing and assessing risks 284
16.7 Working with the pursuit team 285
16.8 Responding to the RFP documents 286
16.9 Responding to the RFP documents 287
16.10 Characteristics of successful bidders 288
16.11 Customer contact 288
16.12 Green Team review 290
16.13 Red Team review 291
16.14 The Executive Summary 291
16.15 Bid submission 293
16.16 Negotiations and pricing 294
16.17 Relationship selling 296
CHAPTER 17 Evaluating the proposal 298
17.1 Overview 298
17.2 The evaluation framework 298
17.3 Primary categories 302
17.4 Product evaluation criteria 303
17.5 Intangible criteria 307
17.6 Other evaluation components 309
17.7 Implementing the evaluation framework 310
17.8 Alternative approaches 313
17.9 Factors for success 314
17.10 Summary 315
DEVELOPMENT PHASE 316
CHAPTER 18 Contract and relationship types 318
18.1 Introduction 318
18.2 The importance of relationships 318
18.3 Primary types of contracts used 320
18.4 Product and services contracts 320
18.5 Contracts for services 326
18.6 Solutions contracts 331
18.7 Outsourcing 333
18.8 Turnkey contracts 338
18.9 Summary 341
CHAPTER 19 Contract terms and conditions overview 342
19.1 Overview 342
19.2 Start right 342
19.3 Purchase contracts and why they matter 343
19.4 Areas that the contract should address 344
19.5 Types of contract and some issues 346
19.6 Separating business and legal terms 347
19.7 Key elements in contracts 348
19.8 Summary 359
CHAPTER 20 Technology contract terms and conditions 360
20.1 Introduction 360
20.2 A specialized discipline 360
20.3 Definitions 364
20.4 Scope of Use 368
20.5 License types 369
20.6 Assignment and rights to use 371
20.7 License versus ownership 372
20.8 Audits and compliance 374
20.9 Software maintenance services 374
20.10 Hardware contracts: overview 376
20.11 Performance 377
20.12 Support and maintenance services 378
20.13 Upgrades 381
20.14 Compatibility 382
20.15 Services contracts: overview 382
20.16 Statements of Work (SOWs) and milestones 383
20.17 Termination 384
20.18 Summary 386
CHAPTER 21 Term linkages, managing cost and risk 388
21.1 Overview 388
21.2 The challenges of term linkages, managing cost and risk 388
21.3 Contract structure 389
21.4 Negotiated terms 390
21.5 Active versus passive terms 391
21.6 Terms Audit 391
21.7 Term analysis 392
21.8 Shifts have impact 394
21.9 Paradigm shifts 394
21.10 Legitimate terms that miss the point 396
21.11 Performance cost of the deal 397
21.12 Acceptance provisions 398
21.13 Preferences – supplier versus buyer 398
21.14 Multi-country projects 398
21.15 Contract pricing arrangements 399
21.16 Summary 405
CHAPTER 22 Statement of Work and Service Level Agreement production 406
22.1 Introduction 406
22.2 What is an SOW? 406
22.3 Why is an SOW required? 407
22.4 Basic process for developing an SOW 408
22.5 How do SOWs and SLAs relate? 411
22.6 Service Level Agreement (SLA) 412
22.7 IACCM outsourcing survey 413
22.8 What is included in an SLA? 413
22.9 Other SLA considerations 418
22.10 Summary 419
CHAPTER 23 Drafting guidelines 420
23.1 Introduction 420
23.2 Clarity 420
23.3 Contracting transformation 421
23.4 The contract document 422
23.5 Why a written contract? 423
23.6 What form should be used? 425
23.7 Rules of contract interpretation 425
23.8 Other contract interpretation guidelines 426
23.9 Background to contract drafting 427
23.10 Drafting best practice 428
23.11 Before you start 428
23.12 Drafting a complete agreement 429
23.13 Amendments and attachments 429
23.14 Drafting techniques 431
23.15 Contract terminology 431
23.16 Writing style 434
23.17 Tools 437
23.18 Summary 438
NEGOTIATION PHASE 440
CHAPTER 24 Approaches to negotiations – framing, strategy and goals 442
24.1 Negotiations overview 442
24.2 Introduction to framing, strategy and goals 445
24.3 Framing 445
24.4 Goals 448
24.5 Strategy 449
24.6 Stages of negotiation 452
24.7 Leveraging your experience 459
24.8 Planning and tactics 459
24.9 Tools for establishing a negotiation foundation 463
24.10 Summary 465
CHAPTER 25 Negotiation styles – positional versus principled negotiations 468
25.1 Introduction 468
25.2 Perspective and precedent 468
25.3 Negotiation options: positional versus principled 469
25.4 Factors that influence your choice 470
25.5 Positional versus principled negotiation 471
25.6 Characteristics of positional negotiating 471
25.7 Characteristics of principled negotiation 472
25.8 Recognizing positional negotiation 472
25.9 Advantages and disadvantages of positional negotiating 473
25.10 Advantages and disadvantages of principled negotiating 475
25.11 Non-negotiable issues 477
25.12 Countering the positional negotiator 478
25.13 Is principled negotiation worthwhile? 480
25.14 Summary 482
CHAPTER 26 Negotiating techniques 484
26.1 Introduction 484
26.2 Preparation 484
26.3 Negotiation power 488
26.4 Abuse of power 490
26.5 Opening offers 491
26.6 Physical/logistical considerations 493
26.7 Connecting with the other side 494
26.8 What happens if there is no agreement? 497
26.9 Technological challenges 500
CHAPTER 27 Tactics, tricks and lessons learned 504
27.1 Introduction 504
27.2 The last gap 504
27.3 How to cross the last gap in negotiations 509
27.4 Competitive tricks and ploys 513
27.5 Another perspective 518
27.6 Summary 519
MANAGE PHASE 520
CHAPTER 28 Manage phase overview 522
28.1 Introduction 522
28.2 Manage phase overview 523
28.3 Contract management activities 529
28.4 Contract management software 531
28.5 Contract management resource planning 533
28.6 Communication 537
28.7 Summary 541
CHAPTER 29 Transition 544
29.1 Introduction 544
29.2 Contract management after signature 544
29.3 Contract analysis 545
29.4 What is ‘the contract’? 547
29.5 Analyzing and understanding terms and conditions 548
29.6 Core contract elements analysis 550
29.7 Setting priorities 551
29.8 Transition meeting 552
29.9 Transition and organization 553
29.10 Transition - meeting goals 554
29.11 Summary 555
CHAPTER 30 Risk and opportunity 556
30.1 Introduction 556
30.2 Understanding risk and opportunity 556
30.3 Understanding and managing opportunity in contracts 560
CHAPTER 31 Monitoring performance, tools and techniques 564
31.1 Introduction 564
31.2 The contract management role 565
31.3 Post award contract management activities 567
31.4 Status reviews: internal 582
31.5 Status reviews: external 583
31.6 Typical issues and problems 583
31.7 Summary 584
CHAPTER 32 Change control and management 586
32.1 Introduction 586
32.2 The realities of change 586
32.3 Designing a change control procedure 590
32.4 Contract claim 597
32.5 When parties do not want a change control and management process 599
32.6 Case studies 600
32.7 Summary 602
CHAPTER 33 Dispute handling and resolution 604
33.1 Introduction 604
33.2 What is a dispute and what causes a dispute? 605
33.3 Common operational disputes causing ongoing problems 609
33.4 What does the contract say about dispute resolution? 611
33.5 Possible consequences of a formal dispute 613
33.6 How to avoid a dispute 615
33.7 Dispute handling and resolution: recovery 616
33.8 Resolution steps: from least to most complex 619
33.9 Solutions to disputes: negotiation 620
33.10 Solutions to disputes: mediation 621
33.11 Solutions to disputes: arbitration 622
33.12 Solutions to disputes: litigation 623
33.13 Case study: an actual dispute and how it was resolved 624
33.14 Summary 626
CHAPTER 34 Contract close-out and lessons learned 628
34.1 Introduction 628
34.2 Types of termination or close-out 629
34.3 Final acceptance 629
34.4 Final acceptance: actions 631
34.5 Expiry of term 632
34.6 Termination 632
34.7 Expiry of term or termination: actions 633
34.8 Close-out - key risks after the delivery of the contract 635
34.9 Continuing obligations 636
34.10 Lessons learned 638
34.11 Summary 639
Annex A Glossary 640
Annex B IACCM training 650
Index 652

Textauszug

CHAPTER 1

Introduction: contract management – a global context

The concept of trade is a characteristic unique to the human species. With each advance in human communications, the complexity of trade has increased1.

It is this growth in complexity that drove the need for contracts, as a written record to ‘memorialize’ the negotiation that had taken place and which committed the parties to some future exchange of value.

Over time, the knowledge gained from past transactions led to a body of experience which became enshrined in laws or customs, influencing the process by which trading relationships were formed, the parties involved in their formation and the means by which they were recorded.

Today, we are at the beginnings of a new era for communications – a world connected via electronic networks that allow unparalleled speed, enabling relationships to be formed and managed in ways that were never previously envisaged. It is the unknown nature of this networked world that represents a new level of complexity for society as a whole, but especially for the politicians who are charged with its regulation and the business leaders who must navigate through the risks and opportunities that it represents.

A survey by IBM Corporation2 revealed that 79 percent of Chief Executive Officers (CEOs) see ‘increased global complexity’ as a major challenge over the coming years. Of course, mastering complexity has been a key trait of humanity over the centuries, but at this time it has taken on a new intensity. At its heart, according to these CEOs, is the difficulty created by ‘the growth of interconnections and interdependencies’. What do they mean by this – and how does it relate to the world of contract management?

1.1      The challenge of choice

Globalization has driven a massive expansion of choice, in particular in the world of trade. Whether as a buyer of goods and services or as a seller, there are few corners of the world where it is no longer possible to find a trading partner. For some, this means new markets; for others, it may mean access to new resources, improved skills, or lower cost supplies. The problems that come with this explosion of choice are many. For example, how do you assess which options are best? How long will that assessment take you? What risks may be associated with your choice – and how do you find out about them? And at the same time as one business is on this journey of discovery, so are its competitors – are they moving faster, or smarter? Will they innovate before me? Do you any longer know who your competitors are – who may emerge from parts of the world where you did not previously play?

Businesses face dramatic and exciting new opportunities, but also very real threats. Many of the CEOs were concerned about issues such as customer loyalty and reputation risk. Why? Because networked technologies mean there are no secrets any more and customers can be accessed by competitors, new and old, at far lower cost. It has become much easier for a customer to undertake regular re-bids using e-procurement technology. It has become inevitable that the media, or bloggers, or disgruntled members of the public will highlight any slip in quality, governance standards or organizational integrity. Misjudgments, mistakes and ethical lapses take only minutes to appear on the worldwide web.

1.2      Impacts upon contracting

Many of these issues touch upon the contracting and commercial capabilities and practices of the organization. The CEO survey offered more detailed insight. Executives are hoping for greater creative leadership from within their organizations. They highlighted three particular areas for focus. They want staff who are:

•   Better at managing risk

•   Better at eliminating rules and bureaucracy

•   Better at forming and managing customer relationships

In the opinion of many executives today, those charged with contracting would certainly be found wanting on at least one of these focus areas – and in some cases, all three. The question for many professionals is whether they wish to have change imposed upon them by others, or to be drivers of that change – the ‘creative leaders’ who are being sought by the CEO community.

The contracting process can operate at two very distinct levels. In some organizations, it is seen as the discipline through which corporate or organizational policies and practices are implemented. Those charged with the role of contract negotiation or management are essentially compliance managers or administrators, either preventing or limiting the scale of deviation from ‘the rules’. Their discretion may be limited or non-existent and they typically rely on others to make operational decisions. They have no meaningful role in the strategy that underlies the standard policies or practices – and feel no sense of responsibility for ensuring that these standards enhance competitiveness or economic performance.

At the other end of the scale, the contracting process is seen as a key instrument for quality control and brand management. It is understood to be not only the instrument through which policy and practice are implemented, but also the closed-loop system through which they are maintained or challenged. Contract and relationship structures, individual terms and conditions and contract governance procedures are constantly under review to ensure they support market advantage and reinforce brand image and reputation.

In either case, operational management of contracts is a critical discipline. This book focuses on the operational aspects, with limited reference to the over-arching strategies and policies that determine the quality of the contracts themselves. These will be addressed in a separate Contracting Strategy volume.

This book is about contracting. But of course there are multiple forms of contract and therefore it is important to define the scope of the types of agreements or relationships that are covered.

First and foremost, the book is about business contracts and it is predominantly about business-to-business relationships. Within this there is some discussion and distinction between public and private sector and passing reference to issues associated with consumer contracting. While the primary focus is on the provision of goods and services (including intangibles such as software), there is also reference to distribution, alliances, teaming arrangements and joint ventures. Finally, it is written with a global perspective, acknowledging the variations created by different cultures and jurisdictions.

Philosophy

It may appear strange to start a book on contracting with a statement of philosophy, but it is important to state that this work has the aim of increasing the probability of successful trading relationships. We present the view that contracting must become a core business competence to assist in understanding, evaluating and overcoming the complexity and challenges of today’s global markets.

This position is reflected in the work of a growing number of academics who show particular interest in the connection between contract management and relationship management. Specific examples include Nobel prize winner Professor Oliver Williamson, author and educator Kate Vitasek, outsourcing guru Professor Leslie Willcocks and a host of thought-leaders who collectively belong to ‘the school of pro-active law’ (Professors Tom Barton, Kaisa Sorsa, Henrik Lando, Rene Henschel and Gerlinde Berger-Walliser being notable examples).

To achieve that end, it seeks to be inclusive of a wide range of viewpoints and to encourage balancing of interests and needs, in a way that is appropriate to the extent and duration of the contract that is being formed. It encourages openness and honesty, but of course we cannot prevent our readers from using the information in whatever way they deem appropriate. In general, we suggest that adversarial or confrontational relationships do not tend to work; but as with all things, this is not always true. Suppliers in particular may choose to stick with domineering customers and learn how to leverage their relationship. But we see limits in how much such a relationship will achieve.

This philosophy leads us in general to warn against unbalanced or inappropriate allocations of risk. It also encourages the parties to question transactional, as opposed to relational, behaviors, recognizing that all choices carry a cost. A good example of this readiness to question is contained in an article by British economist John Kay, entitled ‘It’s time to rip up your unwritten contracts’. In it, Kay suggests that the shift from performance based on long-term relationships to performance based on transactional contracts has reduced input prices, but damaged longer-term profitability.

We seek to explain and bring those costs to the surface, in ways that will assist good business judgment and support sustained business success.

The role of law

The role of law is acknowledged as fundamental to contracting practice and process. Any contracts expert must appreciate the impacts of different legal traditions – for example, statute law versus common law. These differences will impact the attitudes of the contracting parties; they will affect the length and content of the contract; they are likely to influence the language and will certainly determine the choice of...

Produkt-Details

• Erscheint lt. Verlag: 11.11.2011
• Reihe/Serie: IACCM Series. Business Management
• Verlagsort: Hertogenbosch
• Sprache: englisch
• Themenwelt: Schulbuch / Wörterbuch ► Schulbuch / Allgemeinbildende Schulen
• Themenwelt: Mathematik / Informatik ► Informatik ► Programmiersprachen / -werkzeuge
• Themenwelt: Mathematik / Informatik ► Informatik ► Software Entwicklung
• Themenwelt: Sozialwissenschaften ► Pädagogik
• Themenwelt: Technik ► Architektur
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Marketing / Vertrieb
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Personalwesen
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Planung / Organisation
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Projektmanagement
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Unternehmensführung / Management
• Schlagworte: Business Management
• ISBN-10: 90-8753-628-3 / 9087536283
• ISBN-13: 978-90-8753-628-2 / 9789087536282