Term
| Social responsibility issues in preparing obligation documents |
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Definition
| Consider adding clauses about child labor, worker safety, nondiscrimination, ethicl business practices, and environmentally sustainable practices. |
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Term
| State of domain/jurisdiction in preparing obligation documents |
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Definition
| Especially important when procuring goods from internat'l suppliers. Legal counsel can determine if the laws of supplier's country recognise laws of buyer's country. |
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Term
| Liquidated damages issues in preparing obligation documents |
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Definition
| Clause that can be invoked in situations such as inadequate service response times and downtime on equipment, late deliveries, and failure to deliver critical material. Damage awards are for restitution not penalty. Can be activated by partial breech as well as breech of entire agreement. |
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Term
| Contractor downflows in preparing obligation documents |
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Definition
| Regulations regarding child labor, use of small businesses, equal opportunity, and restrictions on certain international purchases are added to subcontractor agreements. Needed for U.S. Federal gov't contracts due to FAR-Federal Acquisition Regulation. |
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Term
| Warrenties in preparing obligation documents |
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Definition
| SM professionals are free to bargain for broad, strong warranties or to accept a supplier's total and complete disclaimer of warrenties. |
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Term
| Define: express warranties |
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Definition
| Can be expressed either orally or in writing by the supplier. Can include almost any statement or representation a supplier makes about its product. Should be included in writing in the contract to make sure it exists. |
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Term
| Define: Implied warranties |
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Definition
| Provided by the Uniform Commercial Code (UCC). Buyer does not have to list them specifically in the contract to have them apply. Include title & authority to sell (supplier has the right to sell product), implied warranty of merchantability (must be of fair, average quality), fitness for intended purpose (supplier warrants that goods are suitable for buyer's purpose), and latent conditions (not identifiable under normal inspection, but when discovered deprive buyer of product's value). |
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Term
| Remedies in preparing obligation documents |
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Definition
| Purpose is to provide buyer with goods that conform to the contract within a reasonable time after a defect is discovered and the supplier notified. Legal concepts involved in remedies include cure, cover, incidental damages, liquidated damages, adn consequential & actual damages. |
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Term
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Definition
| To make the situation right, such as by fulfilling a contract as originally agreed. |
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Term
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Definition
| To provide protection against breach or compensation for breach of contract. |
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Term
| Define: Incidental damages (remedies) |
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Definition
| Expenses reasonably incurred in the inspection, receipt, transportation, and care of goods rightfully rejected. Can also include expenses or commissions in connection with the purchases required from alternative suppliers as a result of the breach and other reasonable expenses incidental to the delay or breach. |
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Term
| Define: General damages (remedies) |
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Definition
| Foreseeable damages that "flow naturally from the breach." Suppliers should assume buyer organization will suffer general damages in the event of a breach; differ from special damages which are not foreseeable, and the buyer must prove the supplier knew the buyer would suffer damages if there was a breach. |
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Term
| Define: Consequential & actual damages (remedies) |
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Definition
| Consequential damages include lost profits and other damages occurring as a consequence of a suppliers inability to perform. |
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Term
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Definition
| Document used in the procurement of services to define exactly what work is being contracted. All services must have a clear definition outlining what exactly is to be done, when it should be done, and what constitutes an acceptable result. |
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Term
| Elements of a Statement of Work (SOW): Work breakdown structure |
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Definition
| For lengthy or complex projects, the SOW may divide the description of the work into segments. Each segment can then be managed as a separate subproject, or the overall project can be quoted and managed by using the work breakdown with a form of project management chart (ie PERT) to sequence activities |
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Term
| Elements of a Statement of Work (SOW): Hold points/milestones |
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Definition
| When the SOW is divided into segments, may be advisable to make continuation of project conditional upon the successful completion of each segment. Quality assessments can take place at those points. Safeguard against the project going too far awry before a deviation is discovered. |
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Term
| Elements of a Statement of Work (SOW): Performance evaluation factors |
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Definition
| Every SOW should state all performance and quality criteria along with the methods by which they will be measured. Results of performance evaluation should be known to each party. |
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Term
| Define: Contract administration |
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Definition
| Management of various facets of a contract to ensure that the contractor's total performance is in accordance with the contractual commitments and that obligations tot he purchaser are fulfilled. |
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Term
| Objectives of contract administration |
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Definition
*Ensures supply management organization fulfills its part of the agreement
*Ensures supplier's performance complies with the contract
*Protects buyer's interests by prompt and fair resolution of problems that arise during performance
*Determines whether any increased costs of contract performance should be borne by supplier and negotiates equitable adjustmens of the contract terms when necessary
*Takes all administrative action necessary to document contractual transactions |
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Term
| In order to assist in cost & schedule control, many cost-reimbursement contracts require the establishment and maintenance of what 3 documents? |
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Definition
| Annual work plans, work authorizations, and notices to proceed (NTP). |
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Term
| Define: annual work plan (AWP) |
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Definition
| details the initial definition of tasks to be performed in the budget year and a schedule for completion. During the AWP review, the supplier's resource projections are approved and tasks are scheduled. Includes goals and assumptions, work auth review results, a schedule, a staffing plan, and a cost estimate. Should be updated mid fiscal year. *Used in cost-reimbursement contracts |
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Term
| Define: work authorization |
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Definition
Generally includes work breakdown structure designations for the work, info regarding the duration of the work auth, the baseline cost estimate for the work, and references to the annual work plan and notices to proceed.
*used in cost-reimbursement contracts |
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Term
| Define: Notices to proceed (NTP) |
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Definition
Upon receipt of the NTP, supplier begins work and begins cost and scheduling reporting for the task. NTP typically includes a statement of work, key schedule milestones for task accomplishments, and the total amt of funds alloted for tasks.
*used in cost-reimbursement contracts |
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Term
| Compliance (Contract Administration) |
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Definition
| A primary responsibility of sourcing; day-to-day monitoring may be assigned to other departments or third-party entities. Complex, specialized, or very technical contracts may require assistance from an internal customer actually using the product to ensure compliance. |
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Term
| End-user and third-party individuals in charge of contract compliance require instruction by supply management in what areas: |
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Definition
*Reading and understanding the basic requirements of the contract
*Developing mutually beneficial, arms'-length relationships with suppliers
*Recognizing potential problems
*What actions they can and cannot take and when to contact contract administrator
*Areas of authority and responsibility |
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Term
| How do contracts such as indefinite deliver contracts, time and material or labor-hour contracts, and cost-reimbursement contracts differ from other contracts in terms of ordering and work authorization processes? |
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Definition
| In indefinite deliver contracts, time and material or labor-hour contracts, and cost-reimbursement contracts, ordering and work authorization processes are defered until after the contract is awarded. Ordering becomes a contract administration matter. |
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Term
| Effective contract compliance programs include a plan of actions to take if what two things occur? |
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Definition
1. The supplier fails to perform
2. The purchasing activity has a change of requirements |
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Term
| Areas to be reviewed in compliance monitoring |
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Definition
*Is performance on schedule?
*Is the cost within the estimate?
*Are resources being applied at expected levels?
*Is quality for the end-product on target?
*Are progress payments warranted?
*Will new components be needed in major equipment?
*Will the supplier's own progress monitoring system be adequate?
*Are all contractual provisions being followed?
*Is the organization receiving all goods/services at the price, time, place and quality contracted for?
*Are requested changes properly documented and fairly resolved? |
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Term
| Financial responsibility (in Contract Administration) |
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Definition
| Supplier's primary concern is to be paid in a timely manner for work done. The relationship between the supplier and the supply management professional differs depending on the contract. In a fixed-price contract, supplier has incentive to perform in the most economical way. In labor-hour, time and materials, and cost-reimbursement contracts, they do not. The supply managment professional must monitor and guide the supplier's efforst to prevent waste of funds and stay on budget. |
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Term
| Approving systems (in Contract Administration) |
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Definition
| Important to determine who has the authority to approve transactions and make sure it is known throught the organization |
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Term
| Administrative responsibilities (in Contract Administration) |
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Definition
| Contract administrators cannot be experts in everything, but it is important for them to understand price adjustment clauses and administration of change orders. |
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Term
| 3 types of price adjustment clauses |
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Definition
1. established price clauses dependant upon fluctuations in the supplier's applicable established prices and in accordance iwth applicable labor and material price indeces.
2. Adjustment clauses that permit changes to labor or material costs when one or more identifiable labor or material cost factor is subject to change. The types of labor or material subject to cost adjustment are described in the contract schedule.
3. Adjustment clauses based upon published cost indecies rather than actual cost. Used when extended period of significant cost will be incurred and it begins more than one year after the commencement of the contract, the contract amount subject to adjustment is substantial, and the economic variables for labor and material are too unstable to reflect a reasonable division or risk between the parties without adjustment provisions |
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Term
| Administration of change orders |
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Definition
| Allow the contract to be altered after the award. Should require both parties to equitably alter the delivery schedule or the price to be paid in accordance with other changes to the contract's terms. Should also give both parties "relief" if the other party takes an action not contremplated or fails to take an action contemplated by the original agreement. |
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Term
| Contract terms and conditions (in Contract Administration) |
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Definition
| Must be known by the contract administrator to make sure both parties are in compliance of contract. Includes price, quantity, deliver, shipping requirements, payment terms, quality specifications, engineering drawings and other docs, sampling plans, conditions of acceptance, and other important factors. Also includes standard "boilerplate" terms intended to give legal protection to the buying organization, such as patent rights, trademarks, contract termination info, etc. |
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Term
| Documentation requirements (in Contract Administration) |
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Definition
| Every contract has its own requirements; could include work orders, invoicing, work plans, and performance measurements among other documents. The point is to document all actions and verify all requirements. |
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Term
| Contract closeout (in Contract Administration) |
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Definition
| Actions taken by both parties to a contract after they have completed their respective obligations. May include verification that all work has been duly performed, accepted, invoiced, and paid in full. |
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Term
| Termination options for the U.S. Federal government include... |
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Definition
| The government may terminate a contract for its own convenience at any time, with or without cause. Furthermore, in government contracts, suppliers cannot realize profits on that portion of the contract not performed. |
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Term
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Definition
| When a party exercising a power created by agreement or law ends a contract for reasons other than a breach. |
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Term
| How do cancellation and termination differ? |
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Definition
| Cancellation implies "cause" and does not excuse the "causing" party from damages resulting from its failure to perform. |
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Term
| Upon termination, what happens to rights and obligations? |
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Definition
| Executory obligations are discharged, but rights or obligations based on prior performance or breach survive. |
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