D4 | Flashcards

Question	Answer
Four contract requirement categories	1. specifications 2. service level agreements 3. contract terms 4. key performance indicators
three approaches to tendering	1. open tendering 2. selective tendering 3. restricted open tendering
purpose of a specification	1. define the requirement 2. communicate the requirement clearly to suppliers 3. minimise risk & costs associated with doubt
two types of specification	1. conformance - the buyer details exactly what the required product, part or material must consist of 2. performance - relatively brief, the buyer describes what he expects a part or material to achieve
advantages of performance specifications	1. easier and cheaper to draft 2. does not depend on the technical knowledge of the buyer 3. suppliers can use their full expertise 4. a greater share of risk sits with the supplier 5. the potential supply base is wider than a confirmative specification
service complications	1. intangible 2. variable 3. provided in 'real time' 4. can inly be performed in particular locations 5. may be procured for a long period of time
what do KPIs measure	1. defined performance criteria 2. previous performance 3. performance of other comparable organisations or standard benchmarks
purpose of KPIs	1. identify the best suppliers 2. suggest how relationships with suppliers can be enhanced 3. ensure suppliers live up to what was promised in their contracts 4. provide an incentive to suppliers 5. significantly improve supplier performance
benefits of using KPIs	1. improved communication on performance issues 2. motivate to achieve performance levels 3. support collaborative relations 4. directly compare performance each year 5. focus on key result areas 6. clearly defines shared goals 7. reduces conflict
disadvantages of KPIs	1. lead to dysfunctional behaviour or less than optimal behaviour (cutting corners on quality or service to achieve KPI targets)
four types of contract terms	1. express terms - clearly stated and recognised in the contract (price, dates) 2. implied terms - assumed to exist by virtue of common law (H&S act) 3. Condition - a vital term, if breached, the contract can be ended 4. warranty - innocent party may claim damages
model form contract	published by a third party expert, incorporating standard practice in contracting and ensures fair balance of contractual rights and responsibilities between buyer and seller
when might a standard contract be used?	when an organisation does regular business with a supplier, or has recurring requirements for a product or service
elements of a legally binding agreement	1. agreement, in the form of an exchange of offer & acceptance 2. consideration 3. intention to create legal relations 4. contractual capacity
two rules of consideration	1. consideration must be valuable but need not be adequate 2. consideration must be sufficient (past and pre-existing obligations don't count)
a contract may be invalid because of a number of factors - mistakes, misrepresentation, undue influence or illegality. Two terms to describe an ended contract	void: having no legal effect on wither party, as though no contract was ever formed voidable: either party can make the contract void
what is misenterpretation	a false statement of material fact made by one of the contracting parties, before or at the time of entering into a contract, which was intended to induce the other party to make the contract
explain undue influence (or duress)	when pressure is placed on one party to agree to a contract in such a way that does not reflect the true intentions or wishes of both parties
Four requirements for a contract to be legally valid	1. be a definite, unambiguous statement of willingness to be bound in contract 2. must be an offer that the offerer intends to be bound by 3. must be communicated successfully to the offeree (they are aware of it) 4. must be 'open' (still in force) when the offeree accepts it
open tender	tender is widely advertised and open to any potential bidder
selective tendering	potential suppliers are pre-qualified and 3-10 suppliers are shortlisted for invitation to tender
restricted open tenders	prospective suppliers are invited to compete however advertising of the tender has been restricted
Contract terms can be "expressed" or "implied" terms and are classified as either a 'condition' or 'warrenty'	1. condition: vital term, if breached the contract can be terminated 2. warranty: less important term which does not constitute failure
Standard contract	used if an organisation has recurring dealings with a supplier and standard terms and conditions
model form contracts	a contract published by third party experts
advantages of model form contracts	1. reducing time and costs 2. avoids 'reinventing the wheel' 3. model forms are widely accepted, reducing negotiation 4. designed to be fair at both parties
disadvantages of model form contracts	1. terms may not be as advantageous to a powerful buyer 2. terms may not include special clauses or requirements 3. legal advice is required if big variations are made 4. costs to train buyers to use model form contracts
The law of contract is concerned with four basic questions	1. is there a contract in existence? 2. is the agreement one which the law should recognise and enforce? 3. when do the obligations of the parties come to an end? 4. what remedies are available for an injured party?
Implications of international law	when does an offer or acceptance become effective in an international trade transaction? when do title, property and risk pass from the overseas seller to the domestic buyer? what are the rights of a party when goods do not conform to the contract?
International Commercial Terms (intercoms)	international transactions that adopt these terms reduces problems - no ambiguity of law
the uniform law formation tries to resolve the considerable differences between English and European law	the uniform law of sales defines a sale of goods as international when the parties reside or operate in different nation states
advantages of leasing an asset	1. no capital investment 2. the total cost of the lease will be known in advance = improved budgeting 3. easier to upgrade or replace asset 4. hirer is protected from inflation rates
disadvantages of leasing an asset	1. committed to making regular payments 2. the total cost of the lease agreement, over time, may cost more than the initial purchase of the asset 3. ownership belongs to leasing company - hirer does not have total control of the asset 4. payments may become difficult if hirer experiences cash flow problems
three elements of a contract for the hire of goods that are not present in a contract for the sale of goods	1. no transfer of ownership 2. the hirer is allowed possession and use of the goods for the specified period 3. the hirer is obliged to pay the owner at the hire rate
how could negotiation be used at three different stages of the sourcing process	1. identify & define needs - challenge requirements and specifications using negotiation 2. develop contract terms - negotiate standard contract terms & conditions and other specific commercial requirements 3. source the market - RFI / RFT / RFQ are a basis for negotiation 4. contract management - contract performance & relationship management
How can stakeholders contribute to a commercial negotiation?	1. contract managers - responsible for managing contract performance 2. finance - interested in the value outcome 3. senior management - interested in the risks and effectiveness / profitability 4. suppliers - interested in gaining business
three macro-economic factors and how they can influence a commercial negotiation	1. economic variables - determine the strength of the economy and the extent of business confidence in spending & investment 2. employment / unemployment levels - affect the availability of labour for suppliers & buyers, affecting the cost of labour. 3. rates of inflation - affect suppliers costs & pricing 4. exchange rate fluctuations - create risk in international sourcing 5. interest rate fluctuation - risk increases when making loans for capex purchases
five sources of information on macro-economics	1. forecasts, reports & statistical surveys 2. published analysis in financial media 3. data published by stock exchanges 4. websites 5. data published by financial institutions 6. published economic indices
explain the term 'influencing' the desired outcome is compliance, conformity, concession commitment & agreement	Influencing is the process of applying some form of power or pressure in order to change the other negotiating party's behaviour. You have an affect on someone which affects the outcome, ideally in your favour.
characteristics of the 'push' approach to influencing	1. a 'push' approach to influencing aims to secure compliance from the other party 2. it is based on power imbalance and is a directive or power-based approach (at the expense of the other party) 3. win-lose (distributive approach) to outcomes 4. may cause resentment or resistance from party being 'pushed' - a barrier to collaboration
characteristics of 'influencing'	1. long term/ continuous process which often results in positive relationships 2. can be done intentionally or unintentionally
types of power that can be used to influence	expert logic LOOK INTO
what is negotiation?	a process of planning, reviewing and analysing used by a buyer and a seller to reach acceptable agreements or compromises
distributive bargaining	involves the distribution of limited resources. one parties gain can be at the expense of the other
integrative negotiation	collaborative problem solving to increase the options available to both parties - aim to find a mutually satisfying or win-win solution
five conflict handling styles	1. avoiding 2. forcing / competing 3. accomodating 4. compromising 5. collaborating
five types of power	1. legitimate power 2. expert 3. reward / resource 4. referent 5. physical
five potential benefits of using KPIs as performance measures	1. enable the buyer to monitor performance 2. motivate the supplier by giving them a target to aim for 3. provide clear definition of shared goals 4. able to compare year-on-year performance 5. provides support for relationships 6. encourages better communication when there are performance issues
explain the content of a contract schedule on H&S requirements	explains to the supplier what H&S measures they should take to protect their workforce, e.g the appropriate clothing and tools
explain the content of a contract schedule on a non-disclosure agreement	this would be used where the buyer and supplier have agreed that no confidential information should be disclosed to third parties, such as the suppliers other customers
explain the content of a contract schedule on the use of subcontractors	where the buyer stipulates to the supplier how it should carry out the process of subcontracting part of the contract awarded by the buyer if it needs to. This would include gaining permission from the buyer and the contract clause would indicate circumstances in which this should be done, following the contract schedule.
five conflict handling styles	1. avoiding 2. accomodating 3. competing 4. compromising 5. collaborating

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	Created by Josie Robinson about 6 years ago