Contract Management

Core Business Competence

Peter Sammons

• Publisher: Kogan Page
• Year: 2017
• ISBN:
  9780749480653
• Edition: 1
• Topic: Business
• Subtopic: Operations
• Index: Business

Contract management is a key management skill, yet it is underplayed in most organizations, which usually default to project management skills as a proxy for contract management skills. Whilst project management skills are equally essential, they are not the same thing. Contract Management looks at the wider contract management picture from an industrial-commercial perspective, and helps set-out typical structures and processes that assist the contract management task. The author uses diagramatic representations to depict complex ideas. Contract Management includes "learning points" in each chapter, looking at handling problems, procedural changes and enhancing commercial performance.

Practical tools and checklists

APPENDIX 1

Preparing specification documents: an approach to support client–supplier contract negotiations

1 What is a specification?

What is a specification? A dictionary definition is: ‘specification – act of specifying; detailed descriptive statement of contract or patent. Specify – make particular mention of; include in specification.’ To say a specification is ‘specifying what you want’ is clearly inadequate! The best definition of a technical specification is contained in BS 5760.

Specifications: BS 5760 – a definition

Specification: ‘means of communicating the requirements or intentions of one party to another in relation to a product, service, material, procedure or test.

Specification – function: ‘to provide the basis of understanding between two parties so that both agree on the criteria to be met.

In spite of the general clarity as to what a specification is and what it is designed to do, it appears very often in commercial contracts that client-side (buying) organizations fail to achieve their objectives when they buy in high technology or specialist goods and services. It may be that their expectations are unreasonable or insufficiently thought through. But it may be that they are failing to specify clearly what they want to buy. Specifications are important because they assist or hamper these buying organisations in acquiring what they need to fulfil their commercial objectives.

Whilst it is often the buying side that prepares the Specification, sellers also have a practical interest in the document. It contains all the technical and commercial ‘promises’ that they must meet. If the seller prepares the Specification, then it represents their ‘public’ statement of what they are capable of delivering, and their confidence in meeting all their contractual promises.

2 General principles

Specifications can be in varying levels of detail ranging from a simple performance/functional description, through to a fully detailed exposition of how a process, system, or equipment is to be analysed, designed, procured, manufactured, delivered, installed, commissioned, operated and maintained, or a service carried out.

UK Supply of Goods and Services Act 1982

How does the Act define a ‘contract for the supply of a service’? … ‘In this Act, a “Contract for the supply of a service” means … a contract under which a person (“the supplier”) agrees to carry out a service.’ The Act goes on to state that a contract is a contract for the supply of a service ‘whether or not goods are also transferred or to be transferred, or hired’.

• It should be recognized that, in general, the greater the level of detail in a specification, the more constraints this imposes on the contractor/supplier with consequent effects on costs and price levels.
• Greater detail in specifications does not always lead to increased price, but added detail often provides an opportunity to ‘gold plate’ the goods or services being supplied. This is especially true where the Specification requires the contractor to vary their normal capacity, methods, practices or resources. Moreover, if what is sought is not in fact obtained, the contractor may be able to avoid liability by demonstrating that it has followed the ‘letter of the Specification’.
• It is generally more satisfactory to describe the required final result rather than the methods by which the results should be obtained. The contractor/supplier may be able to offer alternative, more cost-effective proposals, so to constrain them via a detailed specification may be counter-productive.
• Detailed specifications can lead to sourcing limitations and ‘one-off specials’ which are likely to cost more in purchase and through-life costs.
• By comparison, to specify simple per...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Foreword
• Introduction
• 01 Contract management as a value driver
• 02 What is the task?
• 03 Role and importance of effective contract management
• 04 Contract administration
• 05 Commercial strategy
• 06 Contract design
• 07 Mobilization
• 08 When things go wrong
• 09 Managing for success
• Practical tools and checklists
• Index
• Backcover