FIATA HIGHER DIPLOMA IN SUPPLY CHAIN

MANAGEMENT
MODULE: CONTRACT
MANAGEMENT
 CONTENTS

Chapter 1: Introduction to Contract

Management Chapter 2: Managing
Risks
Chapter 3: Contract Management Team
Formation
Chapter 4: Developing a Contract
Management Plan Chapter 5:
Procurement & Contract Management
Chapter 6: Measuring Performance
Chapter 7: Close out a
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in SCM
CHAPTER 1:
INTRODUCTION TO
CONTRACT Objectives
MANAGEMENT
 To appreciate the fundamentals of
contracts

 To appreciate the role of contracts in

supply chains

 To understand the legal aspects of a

contract
 INTRODUCTION TO CONTRACT
MANAGEMENT
What is Contract
Management?
CONTRACT MANAGEMENT – WHAT IT IS ABOUT?
 Planning
 Stakeholder engagement and going management
 Commercial and contract strategy development
 Alignment with business strategy and objectives
 Risk appreciation
 Negotiation and execution
 Through life monitoring and exception reporting with
remedial actions
 Problem resolution
 Ultimate closure of liability between the contracting
parties
 Ensuring all commercial objectives and planned
business benefits are
archived, all expenditure is justified on commercial
FIATA Higher Diploma 4
in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
What is Contract
Management?
CONTRACT ADMINISTRATION – DELIVERING ON
ITS PROMISES
• Payment are made
• Delivery are received
• Communication are tracked/monitored and
acted upon
• Intellectual property rights are respected
• Good title transfer
• Business review are carried out and
performed

FIATA Higher Diploma 5

in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Why Manage the
Contract?

The value
chain

The
Supplie busine Custom
rs ss ers
(You)

Good contract management enhances reputation amongst

customers and suppliers

FIATA Higher Diploma 6

in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Why Manage the
Contract?
Weak contract management leads
to
• Cost increase
Why contract need • Time delay
managing • Performance shortfall
• IPR infringement
• Disaster recovery/force majeure
• Legal liability

• Contract negotiation and

The value chain - agreements
Activities • Optimized contract prices
The value chain • Inbound distribution or logistics
• Manufacturing operation
Contractual • Outbound distribution or
obligations logistics
management • Marketing and selling
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• After sales service 7
 INTRODUCTION TO CONTRACT
MANAGEMENT
FUNDAMENTAL UNDERSTANDING
ABOUT CONTRACT

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT

What – the contract is

Why – need it

When – make it

Who – entity,
signatory, team

Wher

How
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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Introducti
on

Introduction
• Contract  profitable business  sustainability
company
• Contracts are essential part of business
dealings
• Contracts involve tangible products and
intangible services

FIATA Higher Diploma 10

in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Introducti
on
Local vs.
What is a Form of international
Contract? contract agreement/contr
 Legally enforceable  Verbal  Why is the
act
promise  Behavi there Pros
made between parties difference and
or
 Agreement that binds ? cons?
 Writing
parties to contract
 Evidence of
agreement.
court Partiesother
to force
can to perform
party takeaction
their
in
side of the
agreement

11
 INTRODUCTION TO CONTRACT
MANAGEMENT
Stages in Life of a
Contract

Corporate strategy – commercial strategy – need

Conception
identification- budget allocation – contract strategy
Gestation Market test – negotiation – business case – bid
Birth Drafting – negotiation – execution (signature) – copies to key
stakeholder
Mobilization – contract management plan – progress
monitoring – changes to scope or duration – dealing with
Life
problems – SRM – CRM – progress payments – transfer of legal
title – progress meetings – project memo system for
communication
Final delivery – final payment – final “sign-off” (issue
certificate)
Death

FIATA Higher Diploma

Expiry of warrantees/guarantee – latent defects period – IPR12
in SCM provision expire-
 INTRODUCTION TO CONTRACT
MANAGEMENT

CASE STUDY – 30’: discussion about local (Vietnamese) contract template vs.
international contract
template
A Vietnamese company (VN) wants to sell 10 ton materials with value appx
1.000.000.000 vnd to a foreign company (FIE) located in Vietnam. VN company
send the contract template that they used to sign with their partners so far,
Vietnamese style. FIE did not agree, they ask for the use of their template.

Team A – represent VN company, present the points to convince your

customer using your own
template
Team B – represent to FIE company, present the points to pursuant for use your
own template

FIATA Higher Diploma 13

in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Governing Law of the
Contract/Agreement

1.Governing Law of the contract/agreement

 Local laws and regulations
 International Laws and regulations
 Others:
• Customs
• Morals
• Religion and beliefs
• Government

2.Can be divided into:

 Codifications
 Common law
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 INTRODUCTION TO CONTRACT
MANAGEMENT
Form of Contract/
Agreement
Contracts Form of contract/ agreement
 In supply chain, contracts  Offer & acceptance
entered include:
• Purchase of goods & • One party offers and the other
equipment accepts
• Warehousing  Consideration
• Carriage of goods • Exchange of promises between
• Agency agreements parties
• Marketing agreements  Intention to create legal relationship

• IT services • Both parties agree to legal bind to

one another
• Other outsourcing
services  Legal capacity

FIATA Higher Diploma

• Both parties must be mature and
15
in SCM
clear thinking
 INTRODUCTION TO CONTRACT
MANAGEMENT
CASE STUDY – 45’:
Creative Master Agreement signed between Company A in VN and Creative Agency B
in Singapore. Marketing Manager received an email from creative agency dated 7 July
2017 asking for starting day of a TVC shooting which requested the involvement of a
Vietnamese celebrity is a must. Marketing manager replied “20 August 2017”.
Talent asked for deposits or she will sign an exclusive contract with competitor. Agency
paid deposit to her @ 10.000usd.
Marketing Manager then informed the agency on cancellation of the project. Agency
asked for compensation
of the deposit they made for the talent.
Team A – for Agency company
Team B – for company of marketing manager
Prepare and present the arguments to protect the benefit of the company you are
presenting for

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Concept of Contract Management

Concept of Contract Management

 Correcting mistakes
 Organizing a series of payment in accordance
with the
progression of payment
 Responding to action or inaction resulting in
additional costs
 Establishing the consequences of late
completion
 Methods for dispute resolution

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Structure of a Contract

Structure of a Contract
 Articles of
agreement
• Actual
agreement
 Recitals
• Series of
statements
setting
forward the
relevant
matters
• Facts about
the contract
 Articles
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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Process Leading to a Contract

Condition to effect
 Legal personality and legal capacity
 Entire volunteer
 Purpose and content of the agreement are not contrary to the law
and/or social ethics
 Form of agreement if being required by laws
• Notarization
• Writing
• Authorization
• Signature
• Seal
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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Process Leading to a Contract

Legal Capacity
For a contract to be legally valid, the court requires parties to
possess legal capacity
 A person is considered to have the power if he is NOT:
• A minor
• Suffering from mental sicknesses
• Drunk

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Process Leading to a Contract
CASE STUDY – 30’
 Proposal from marketing agency in US was that the TVC (for Vietnam
market) will be top-up in video accessed from Vietnam having high view
rating. The company agrees so.
 TVC was sometime inserted into sensitive videos which created a
strong reaction from consumers and impacted to brand image
 General manager requested you to ask for compensate from the agency
for such damage.
Team A: Company asking for compensation
Team B: agency – no compensation

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Process Leading to a
Contract

Void and Null agreement

 Against the laws
 Against the principal of agreement
 Formality of the contract
• Authorization
• Signature
• Seal

FIATA Higher Diploma 22

in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Process Leading to a Contract

CASE STUDY – 30’

Mr. A leases house from Mr. M in 03 years. After 12 months, Mr. M
wants to terminate the contract to sell it. He said the contract was not
notarized so it was void.
Team A: for Mr. M- build argument to kick A out
Team B: For Company A: build argument to continue the contract.
 INTRODUCTION TO CONTRACT
MANAGEMENT
Process Leading to a Contract
CASE STUDY
 Ms. Mai Thuy Anh signed labor contract with Company A as Logistic
Manager in which requested she must keep confidential for what she
has been known during the job; and not join any competitors of the
Company A after terminating the contract with the Company within 02
years.
 Ms. Anh in July 2018 resigned. She joined agency of Company A to lead
a team providing supply chain and logistic service to agency’s Client.
Does Ms. Anh breaks the agreement with the Company A?
Discussion
- Team A: represent for Company A
- Team B: represent for Ms. Anh

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Contents of
Contract

OFFER
 An Offer
• Clear & certain
• Must be communicated
 Invitation to Treat
• Preliminary to an offer
being made
• Goods on display in shops
• Request for tenders
• Advertisement

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Contents of Contract

RFI, QUOTATIONS, LETTER OF INTENT

• Responding to an RFI is not making an offer
• Quotations are not an acceptance of an offer
• LI does not usually give rise to contractual rights
& obligations
• In some societies, LI is being construed as a
legally enforceable
promise, under the law
• If there is dispute, quantum meruit

FIATA Higher Diploma 26

in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Contents of Contract

RFI, Quotations, Letter of

Intent
? Purpose of LOI
? Legal bidding

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Contents of Contract

Acceptance
• Offeree must be aware offer is made
• Acceptance must be absolute and unqualified
• If method of acceptance is stipulated, method
must be followed
Consideration
• Must be legal
• Must be real
• Need not be of equal value to the promise
• Must be present or future but not past
• Must move from promise
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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Contents of
Contract

Consideration
??? Zero
value

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Contents of Contract

CASE STUDY - 10’:

Company A purchase a set of machine with price 2milUSD. The Seller is
a company in the same Group with Company A, agreed to provide
technical assistant monthly basic including training at site, supervising,
issue handling in first three years. All expense related to traveling,
accommodation for technician/experts shall be born to the Seller.

Any issue? [10’ to discuss]

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Contents of Contract

CASE STUDY - 45’:

Additional info: tax authority judged the technical support must
subject to withholding tax and ask Company A to pay o.b.h of the
seller.

Team A: for Company A: to not pay

Team B: for tax authority: to call for tax and penalty

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Changing Terms in a Contract

Contract amendment
• Terms cannot be changed once a contract is signed
unless both parties agree to change
• Contract contains provisions which allow the contract to
be altered

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 INTRODUCTION TO CONTRACT
MANAGEMENT
Transferring Rights &
Obligations

Transferring Rights & Obligations

 Assignment
 Contractual obligations cannot be
transferred
 Only benefits can be transferred
 Novation

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Discharging a Contract
 By performance
• Parties performed satisfactorily
 By agreement
•Contract is discharged by agreement eg
release each other
 By frustration
• Unable to perform contract due to
unforeseen
circumstances
 By breach
• One party breaches terms and other
party entitled to
compensation
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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Mistakes

Mistakes
 Contracts can be void if there are
mistakes:
• Common mistake
• Mutual mistake
• Unilateral mistake

Disputes & Litigations

• Mediation
• Arbitration
• Court

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in SCM
 INTRODUCTION TO CONTRACT
MANAGEMENT
Mistakes
Disputes &
Litigations CASE
STUDY - 45’
Company A signed a contract to lease space with building M. Contract expiry
date: 03 Dec 2016. Company M agreed to grant Company A the “first right
refusal”: 06 months before the termination date, if Company A sent a official
written intent of renewal, Company M shall open the negotiation with
Company A. Unless the parties fail on price agreement and having writing
refusal from Company A, Company M shall not open the space for others.
06 months before the termination, Company A sent an email to M for intent on
renewal. Company M sent the new price which was double price vs. old term
in Nov 2016 to Company A. By Dec 2016, without getting feedback from
Company A, M sent the notice saying the contract was expired and ask
Company A to leave and return the space
Team A for Company A: build argument to
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keep contract Team B for company M: build
in SCM
CHAPTER 2: MANAGING
Objectives
RISKS
 Recognize the elements of risk
in contract management

 Know how to mitigate the effects

of risks

 Draw up a risk register

 Managing risk effectively

 MANAGING
RISKS
Introduction

• Risk may be defined as hazard, danger, chances of loss or injury

• Every contract brings risks and benefits
• The words used in a contact have legal consequences.
• Contractual terms with hidden risks that could negate anticipated benefits
• To avoid or minimize conflicts, or to benefit from a divergence of interest
Contract Managers responsible for managing contracts must have a
practical appreciation of the conflict theory and resolution methods

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 MANAGING
RISKS
Risk Considerations

• Environment and pollution control

• Supplier performance bond
• Guarantees procedure
• Documentation flow, control and filing/retrieval
• Audit control procedures
• Loss reporting, deviation reporting, non-
compliance reporting
• Contract schedule and timelines
• Delay in payment
• New interpretations of law

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in SCM
 MANAGING
RISKS
Risk Considerations

EXTERNAL RISKS
• Political risks can include any political altercation that can lead to a boycott,
policies changes that can affect contract terms directly (eg imposition of special
taxes), and political instability that can lead to a shutdown of its ports and
airports or a closure of its boundaries
• Social and cultural risks can include changing habits, food taste, fashion
changes, a clamp down on
entertainment activities, religious festivities, and control of the internet
• Supplier type risks. A recent example would be the curtailment of exports of “rare
earth” materials by China to Japan
• Another incident involved the stoppage of the export of sand to Singapore by
Indonesia over a dispute
regarding extradition rights

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 MANAGING
RISKS
Risk
Management

 IDENTIFYING RISKS
• The list given above identifies the types of risks that may
occur
• This is a useful preliminary checklist fro promoting
discussions about those risks that may be important
• Identification of risk must be linked to a clear statement
of client’s priorities for a project
• For example, if the timing of the project is critical, the
severity of time-related risks is automatically increased

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in SCM
 MANAGING
RISKS
Risk Management

 ASSESSING RISKS
• The second step in the process is to analyze each of the risks, in
terms of likely frequency of occurrence, like severity of impact and the
range of possible values of minima, maxima and medians for each of
these aspects
• This may be fairly subjective so that it can be done quickly but is an
important step in
raising awareness about risk exposure
• Some risks may be deemed so critical that they need detailed
quantitative analysis but most risks are dealt with more subjectively
because they have lower priority

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in SCM
 MANAGING
RISKS
Risk Management

CONTRACT RISK REGISTER

• Identify all possible risks and spell them out in a contract risks register
• The register should be constantly monitored, reviewed and maintained
• Risks once identified should be recorded in a Risk Register and this
forms a basis for the financial impact of problems on a contract
• The contingency payout should be properly documented, preferably on a
contingency budget form that sets out the original cost provision, the
contingency that calls for the cost revision, the risk adjustment made, the
date of the revision and the revised provision
• A man-hour budget covering the time expected for the company’s
contract management
team to spend on the contract should be set out and charted
• An overall contract budget would give an overview of the contract and
incorporate the key elements from the payment schedule, contingency
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in SCM
 MANAGING
RISKS
Risk
Management

 RISK RATING
• Likely hood
• Impact
• Risk treatment
• Risk register and mitigation action
• Risk management forum/board: to review rating, risk
treatment, action plan…

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 MANAGING
RISKS
Risk Rating

 RISK RATING = LIKELIHOOD X

IMPACT
Business Impact
Minor Modest
Moderate 3 Major 4 Catastrophic 5
1 2
Almost
Certain Medium High Very High Very High Very High
Likelihood

5
Likely
Low Medium High Very High Very High
4
Moderate
Low Medium Medium High Very High
3
Unlikely
Low Low Medium Medium High
2
Rare
Low Low Low Low Medium
1

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in SCM
 MANAGING
RISKS
Treating
Risks

 Transfer of Risk
 Acceptance of
Risk
 Avoidance of
Risk
 Insurance of
Risk
 Doing Nothing

FIATA Higher Diploma 46

in SCM
 MANAGING
RISKS
Treating Risks

RISK REGISTER AND

MANAGEMENT

Rating
Registr Risk Ris
Foru Likelihoo Impac Owne Mitigatio after Status
ati on descripti k
m d t r n mitigati
date on ratin
on
g

FIATA Higher Diploma 47

in SCM
 MANAGING
RISKS

CASE STUDY –
45’
 Hanjin is your biggest vendor handling 70% of goods In early
delivery to Vietnam. 2016
you knew about the bankruptcy.
 Risk rating and propose mitigating plan

CASE BỔ SUNG SAU

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in SCM
 CHAPTER 3:
CONTRACT MANAGEMENT
Objectives
TEAM FORMATION
 To evaluate the composition of a
Contract Management Team more
effectively

 To differentiate the dynamics of

team work and why teams can fail
to deliver

 To recognize the characteristicsof

a good contract manager
 CONTACT MANAGEMENT TEAM
FORMATION
Introduction

• Major projects need to be closely monitored to anticipate, avoid or

resolve problems
• Formation of a contract management team to maximize leverage
on the skills and competencies of members
• Identify, develop and nurture contract managers with the
necessary skills and personal
attributes
• Getting a number of people skilled in different disciplines allows the
interplay of views to yield the desired solutions

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 CONTACT MANAGEMENT TEAM
FORMATION
Team
s

Teams
• You are a part of it
• Your role and deliverables are within the
team
• What the other team members are
expected to deliver

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in SCM
 CONTACT MANAGEMENT TEAM
FORMATION
Conflict in Work
Team

Conflict in Teams

 Differences
• Personalities
• Agenda
• Concepts
• Decision-making

 Exploitati
on
• Strength
s
• Similari
ties
FIATA Higher Diploma 52
in SCM
 CONTACT MANAGEMENT TEAM
FORMATION
Profile & Work Scope Of The Contract
Manager
SKILLS AND FACTORS TO CONSIDER
ATTRIBUTES
 knowledge and experience
Experience  ability and authority to decide and act
 understands the business requirements
Technical skills  can specify variations and offer alternatives
 ability to make full use of information technology
 experience/training in contract management
 people management skills
Management skills  decision-making skills
 problem-solving skills
 skills in financial/cost management
(budgeting, costing, asset management)

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in SCM
 CONTACT MANAGEMENT TEAM
FORMATION
Profile & Work Scope Of The Contract
Manager

SKILLS AND FACTORS TO CONSIDER

ATTRIBUTES
 effective written and verbal communication skills
 negotiation skills •facilitation skills
Communication skills 
conflict resolution skills
 networking, within the organization and with
industry peer
 interpersonal skills
 good EQ
 flexibility
Personal attributes  high level of integrity
 leadership qualities
 persuasive skills

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in SCM
 CONTACT MANAGEMENT TEAM
FORMATION
Profile & Work Scope Of The Contract
Manager

WINNING VERSUS LOSING

TEAM?

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 CONTACT MANAGEMENT TEAM
FORMATION
Role of Contract Administrator/
Manager

Role of Contract Manager

• Negotiated the contract up to the award stage of
the contract
• Brought in at the post-contract implementation
stage
• Can influence the success or failure of a contract

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in SCM
 CONTACT MANAGEMENT TEAM
FORMATION
Role of Contract Administrator/ Manager

CASE STUDY- 45’: TEAM FORMATION

LXervier is one of famous MNC in FMCG. Brand O – a beverage brand of
LXervier accounted for 45% consumption on the market; and accounted for
65% turn -over of the company. P. is manufactured by a local contractor.

On December 2017, Manufacturer P sent termination notice to LXervier in

June 18, in line with termination term of the contract. General Director
nominate you as Project Leader to sourcing a new contractor.

Group discussion and present:

• Project team member designs winning team – PIC (lead) /RACI (duty of team
member)/Timeline
• Requirements for new manufacturers
• Key risks of termination of manufacturer P

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in SCM
 CHAPTER 4:
DEVELOPING A
Objectives
CONTRACT MANAGEMENT
PLAN  Know how to form a contract
management
plan

 Identify the number of contract,

suppliers

 Build comprehensive contract

management plan
 DEVELOPING A CONTRACT
MANAGEMENT
Introduction PLAN

• Trading model requests a matrix of contract

• Effective and smooth supply chain requests compatible activation
where the connection of all suppliers/vendors and contracts in place are
critical;
• A comprehensive contract management plan is crucial to make the
success for the business

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in SCM
 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Components of Contract Management Plan

Contract management plan include:

 Identify contracting parties;
 Identify trade route and invoicing route;
 Vendor selections and prequalification (Chapter 4)
 Identify number of contract must be in place;
 Build plan to manage the execution of the contracts – Contract
Management Plan
 KPIs of contracting party
 Drafting
 Negotiation
 Execution
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 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Components of Contract Management Plan

CASE STUDY - 60’

Company X in Singapore is the supplier of materials into Vietnam
for Manufacturer Y. Material manufacturer is in Australia
Manufacturer Y after producing will sell goods back to Company X
Materials is from Australia to Vietnam
Goods from Vietnam to distributor of Company X in Vietnam and
Cambodia.
By Sept 2018, all contracts must be in place for execution to
ensure 40mil GBP for the business.
Group discussion and present contract plan – starting from April
2018.
• Team forming
• Contract model, timing completed 61
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 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Components of Contract
CASE STUDY Management Plan
- 60’ Materia Vietnam
l
Material Border
Supplier
(Australia
Material ) Z.
Invoice Mnfr
(Vietna
Toll/Purchase FG
Compan m)
(?) delivery
yX
(Singapo
re) FG
Invoice
FG
Invoice
Distributor
in
Distributor
Vietnam
in
Cambodi FG
a delivery

62
 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Components of Contract
Management Plan

STAGES IN LIFE OF A
Corporate strategy – commercial strategy – need
Conception CONTRACT
identification- budget allocation – contract strategy
Gestation Market test – negotiation – business case – bid
Birth Drafting – negotiation – execution (signature) – copies to key
stakeholder
Mobilization – contract management plan – progress
monitoring – changes to scope or duration – dealing with
Life
problems – SRM – CRM – progress payments – transfer of legal
title – progress meetings – project memo system for
communication
Final delivery – final payment – final “sign-off” (issue
certificate)
Death

FIATA Higher Diploma

Expiry of warrantees/guarantee – latent defects period – IPR63
in SCM provision expire-
 DEVELOPING A CONTRACT
MANAGEMENT
Contracting PLAN
Process

Negotiatio Drafting Review/ Approva Filing Monitoring Liquidati

n Endorse l on
/
Recommend
Negotiat PIC/RACI/ PIC/RACI/ Authoriz PIC/RACI/ PIC/RACI/ PIC/
io n Timeline Timeline at Timeline Timeline RACI/
team ion Time
line

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 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Key Performance Matrix

• Compliance with minimum contract requirements (KPIs can also

relate to Risks and Accident Rates in addition to contract
completion)
• Tie in with performance incentives (can be paid out on regular
basis, one off, or in
varying amounts in line with performance standards achieved)

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 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Key Performance Matrix

CASE STUDY - 30’

Build Key Performance Matrix for Brand
Ambassador service

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 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Contracting Process

CASE STUDY - CONTRACT CHANGE CONTROL PROCESS

 A global project request to change distributor of medicine in Vietnam.
Cut-off date is Jun 2019
 Out-line contract change control including clear project time-line, task
to be done, risk identify, mitigation

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 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Contracting Monitoring

• Feed-back channels defined for product/service assessment, complaints,

etc
• Invoice Review and Payment Procedures
• Claims procedures (Valid or invalid?)
• Forum for amicable settlement of disputes (Avoiding litigation)
Controlling and overseeing litigation costs (Who will pay for what?)

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 DEVELOPING A CONTRACT
MANAGEMENT
Ancillary PLAN
Agreements and Contract Records

• Checklist and file for all necessary Governmental and International

agreements, e.g., licenses & permits, which are deemed essential to
the contract in question.
M&A of Grab and Uber
• All other relevant contract records like 3rd party certifications as to
product quality,
copyright approvals, patents, etc critical to the performance of the
contract
+ Office lease vs. land use right lease for factory
+ Song for TVC
• Ancillary contracts may be independently managed

FIATA Higher Diploma 69

in SCM
 DEVELOPING A CONTRACT
MANAGEMENT
Post ContractPLAN
Liabilities

• Contractor to provide all identifiable post contract liabilities with

adequate documentation supported by an audit trail to assess impact
measurement, follow-up, cost implication
• One likely area is that of site cleanups inherent to contractor’s
responsibility in most large construction projects
• Contractor’s responsibility to repaint a condominium a few years later
after completion of the project

FIATA Higher Diploma 70

in SCM
 DEVELOPING A CONTRACT
MANAGEMENT PLAN
Contract Closeout

• Refers to the major elements of contract closeouts, which occur

after the contractor has completed his work scope and the
organization has finished verification of contract completion
+ Renewal vs. auto renew
+ Deposit monitoring

FIATA Higher Diploma 71

in SCM
CHAPTER 5:
PROCUREMENT &
Objectives
CONTRACT
MANAGEMENT  Role of Procurement in contract
management
 Know why it is necessary for
organizations to put in
place robust contract management
processes
 Differentiate between the importance of
managing service delivery, managing
contract relationships and managing
contract administration
 PROCUREMENT & CONTRACT
MANAGEMENT
Introduction

 Failure to adequately manage third-party relationships could result in

business interruption
and exposure to risk
 Multiple globally applicable laws covered e.g. Human Rights, ABAC,
Competition Law…
 Multiple assessment and controls on vendor such as ABAC and other
significant risks: Competition Law, Human Rights, ABAC, Information
Security, Privacy Law…

FIATA Higher Diploma 73

in SCM
 PROCUREMENT & CONTRACT
MANAGEMENT
Selection and Assessment
Process

(1) • List of potential

Vendor
vendors
selectio
n
(2) • Collecting
Vendor documents/information
assessm for risk rating
ent
(3) • Final vendor
Vend
list
or
list • Tender
(4)
• Bidding
Pricing
• Quotati
Assessm on
FIATA Higher Diploma
ent 74
in SCM
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor Assessment

Vendor assessment - What should be

collected
• License
• Corporate structure and management
structure
• Finance capacity
• State own, private own, holding
company;
• Company charter
• Red flag

FIATA Higher Diploma 75

in SCM
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor Assessment

License
• Formality: oversea vs. Vietnam
• Capital
• Scope of business
• Legal representative
• License period
• Sub-license (for conditional
goods/service)
• Regulatory license/permit
• Goods
• Service (copyright, trademark…)
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor Assessment

CASE STUDY - 30’

Build check list for purchasing Vietnam
Idol format.
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor Assessment

CASE STUDY - 45’

Marketing asked you, as procurement manager to source Iphone for a
promotional campaign because it was very hot. In 2007, Iphone was not
officially distributed in VN. One of the supplier said they can supply
Iphone and provide VAT invoice for that.

Shall you purchase Iphone for the promotion?

 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor
Assessment
CASE STUDY
- 45’
Thần đồng đất
Việt (Phan Thi Co., Long Trang
Ltd vs. Le Linh Linh - Ti
[2006-2012] Le Linh
PROCUREMENT & CONTRACT
MANAGEMENT
Vendor
Assessment
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor Assessment

CASE STUDY - 45’

Company A prepared for launching a new milk product for kids in 2006.
The life cycle of the SKU from 1-3 years. You happened to know the issue
bw Phan Thi vs. copy owner.
Than Dong Dat Viet was very hot at that time. Using that could help the
launch successfully.

GM asked you, as procurement manager, to purchase the contract with

Phan Thi. What should you do?

Team A: not to
purchase Team B:
to purchase
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor Assessment

Vendor assessment - What risk should be

considered
• Type of activity – to evaluate the risks
associated
• Environment, Health and Safety
• ABAC
• Information protection
• Labor right
• Finance control and reporting
• Research practice (test on animal,
human trial…)
• Supply continuities and Crisis
FIATA Higher Diploma 82
management
in SCM
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor
Assessment

Selection vendor tool - Tender

 Quotation (chào giá)
 Appointed tender (Chỉ định thầu)
 Tender (đấu thầu)
 01 pack
 02 packs
 Tender Law application
 Constructions contract (Vietnam,
FIDIC…)

FIATA Higher Diploma 83

in SCM
 PROCUREMENT & CONTRACT
MANAGEMENT
Vendor Assessment

CASE STUDY - 60’

Company X called for bidding a construction project.
Vendor must pay deposit in order to participate tender.
Vendor M finally wasn’t won. Vendor M made complaint to company X. Vendor
M said they knew their price is lower than the winner. Company X called
them just for fulfill the minimum of vendors (at least 03 vendor). The winner
was chosen by choice, not by bidding. So, they ask for compensation of
cost associated to tender including bank interest lost, cost for employees…

Team A present for Company X

Team B present for Vendor M
To discuss and present the arguments.

FIATA Higher Diploma 84

in SCM
 PROCUREMENT &
CONTRACT
MANAGEMENT
CASE STUDY - 30’ - ĐẤT VÀNG' 8 - 12 LÊ
DUẨN
“Quyết định số 5671 của UBND TP.HCM giao
nhiệm vụ cụ thể cho các cơ quan, tổ chức,
cá nhân thực hiện. Đồng thời yêu cầu Công
ty cổ phần đầu tư Lavenue có trách nhiệm
bàn giao khu đất, giấy chứng nhận quyền sử
dụng đất, giấy tờ pháp lý khác có liên quan
đến quyền sử dụng đất cho Trung tâm phát
triển quỹ đất của TP.HCM quản lý theo quy
định pháp luật”*
 Taking point?
 https://thanhnien.vn/thoi-
su/tphcm-huy-thu-hoi-khu- dat-vang-
8-12-le-duan-khong-co-gi-uan-khuc-
BSC Finance Board
Metrics 85
CHAPTER 6:
MEASURING
Objectives
PERFORMANCE
 Match contract performance with
contract requirements

 Make use of periodic reviews to

measure the performance of
contract terms

 Differentiate between progress,

cost, quality,
time and other performance
criteria
 MEASURING
PERFORMANCE
Introduction

• Even in the most comprehensive of contracts the major sources of

difficulty are where the interests of the client and contractor conflicted
• Contractors are interested in the opportunity cost, the
revenue
consequence that
of accommodating
he loses
changes as a
• It is a fundamental requirement to monitor contract performance regularly
and to measure it against expected performance schedules.
• This will help to identify risks and deviations from the contract
management plan early so as
to trigger corrective action

FIATA Higher Diploma 87

in SCM
 MEASURING
PERFORMANCE
Introducti
on

• System, tool to measuring

performance (DMS…)
• Documentations
• Performance tracking
• Performance management

FIATA Higher Diploma 88

in SCM
 MEASURING
PERFORMANCE
Performance
Management- Performance Management -
•Contract
The contract
Reviewperformance
Meeting to date
• Establish the status of the contract performance
• Pinpoint any deviations and problems
• Discuss actions that can be taken to bring them
back into line
• Review and achieve the success of the contract
management plan
• To review actions from the previous contract review
meeting
• Review of the contract risks register
• Amend the risks register as required
FIATA Higher Diploma 89
in SCM
 MEASURING
PERFORMANCE
Measuring Performance

• A summary of the current status of the project

setting out the
main milestones of the contract
• Progress achieved against expected schedule
completion
• Performance against budget
• Performance against schedule
• Performance against quality
• Safety and environmental standards
• Supplier cooperation issues
• Explanation and clarification of positive or
negative variances
FIATA Higher Diploma 90
in SCM
 MEASURING
PERFORMANCE
Measuring Against Schedule

• Proposed activity start-up date

• Targeted activity end date
• Actual activity start date
• Actual activity end date
• Delay period and cause
• Revised activity start date
• Revised activity end date
• Any impact on the contract completion
date as a result
• Changes in the critical path
• Which activities have “slack” or “no slack”

FIATA Higher Diploma 91

in SCM
 MEASURING
PERFORMANCE
Corrective Actions for
Schedule

• Can any tasks be undertaken concurrently instead of consecutively as

originally planned for?
• Can additional resources be brought in to speed up activities?
• Can the number of man-hours be increased, eg3 shift activity instead of
transportation mode be enhanced, e.g. direct transit
1?
transshipment?
port to port instead of
• Can
• Can thethe
scope of the contract be adjusted and/or reduced to keep to
original time schedules?
• Can the non-critical activities be re-scheduled to end of contract or be
outsourced?

FIATA Higher Diploma 92

in SCM
 MEASURING
PERFORMANCE
Benchmark
ing

 There are many definitions of benchmarking. Each possesses a slightly

different twist, perhaps stemming from the various experience of the
organization formulating the definition:
• The continuous process of measuring our products, services and
practices against our
toughest competitors or those companies renowned as the leaders.
 A working definition offered by Xerox executive, Robert Camp is, literally,
the title of his book on the subject:
• Benchmarking: The Search for Industry Best Practices that lead to
Superior Performance.

FIATA Higher Diploma 93

in SCM
 MEASURING
PERFORMANCE
CASE STUDY
A market research agency, subsidiary of global agency, provides retail audit service
for your company.
The Delivery for quarter 1 showed a big gap between your own data (from your
distribution data) vs. data from the agency. You has asked them to find the route
cause to fix. The 2nd batch of the data for the 2nd quarter still showed the gap.
Contract was for 01 year with 06 months notice in prior. Marketing wanted to not
purchasing data for quarter 3 and 4 of 2017.
As Procurement Director/Contract Manager, what should you do?
 MEASURING
PERFORMANCE

CASE STUDY
Staff of logistic agency called you, Supply chain management informed
custom officer asked
for a case of touch-paste as sample.
What should you do? What should you talk to him/your vendor?
CHAPTER 7:
Objectives
TERMINATION &
CONCLUSION  Contract termination

 Summarize the importance of details

of a
contract

 Pre-empting and avoiding conflicts

 Understand that litigation should

always be the final resort
 TERMINATION &
CONCLUSION
Termination of Contract

• It is important that, where there is a dispute (especially one

deemed “minor”),the purchaser and provider must continue to
perform all obligations under the contract and ensure services and
product supplies from the provider are not disrupted
• The contract should allow the purchaser to engage another provider
in the event that performance is not satisfactory or services are not
being provided while in any dispute

FIATA Higher Diploma 97

in SCM
 TERMINATION &
CONCLUSION
Close Scrutiny of Contractor

PRE-EMPTING DISPUTE
• When the contract is drafted, the contract manager
should be asked for his input
• Information provided will help to tweak the
contract to prevent
costly dispute later on
• Sometimes, the two parties may become lax in the
drafting of the contract due to their initial friendship
• When disputes arise, friends become foes
• It is best to become impartial to contracts and leave
the terms and conditions to the experts such as
lawyers and contract managers
• When thereis a dispute, the bond between the
parties can be
FIATA Higher Diploma
in SCM
98
 TERMINATION &
CONCLUSION
Close Scrutiny of Contractor

TELLING SIGNS
• Contractor late in paying wages
• Rumors
• Sub-suppliers are not paid
• Slow down in work
• Arbitrating and litigating contractual disputes require much
work and money
• Differentiate between interpretation and performance failure
• Check in which country that contracts are to be litigated
• Out of court settlement is best to save the honor of parties
• Contract conditions are simplified
• Termination clauses must not only be simplified but must be
clear and precise
FIATA Higher Diploma 99
in SCM
 TERMINATION &
CONCLUSION
Close Scrutiny of
Contractor

LITIGATION
• Always use it as a last resort
• One cannot predict its ramifications with
certainty
• One cannot predict its aftermath and
future course

FIATA Higher Diploma 10

in SCM 0
CHAPTER 8: SHIELD OF A
CONTRACT
Objectives

 Understand necessary terms of

contract to protect benefit and
rights

 How to use necessary terms

 SHIELD OF A
CONTRACT
Shield of a
Contract

1. Recital/Whereas
2. Preconditions of the
effectiveness
3. Self affirmation;
4. Subcontracting/
assignment;
5. Compliance with Laws;

FIATA Higher Diploma 10

in SCM 2
 SHIELD OF A
CONTRACT
Shield of a Contract
CASE STUDY
Your company purchase flour from China supplier to manufacture
bread. One day, there was a news saying that your supplier used dirty
oil to produce the flour. The new paper listed your company names as
purchaser of China supplier.
Volume immediately dropped 90%.
You claimed the supplier for compensation. They said the flour
delivered to you was
qualified and met the specification as you expected.
Can you bring the case the court?

FIATA Higher Diploma 10

in SCM 3
 SHIELD OF A
CONTRACT
Shield of a
Contract

6. Conflicts of
terms/Prevails
7. Waiver of rights
8. Force majeure
9. Indemnity/Penalty
10.Insurance

FIATA Higher Diploma 10

in SCM 4
 SHIELD OF A
CONTRACT
Shield of a Contract

CASE STUDY
Contract term: in case of late delivery, the supplier has to compensate the
buyer 8% on total value of the late delivered shipment.
Shipment valued 100K usd was late in 1 months. Your customers asked you
to compensate for their business loss appx 50K usd. You asked the supplier
to compensate 50K. Supplier said they compensated 8K as the contract
stated the compensation is 8% on total shipment.
Supplier win or your company win?

FIATA Higher Diploma 10

in SCM 5
 SHIELD OF A
CONTRACT
Shield of a Contract

11.Survival of the agreement vs

void of term
12.Insurance
13.Entire agreement
14.Limit of liability
15.Notice

FIATA Higher Diploma 10

in SCM 6
 SHIELD OF A
CONTRACT
Shield of a Contract

CASE STUDY
In a contract with your customer – you request your customers buy
exclusively your products with incentive reward for the exclusively.
One day, your customers said the exclusively for a dominant product like
yours are illegal and therefore the contract was void and null. They
refuse to implement the contract i.e stop purchasing.
How is your view?

FIATA Higher Diploma 10

in SCM 7
 SHIELD OF A
CONTRACT
Shield of a
Contract

16.Amendment formality
17.Relationship of the party
18.Attorney fee
19.Governing Law;
20.Dispute settlement/Choice
of venue

FIATA Higher Diploma 10

in SCM 8
 SHIELD OF A
CONTRACT
Shield of a Contract

CASE STUDY
Your company purchased service from service
provider. Buy that, agency to provide a number of
promotional girl to stand in self in the supper markets.
Your company was to interview, confirm recruitment, confirm offer, check
verify the working
hours, calculate salary, provide uniform etc.
Some poor performance you want to terminate. They sued your
company by saying your company was their employer but not the
agency.
How is your view?

FIATA Higher Diploma 10

in SCM 9
 SHIELD OF A
CONTRACT
Shield of a Contract

CASE STUDY – 60’

• In July 2017, Government introduced a new law which outlines the risk
for your business as follows:
• Distributors, as a foreign company, has to stop the operation;
• Moving to local distributors is a must;
• Selling and marketing activities under your own company must
be moved to local
distributors
Group A- Risk assessment and mitigation, action plan for moving
distribution activity Group B - Risk assessment and mitigation, action
plan for Selling and marketing activities

FIATA Higher Diploma 11

in SCM 0
FIATA HIGHER DIPLOMA IN SUPPLY CHAIN
MANAGEMENT
MODULE: CONTRACT
MANAGEMENT