Contract Management And Supplier Performance

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PROCUREMENT TRAININGCONTRACT MANAGEMENTAND SUPPLIER PERFORMANCEPresented by: The Procurement Unit15/02/202241

PROCUREMENT TRAININGCONTRACTMANAGEMENT15/02/20222

“Contract Management is the effective and efficientmonitoring of procurement contract activities toensure that goods, works and services are deliveredin a timely manner, at the agreed cost and to thespecified requirements”.PROCUREMENT TRAININGWHAT IS CONTRACT MANAGEMENT?(OPR Guidelines Management & Monitoring of Procurement Contracts )15/02/20223

It is essential that the solicitation document includeslanguage that will facilitate management of thecontract, the terms and performance metrics.15/02/2022PROCUREMENT TRAININGCONTRACT MANAGEMENT4

At a minimum, contract management involves:Contract AdministrationPROCUREMENT TRAININGCONTRACT MANAGEMENTTracking and monitoring performanceEffective communication and collaborationManaging relationshipsManaging paymentsManaging problems and issuesRisk Management15/02/20225

3 LEVELS OFCONTRACTMANAGEMENTPROCUREMENT TRAININGMonitoringEvaluatingReporting15/02/20226

Monitor and measure outputs/outcomes Analyze reportingCONTRACTMANAGEMENTPROCUREMENT TRAININGROLE OF THE CONTRACT MANAGER Organize contract administration and record keeping Prioritize risk management Report to Management, Legal or Procurement Unit Control payments for successful delivery Provide relationship management Control changes and control variations15/02/20227

15/02/2022PROCUREMENT TRAININGCONTRACTMANAGER WHO ISBESTSUITED? Technically sound/subject areaexpert Designated with the responsibilityand authority to manage thecontract Understands the need to be met(from User Department or PEA)8

15/02/2022PROCUREMENT TRAININGCONTRACTMANAGER WHO ISBESTSUITED? Understands the contract and themetrics to be measured Effective Communicator – to manageand ‘massage’ the relationship withcontractor Understands risk management andoptions for redress and escalatingmatters (legal, procurement, logisticsissues)9

PROCUREMENT TRAININGMONITORING ANDASSESSING CONTRACTPERFORMANCE15/02/202210

Monitoring contract performance is a keyfunction in the contract administration process tomake sure that all involved parties are performingtheir duties in accordance with the contract.15/02/2022PROCUREMENT TRAININGCONTRACT MONITORING11

Supplier/Contractor’s execution ofcontractual obligations as per SOW/SOSPROCUREMENT TRAININGWhat is Monitored? Identification of any problems or deficienciesas per the Statement of Requirement Remedial actions taken where necessaryCONTRACTMONITORING Interpersonal skills and relationshipsof contractor resources Failure to meet terms and conditions Costs15/02/202212

CONTRACTMONITORING15/02/2022The contractrequirements thatwill be monitoredPROCUREMENT TRAININGExpectations should be established so that theContract Manager and the Supplier/Contractorunderstands:The evaluation criteriafor each contractrequirement13

CONTRACTMONITORING15/02/2022Site VisitsPeriodic BusinessReviewsDesk ReviewsExpenditureDocument ReviewsPROCUREMENT TRAININGContract Management Tools14

Review meetings should be held to discuss:PROCUREMENT TRAININGCONDUCT STATUS MEETINGS Key performance indicators Milestones Progress Achievements Changes Issues15/02/202215

PROCUREMENT TRAININGSUPPLIER PERFORMANCEMANAGEMENT15/02/202216

Supplier Performance Management (SPM), is thepractice of monitoring and analyzing the quality,performance, and reliability of your suppliers.PROCUREMENT TRAININGWHAT IS SUPPLIER /vendor-performance-managementIt helps to measure, rate, or rank suppliers on acontinuous basis15/02/202217

Supplier performance measures helps to determine whethersuppliers/contractors are doing their work as expected. They can beused to measure the delivery of goods, services or works.Measure must be:PROCUREMENT TRAININGCREATING SUPPLIER PERFORMANCEMEASURESS – specificM – measurableA – attainableR – realisticT – time based15/02/202218

Establish Key Performance IndicatorsThe Key Performance Indicators (“KPIs”) to be measured in thecontract should be identified before the contract is signed.PROCUREMENT TRAININGPERFORMANCE ASSESSMENTBoth parties will need to agree:1. What KPIs will be measured?2. How they will be measured?3. Who is responsible for tracking performance and how frequently?This should be incorporated into the contract.15/02/2022Source: OPR Guideline,Management and Monitoring ofProcurement Contracts19

KEY PERFORMANCEINDICATORKPI MEASUREMENTQuality, performance,conformance or compliance Percentage or volume of rejects and returns, errors or scrapped items delivered Number of user complaints or returns Certification standards maintained (ISO 9000,14001)Timeliness/Delivery Frequency or percentage of late, incorrect or incomplete deliveries Percentage of on time in full (OTIF) deliveries Range of acceptable schedule variance (deadline /- x hours or daysCost Management Value or percentage of cost reductions obtained Number of cost reduction initiatives or implemented Percentage range of acceptable cost variance from budgeted costResources Minimum number of staff or resources of specified grades to be allocated to theprojectAfter Sales Service Promptness in responding to enquiries and problems Promptness in resolving issues/ breakdowns15/02/2022CIPS – AdvancedDiploma in P&SPROCUREMENT TRAININGEXAMPLES OF KPIs and MEASUREMENTS20

Any identified weakness on the part of the Supplier/Contractor can beaddressed or concessions/compensation can be sought for poor performance.Why monitorand assessperformance?PROCUREMENT TRAININGPERFORMANCE ASSESSMENTThe data may be used to evaluate and compare performanceof new Suppliers/Contractors.Measurement can be used as the basis for continuous improvementMeasurement on a two-way basis can highlight the buyer’sdeficiencies, which may be the source of common problemswithin many Supplier/Contractor relationshipsQuantitative & qualitative measurements givean overall picture of the Supplier/Contractor’s performance15/02/202221

PROCUREMENT TRAININGPERFORMANCE ASSESSMENTKey 2

KEY PERFORMANCEINDICATORKPI MEASUREMENTQuality, performance,conformance or compliance Percentage or volume of rejects and returns, errors or scrapped items delivered Number of user complaints or returns Certification standards maintained (ISO 9000,14001)Timeliness/Delivery Frequency or percentage of late, incorrect or incomplete deliveries Percentage of on time in full (OTIF) deliveries Range of acceptable schedule variance (deadline /- x hours or daysCost Management Value or percentage of cost reductions obtained Number of cost reduction initiatives or implemented Percentage range of acceptable cost variance from budgeted costResources Minimum number of staff or resources of specified grades to be allocated to theprojectAfter Sales Service Promptness in responding to enquiries and problems Promptness in resolving issues/ breakdowns15/02/2022CIPS – AdvancedDiploma in P&SPROCUREMENT TRAININGEXAMPLES OF KPIs and MEASUREMENTS23

Any identified weakness on the part of the Supplier/Contractor can beaddressed or concessions/compensation can be sought for poor performance.Why monitorand assessperformance?PROCUREMENT TRAININGPERFORMANCE ASSESSMENTThe data may be used to evaluate and compare performanceof new Suppliers/Contractors.Measurement can be used as the basis for continuous improvementMeasurement on a two-way basis can highlight the buyer’sdeficiencies, which may be the source of common problemswithin many Supplier/Contractor relationshipsQuantitative & qualitative measurements givean overall picture of the Supplier/Contractor’s performance15/02/202224

Throughout the performance of the contract theSupplier/Contractor should be appraised of theirperformance which should be documented accordingly andcommunicated to the Supplier/Contractor appropriately.PROCUREMENT TRAININGPERFORMANCE APPRAISALS The Supplier/Contractor Performance Evaluation Formcan be used as a tool to document these assessments.15/02/202225

Who should prepare these appraisals?The Contract Manager in collaboration with the Procurement Executing Arm(PEA) will be responsible for completing the Supplier/ContractorPerformance Evaluation Form.Upon completion, the form should be forwarded to the Procurement. Theform will either be filed by the Procurement Unit or forwarded to the CPC forfurther action where necessary.PROCUREMENT TRAININGPERFORMANCE APPRAISALSWhen should appraisals be conducted?Appraisals can be conducted weekly, monthly or quarterly based on theduration of the contract and project milestones.15/02/202226

Reports should be prepared tonot only document theproblems experiencedthroughout the performance ofthe contract, but alsoaccomplishments.PROCUREMENT TRAININGCONTINUOUS ASSESSMENT & REPORTINGSuppliers/Contractors should becommended for goodperformance throughout thecontract.15/02/202227

GOOD PERFORMANCE: Documented for auditability An effective motivator tothe Supplier/Contractor tomaintain for the duration ofcontract. Record can be referred tofor future selective tenders15/02/2022PROCUREMENT TRAININGCONTINUOUS ASSESSMENT & REPORTING28

POOR PERFORMANCE: Gives Supplier/Contractoropportunities to rectify performanceissues before taking drastic measuresthat will ultimately delay completionPROCUREMENT TRAININGCONTINUOUS ASSESSMENT & REPORTING Supplier development and continuousimprovement Can be used as a basis for deciding notto invite Suppliers/Contractors forupcoming procurements, to renew acontract for a second term, and todecide on suspension/ blacklisting(approved prequalified listing)15/02/202229

PROCUREMENT TRAININGDEALING WITH CONTRACT ISSUESContract management planning should includeagreement on the procedure to follow to resolvedisagreements between parties.15/02/202230

Cost VariationsVariations chedulesResourcesPROCUREMENT TRAININGCONTRACT ISSUESPaymentprocessingThe Campus Legal Office should be contactedwhen contract issues arise15/02/202231

There should be anagreed procedurefor escalating theconcern to a higherlevel of authority.15/02/2022The parties must notallow disagreementsand disputes toprevent theimplementation ofthe contract.Parties must committhemselves to theamicable resolutionof the inevitabledisputes that willarise between them.Contract claims anddisputes cannot beavoided entirely, butthey can be resolvedefficiently, timely,fairly, and withoutrancor and litigationPROCUREMENT TRAININGDEALING WITH CONTRACT ISSUES32

It is important tokeep record or log ofall issues raised anddiscussed. The recordshould address thefollowing at aminimum:The issuePROCUREMENT TRAININGDEALING WITH CONTRACT ISSUESDate raisedRaised by whomPerson to resolveDate escalatedWho it was escalated toResolutionDate resolved15/02/202233

CONTRACTCLOSEOUT15/02/2022PROCUREMENT TRAININGThe objective of the closeout phase is to ensure thatThe UWI is satisfied withthe delivery of the goods,works, materials andservices that wereprocured.34

The true end of the contract may be the end of a warranty,retention or defects liability period or completion of all legal,administrative and managerial tasks.CONTRACTCLOSEOUTPROCUREMENT TRAININGA contract may not necessarily be considered as concludedwhen the actual physical work has been completed or thegoods delivered.Upon completion of the contract, the Contract Manager isrequired to prepare a Supplier/Contractor PerformanceEvaluation Form that would summarise the overallperformance of the contract.Additionally, a Contract Completion Certificate may becompleted and issued to the Supplier/Contractor as proof ofhaving completed the contract.15/02/202235

The delivery is in line with the contractrequirements, andPROCUREMENT TRAININGDocumenting and maintaining a contract fileare good practices to ensure: Issues are addressed timely.CONTRACT FILEMAINTENANCE15/02/2022All contract performance issues should beproperly documented and included in theofficial contract file.36

PROCUREMENT TRAININGThe contract file should contain the essentialrecord of contract award and performance asfollows:1. Pre-award documentsCONTRACT FILEMAINTENANCE15/02/2022a. Solicitation documentb. All responses to bids or proposalsc. Copy of the contract, including allattachments and amendmentsd. General Guidelines – Management andMonitoring of Contract Activities37

CONTRACT FILEMAINTENANCE15/02/2022a. Copies of all correspondence with thesupplier/contractorb. Notes from all meetings and verbalcommunicationsc. Documentation of performanceissues/complaints, Notice to Remedyd. Contract amendments/Variationse. Documentation of deliverablesf. Payment recordsg. Contract closeout documentationPROCUREMENT TRAINING2. Post-award to contract closeout documents(Contract Administration Documents)38

TemplatesPROCUREMENT TRAININGContract Completion Certificate(external)Project Issues LogSupplier/Contractor PerformanceEvaluation Form15/02/202239

Introduction Module -Procurement TrainingPROCUREMENT TRAININGNEXT ON THE TRAINING SCHEDULEModule #2 - Procurement Planning and SolicitationModule #3 - Evaluation and AwardModule #4 - Supplier Performance Management & Contract ManagementModule #5 - Procurement Reporting and Records Management15/02/202240

15/02/202241PROCUREMENT TRAINING

CONTRACT MANAGEMENT AND SUPPLIER PERFORMANCE 4 15/02/2022 1. G CONTRACT MANAGEMENT 15/02/2022 2. . Provide relationship management Control changes and control variations 15/02/2022 7. G CONTRACT MANAGER - WHO IS BEST . Contract Management Tools 15/02/2022 14. CONDUCT STATUS MEETINGS G

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