Project Managers in Contracts - Coursework Example

Project Managers in Contracts Contents Contents 2 Executive Summary 3 Introduction 4 1. Contract 4 2. Functions of contract managers in IT projects 4 2. Tendering 5 2.1. Tendering process 6 2.2. Negotiation 7 2.3. Invitations 8 2.4. Offer 9 2.5. Acceptance 9 2.5. Letter of intent 10 Purpose 10 Drafting issues 10 3. Contractual obligation 11 3.1. Health Aspects in Tendering 11 3.2. Financial Aspects 12 4. Liability in Procurement 13 5. Good Business Planning 14 Conclusion 15 Recommendations 16 Executive Summary Contract managers in Information Technology fields have huge tasks when it comes to procurement processes. This paper illuminates some of the functions including checking procurement processes, drafting documents in tendering processes, and assessing suppliers. The tendering processes, in particular, entails various things that the contract managers should be actively involved in. Some of the major concerns that contract managers should deliberate on while tendering processes include assessment, offer, acceptance, letter of intent, and contractual obligations. In all these processes, contract managers should ensure that the processes do not cause conflict of interests. 1. Introduction The importance of Information Technology (IT) has risen exponentially for business and organizations as a strategically essential competitive advantage. However, implementing and managing information systems requires skills and experience and many organizations opt to outsource hardware and software and related activities. Complications often arise between purchasing companies and suppliers over the robustness of their systems and efficiency of their systems. The tendering processes are also normally fraught with problems due to the uncertainties involved. Organizations thereby deem it fit to consult experts in contracts to oversee their tendering processes. 1.1. Contract Contracts have been defined as promises that are delivered in response to promises, and breaching the contracts may call for the intervention of the law as a remedy (Fried 1981: 7). Contracts have various ways of enforcement. Contract managers use covenants to enforce followed by erosion of solemnity or seals. There are various things that may lead to controversies between two parties in a contract. In an IT project, contracts can use evidentiary function to ensure trustworthy evidence of the contract terms to solve controversies. In addition, contract managers can consider assumptions, where a bidder seeks recovery for damages that occur due to a consensual undertaking (Alces 2011: 24). 1.2. Functions of contract managers in IT projects Contract managers have various functions, particularly when dealing with procurement processes. The functions that they undertake are important, and they should make careful considerations before awarding a bidder a particular contract. They perform drafting, assessment, and execution of contracts that may be of various forms such as formal, short, and annual. In this vein, contract managers ought to check the sales, purchasing, purchasing agreements, sub-contracts, and other proposed terms involved in contracts. Contracts also involve distribution agreements that should catch the attention of the managers. Often, contract managers mediate transactions between companies and clients ensuring timely approval and review of variations to avoid conflicts. Further, they maintain contractual records and offer guidance to project managers, including managers and company employees regarding contracting practices and procedures. When contracts achieve their objectives and come to a close according to their terms, the contract managers ought to be present to oversee the transition and closure (Royse et al. 2009: 330). 2. Tendering Contract managers have to assess tenders carefully to strike a balance between the value they bring to the business and conflicts. Tendering processes should always avoid issues that may lead to conflicts, but there are some instances where conflicts are a must. Parties may develop conflicts with other business goals in trying to attain value for money in the works, goods, or services received,. In such situations, tenderers and contracting authority ought to strike a balance that is appropriate. For example, when purchasing party receives an offer from a purchaser that does not conform to some of the formal tendering requirements – for instance, does not include a bid bond or is late, it constitutes a conflict of interest. In this scenario, a tenet of equal treatment might posit that the procuring party cancels the tender. However, if the bid stands as the best among all the submitted bids, the tenet of value for money will outweigh the former principle and its application in a particular transaction should be acceptable, for it will give better value to the procuring party (Garda 2007: 9). Prevention of corruption might also lead to conflict of interest, especially in situations that appear to differ with the rules that are intended to minimize corruption by hindering the discretion of entities in procuring methods, and hence hindering prospects for abuse to benefit a specific supplier. These situations may also restrain discretion, which could lead to the acquisition of better money value. Moreover, tendering processes are usually clouded by actions that are meant to help parties gain value for money over a short time. A good example is a situation where procuring entities present late tenders. In all these conflicts, procuring entities as well as bidders should be on the lookout to ensure that they do not suffer loss (Arrowsmith 2011: 45). 2.1. Tendering process In IT projects, contract managers ought to evaluate tenders carefully to ensure that the all factors including costs and ethics are in consideration. Tenders should be evaluated carefully to ensure that conflicts that are avoidable are mitigated,and the right balance is struck between the purchaser and the bidder. Evaluation of tenders during a procurement process against the requirements of the contracting authority is one of the utmost essential segment of the entire process. The process requires careful deliberation because of its sensitivity; most businesses meet challenges at this point. Key principles that guide the EU regulations and that contract managers should always check for, include transparency, equal treatment, and fairness (EU, 2004: 15). Computer companies have to estimate prices correctly, as the activity enables them to determine their bottom line and direct costs below which it would not be sensible for them to enter into a contract. If bidders overestimate costs, tender prices escalate, and clients reject bids. Likewise, underestimation of costs could cause contractors to run into losses. If the purchasers choose a particular company, then the suppliers should be in a position to offer estimates for purposes of budgeting and control of the IT project. The successful submission of tenders is evidently important to the very being of contractors. The central reality of competitive tendering, especially in the IT industry, is that the cheapest tenderer is mostly the one who has most earnestly underestimated the risks that could lead to drastic consequences. The contractor usually endures the tendering cost but if the supplier undertakes additional services to the satisfaction of the purchaser, he may ask for a reasonable pay on top of the tender price. An Information Technology company, BIDCO, supplying computer hardware made a clerical error in responding to a call for tenders by an engineering company. Instead of quoting $6,000,000, the company understated its amount like $1,000,000 and drew the attention of the prospective purchaser. BIDCO did not realize this until five minutes after submission expiration. It attempted to request for withdrawal of the submission, but the engineering company refused and awarded the supply of computers to it. Was the company entitled to withdrawing the bid? This question mushroomed after the accidental understating scenario. According to Belle River Community Arena v. Kaufmann, no contract exists if a bid has no seal and thus BIDCO could withdraw (Harder, 2010: 1). 2.2. Negotiation Companies should undertake negotiations in an ethical and professional manner to avoid conflicts. By doing this, companies maintain value for money. Post tender negotiation undertakings are usually at the discretion of the supply and purchasing management. The two ought to decide whether a certain contract requires post tender negotiation. Businesses usually obtain value when there is bid clarification or in-depth discussion regarding an offer during the final stage after the reception of tenders and before the awarding of contracts. It is a must for contract managers to highlight objective before venturing into a contract. They should conduct in-depth research before carrying out any negotiations. In the negotiations, time frames, payment details, and pricing should be present in a lucid manner (Lutz n.d., p.101). Serial negotiation can lead to the selection of an appropriate contractor. However, the tender can only become legally binding if another party has accepted it. However, projects that require public tendering there is a ban on negotiation. The prohibition on negotiation represents a substantial hindrance from the perspective of attaining the best, most suitable contractual devising for IT projects, and experience has proven that negotiations between purchasers and bidders are often inescapable even after the acceptance of tenders and successful execution of projects. However, the principal position of negotiation is often poor once a tender has won acceptance. This is because the bidder can only break off from the tender under special circumstances (Kai, 2004: 407). 2.3. Invitations A contract exists when an offer, an approval, a consideration, and intent are present and ready to be bound. On the other hand, an invitation to treat refers to an invitation by clients to submit bids. While it highlights a willingness to enter into a deal, it stands different from the offer as it lacks the binding intention. An invitation to bid, creates an invitation to treat for contracts. In essence, all these terminologies refer to the solicitation to prospective suppliers of services and goods to present their bids. In IT projects, the contract manager should make invitations for hardware and software should solicit tenders or bids for those specific goods from suppliers who are capable. Any other bid should be deemed as an offer and the party may accept or reject them. 2.4. Offer An offer by a purchasing entity or a merchant to sell goods is a signed writing through which the merchant offers his term. Offer is normally given by a buyer to an offeree in anticipation for an acceptance, and it becomes legally enforceable once the offeree accepts it. Unlike a solicitation, an offer is a lucid indication of the offeror’s intent to enter into a contract under stipulated terms. It is usually made in a reasonable manner so as to facilitate acceptance that will lead to a binding contract. In the IT project, special consideration should be made regarding the price, quantity, delivery date, discounts, and shipping costs, which are subsumed under terms and conditions (Lundmark, 1998, p. 128). 2.5. Acceptance Acceptance refers to an indicator of agreement to the terms, or the offer, presented by the offeree, which is the purchasing company in a way that is appropriate to the offer. In determining whether a supplier accepted the purchaser’s offer and entered into a contract, three things are normally looked at for evidence: 1) the intention of the supplier to enter into a contract, 2) the acceptance of the terms presented by the supplier, and 3) communication of acceptance. The court often looks for the intention to enter into a contract from the supplier’s side (Lundmark, 1998, p. 129) 2.5. Letter of intent The letter of intent offers the business person a vital bridge between mere negotiations and the binding of the contract. However, the infamous Texaco v. Pennzoil case of the past decade demonstrated major pitfalls characteristic to this commonly applied tool of business. In an IT contract, the following should assist with the pitfalls: Purpose The major aim of this business tool is to aid the commencement of a business project deal or project between the involved parties by highlighting the important contractual and business understandings that will create the foundation for the final contract. Drafting issues The letter of intent is often purposed to be non-binding as opposed to binding, but also may be “binding” if the business parties do not state so, or if the language portrays a conflicting aim. The letter of intent is usually assumed to be binding in cases that it stays silent on the non-binding nature. Parties ought to draft a distinct confidentiality letter that they are to exchange during the initial stages of the discussion. An agreement of that sort imposes binding responsibilities of confidentiality that endure the non-binding intent letter, and may serve as an exhibit. Businesses easily promise too much in intent letters out of an injudicious zeal to encompass all aspects. For instance, clauses such as “agree to bargain," and “negotiate in the best faith” have made courts neglect letters of intent that are non-binding, and rule intent letters. Therefore, business should always consider brevity providing only as much as is needed. In a recent case, a party’s letter of intent stated: “This letter is not meant to create, nor do we or you presently have any legal or binding obligation.” However, in the following paragraph, the intent letter stated: “However, it is our aim, and we comprehend your purpose to continue in good faith in the definite agreement’s negotiation.” Schwanbeck v. Federal Mogul Corp., 412 Mass 703 (1992). The court contended the phrase “however” doubled by the statement “continue in good faith” generated an obligation that was autonomous to the sweeping disclaimer that the letter was non-binding (American Bar Association, 2001: 110). 3. Contractual obligation 3.1. Health Aspects in Tendering Over the recent past, computers have evolved working environments tremendously, speeding up and simplifying myriad tasks over various areas. However, with these innovations have come serious health issues that are worth consideration during the tendering process. Health guidelines ensure that tenderers do not introduce products that could cause detrimental harm to end users within the EU region (EU, 2004: 16). The guidance mirrors the present knowledge as well as best practice for use of technologies so that they can offer maximum efficiency, health, and safety at the workplace. The Health and Safety Act should guide the tendering process in this case to ensure that the hardware that comes in from another country meets the EU guidelines (Hoekman, 1995: 93). Successful bidders should portray their ability to meet certain health and safety standards before the supplying process begins. It is a rule in the EU regulations that the winner of the tender offers a safety statement that shows the risks associated with the products he will supply. In addition, procurement laws state that successful tenderers should evaluate the compliance of winners regarding the necessary health and safety laws. Products supplied by companies into the EU should not harm the final consumers or the workers of the requesting company (EU, 2004: 15). Also, waste management regulation state that tenderers have to comply with applicable waste management regulations as well as prevailing regulations in the EU for pollution prevention (Garda, 2007: 8). 3.2. Financial Aspects Contracting authorities are to clear taxes for contractors while tenderers ought to contact the local revenue district or the collector general during the process of procuring. Tax clearance issues for procurement procedures are contained in Circular 22/95 Tax clearance or any revised versions of the same available in the tax and revenue online resources (Noone and Dooher, 2004: 9). During the process of procurement, the buying nation or organization has to determine the financial situation of the selected bidder to ensure that they comply with all the regulations or legal obligations. Therefore, finance, legitimacy, and status are important in the selection process. In most situations, these factors eliminate bidders. That is, purchasing organizations can discontinue bidders with immediate effect if they establish that their financial situation is low to the level that awarding a contract to them may present certain risks. Purchasing bodies ought to ensure that bidders satisfy all the tendering questions clearly, fully, and accurately (Lewis, 2012: 19). 4. Liability in Procurement There are various instances that involve liability in a tendering process. First, tenderers ought to produce a certificate of insurance that is current and in accordance to the public liability and the employer’s acts with their proposal. The winning bidder normally has to produce relevant certificates for the time of the contract. Further, tenderers have to provide relevant financial profile for the previous three years, ideally ascertained by an accountant or an accountant’s equivalent. Where the bidder is trading years of accounting that do not meet the minimum of three years, the accounts for every year of business must be presented (Garda 2007: 8). Companies involved in the tendering process may also incur corporate liability if they engage in illegal activities. One instance that may lead to criminal liability is engagement of employees in corruption. Companies that wish to avoid this liability, which is common in tendering processes, should ensure that the workers dedicate their efforts towards the reduction of corruption. Both procuring entities and bidders may ensure that they reduce corruption by adopting an ethical policy in their environments that require employees to undergo training. Monitoring and evaluation systems can also go a long way in averting corruption cases. For business partners, companies may get themselves into business liability if they engage in corrupt activities with sub-contractors, group companies, joint ventures, or agents if it can be proven that a company acquiesced in, consented to, or turned a blind eye to instances of corruption. For an ethical institution or entity, this can lead to detrimental issues, for instance, it is not able to make sure that the business partners will not engage in corrupt deals and is, thus, at risk of implicated in the corruption by inference. Consequently, to avert liability or to prevent penalties, entities ought to take significant mitigation measures to deal with such inferences. Such measures may subsume the adoption of an ethical policy, implementing due diligence on probable business partners, and asking partners to do the same and provide warranties that prove they are taking anti-corruption measures (Garda 2007:8). 5. Good Business Planning Whether a business is entering into an association with a vendor, a consumer, or an independent contractor, changes are unavoidable, and good business planning is essential. Good business planning ensures that contracts are accommodative amid the changing financial times. Contract planning, therefore, should follow a well-laid down structure and disciplined approach taking the objectives of the business, the prevailing contract environment, and project alternatives into account. An efficient contract plan should include: Alternatives of contract pricing: there are countless ways to make pricing and payments for contractual performance, and they range from lump-sum techniques to cost sharing methods. To each, a contract manager may apply a variety of cost, plan, as well as technical inducements, risk sharing, and escalation provision elements. Contact scheduling and packaging: each contract process calls for planning and scheduling, along with sufficient scope explanation and a tailored scheme of pricing. Contract plans that are well conceived should undergo implementation before the commencement of bidding, and essential schedule constraints should be integrated into the contract award plan (Gilbreath, 1992: 16). Success factors: proper planning calls for the setting up of success factors that are established in order of relevance. In multi-sourcing undertakings, businesses should always ensure there is a good comprehension of agreements to ensure success. Time scale: contracts should always have a stipulated completion date and further negotiation is required if contractors do not complete their works within the specified time and period. Risk management: planning serves as the initial phase of risk assessment for a contract. This component requires careful attention as it minimizes “preventable problems” (Benjamin and Belluck, 2001: 20). Successful contract managers in IT ought to define all the milestones that are critical to the business for a particular project they are undertaking. They should also ask the bidder or the contractor to offer a time schedule early in advance, which will help in determining the feasibility of attaining the milestones of the business, supported with the applicable resources and staffing. Finally, good business planning calls for requests for approval of the working schedule that proves to be proactive, collaborative, and transparent (Popescu, 1995: 190). Conclusion It is apparent from the above essay that the tendering process for the hardware and software products into the EU region will have to consider myriad factors. First, it is essential the tendering process conform to three tenets: transparency, integrity, and accountability. These principles will ensure the smooth processing of the purchases. Tendering processes should be open to both sides to avoid conflicts of interest. Further, purchasing bodies should consider health and safety concerns to ensure that the procured products are in line with all the health requirements in EU. Finally, the financial health of bidders is essential, and purchasing bodies can eliminate bidders instantly on financial grounds. Liability is an issue that should draw the attention of both procuring entities and bidders, who ought to take necessary measures to avoid problems that may lead to liability issues such as corruption. Liabilities often arise because organizations do not have robust ethical guidelines or ethical cultures. To solve this, companies can implement different corruption prevention measures, and ensure the companies whose bids they approve have anti-corruption certificates. The work involved in the tendering process is crucial and the inclusion of a consultant is beneficial to ensure that all things go as planned. Recommendations The analysis and conclusions show that contract managers must have robust comprehension of contract terms and tender processes. Contract rules apply to IT projects and managers should always advise the company while undertaking purchases and other related activities pertaining to hardware and software. Purchasers and suppliers can be subjected to litigation if they do not follow the correct tendering procedures. In addition to that, contracts are binding and both parties should be committed. It is advisable that companies engage in contracts after making careful deliberation. Finally, project planning is important, as it ensures that a business is ready for a project or a contract. Thus, businesses should be careful not to lose economically because of errors. Reference List Alces, P.A., (2011). A Theory of Contract Law: Empirical Insights and Moral Psychology. Oxford University Press. American Bar Association, (2001). 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