Supply Contract Management Strategies - Coursework Example

MANAGING SUPPLY CONTRACTS By (Name) Name of class (course) Professor (Tutor) Name of Institution (University) City and State The Date A supply contract management strategy is the basis of carrying out a steady approach to supply and contract management across service areas and products so as to achieve the anticipated value from already existing and new contracts (Henig, 1997). It is therefore a series of planning and meetings to come up with grounds to implement the contract management. Thus a supply contract should put into consideration the expected outcomes of a particular action. One of the supply contracts is the Public-Private Partnership (PPP) contracts which involve the allocation of risks and responsibilities between the public and private sector. Being social refers to everything that affects the society in question (Ernst, 1997). This then opens an area of human rights protection which protects humanity at large. Therefore, the environmental factors are also under social outcomes as they are part of the society. Governments act as advocates for its citizens in this partnership with the private industry. Therefore, the contract has to consider legal implications of the business. They are focusing more on social outcomes from PPP procurement contracts and this calls for a clear understanding of contract strategies and social outcomes in this context. Supply contract management strategies are a series of plans to successfully implement a contract. The agreement ensures that the best procurement and supply practices are put into place. The pre-emptive management, monitoring and review of contract terms is what is known as contract management; it is done through the procurement process in order to ensure the partners or suppliers deliver on the agreed terms. The responsibilities of contract management include: ensuring compliance with the terms and conditions agreed and documented and approved any changes or amendments that may arise during contract implementation or execution. This therefore means that effective contract management has to ensure that the agreed strategic priorities are promptly delivered and non-compliance or variation issues are seen and dealt with early or moved forward appropriately to seek for resolutions (Hobbs, 1996). A successful supply contract should be in accordance with the organization’s procurement strategy. The development of a contract strategy is designed to establish the form of the procurement and provide assistance in determining the formulation and award of the contract and the style and type of management to be adopted for the subsequent service delivery, relationship management and contract administration. For a contract management to be successful, the following is important: administration of the organization's responsibilities during the contract, ensuring the supplier meets the minimum performance criteria, such as compliance, allowing the achievement of both short and long term supplier performance improvements through developing effective supplier relationships (Huang, 2005). Concurrently with identifying the contract strategy, consideration should be given to the evaluation plan which sets the direction for the overall evaluation of suppliers and the related tender process. It covers such considerations like business plans, important success factors, relative priorities of the requirement, communication strategy, criteria for determining quantifiable and non-quantifiable products, overall evaluation procedures including assessment formulae, personnel involved in the evaluation, supplier selection criteria including guidance on explanation and marking of replies. Another important consideration in implementing contract strategy is whether to utilize Service Level Agreements (SLA). These are agreements that are negotiated and designed to come up with a common understanding of priorities, responsibilities and services and can be applied in two situations. Firstly, internally used and provided specialist support services and secondly when outsourcing (Manuj, 2005). Companies should aim to make a lasting, positive contribution to the countries and communities in which they operate, to become partners in the future. To accomplish positive social outcome, companies should create and maintain mutually beneficial relationships by understanding and capitalizing the positive influence that they can have on local development. This can be achieved by maximizing on the strengths of their main business through local procurement, infrastructure synergies, and local labor development as well as focusing on local institutional capacity building, enterprise development and education and health initiatives. The requirements of all stakeholders will inform and guide their approach to doing business. They should also realize that in order to positively influence development, they should manage the potentially adverse effects of their activities at the local level. The companies should further protect and respect human rights, heritage, culture, livelihoods and beliefs of the host communities and states (McCrudden, 2004). Leaders should also be accountable for managing the social impacts of their companies’ activities, including those undertaken on their behalf by contractors. All line managers and supervisors should also provide effective leadership in managing social issues. To achieve positive social outcomes, leaders should ensure appropriate staffing and training to ensure the development, implementation, and governance of social performance requirements (Sneider, 2006). They should also enhance active and inclusive engagement with local stakeholders. Proactive identification, assessment, and management of social impacts should be a prime consideration for the leaders. Finally, leaders should highlight an integrated approach, focused on leveraging the core business activities to maximize the positive developmental contribution of their business (Heide, 2007). Social outcomes are very broad and need to be focused on with a keen eye. Depending on the contract, the social issues or rather outcomes can either be positive or negative. For a positive social outcome, the contract should have the necessary social commitments. The contract should, therefore contain social risk management which should identify, assess and manage social risks and impacts. Social risks involving the business, employees, contractors and external stakeholders should be integrated into the site risk management process to take into account evolving social dynamics, particularly for vulnerable groups. Stakeholder engagement is also another key consideration. Interested parties in a supply contract involve the supplier, the government if it is on a national level and the client. Therefore, setting of grounds to benefit the parties involved is important. This is possible through direct engagement, meetings and conferences. Public opinion is also necessary to see the compatibility of the business plans to the intended market. This is effective through surveys (Takeuchi and Taylor, 2005). Partnerships also ensure positive social outcomes. This is because they ensure that organizational contributions complement and amplify rather than substitute or duplicate the development efforts of other organizations (Sherman, 1985). To support this, all governance structures, roles, and responsibilities should be clearly spelled out in formal and transparent agreements. Social commitments also play an important role in social outcomes. These includes, for example, social commitments within community agreements; commitments made to shareholders; or regulatory and legal necessities for social projects. Social incident management also helps in controlling some of the problems that might be under the social outcomes (Quiggin, 2005). Social incidents may be self-reported through the site incident management system or reported by third parties through the site complaints and grievances procedure. The management of security, health and safety of the community should be considered where the company conducts an assessment of conflict and human rights-related risks and impacts to the involved parties (Basheka, 2008). This should ensure the acquisition of relevant safety gadgets for the safety of the suppliers who are usually the local labor force. The companies should ensure consultation with relevant stakeholders on security and human rights related matters, including risk assessment and security arrangements with security providers. They should also develop systems for reporting, investigating and addressing any allegation of security related human rights abuses. A benefit-sharing agreement should be formulated. This is because, in some specific contexts, an operation may find it necessary or desirable to implement a formal benefit sharing agreement with a host community, including community trusts, equity stakes or other financial and non-financial commitments to host communities (Simoes and Marques, 2013). The development of these agreements is complex, can have unintended consequences and may set precedents (intentionally or otherwise) for other parties. However, it is unfortunate that the state mostly treats procurement as a back office administrative function, instead of treating it as an important part of their strategy for beter delivery. States adopt inappropriate procurement strategies and contract types that are not aligned with their objectives. Procurements can be overly prescriptive and regulated, stifling creativity and minimizing competition. Contractor performance is not commonly tracked in a meaningful manner. Contract management focuses on compliance instead of performance improvement, with contractors held accountable for inputs and activities rather than results and impacts. Governments make insufficient use of data on past performance in making future procurement decisions and tend not to incorporate performance incentives into contracts (Carroll, 1999). The decision to contract should be made carefully by assessing whether the service or product could or should be produced directly by the government, whether the government can maintain sufficient control and oversight if it purchases the items, and whether buying is cheaper and likely to produce the desired outcomes. If the state decides to contract for the good or service, contract officers and program officers should use market research to understand better what products or services are needed and how to most cheaply obtain that given the state of the marketplace and vendor expense structures. The state then structures the procurement as informed by this market research to get the desired outcomes. Specifically, the objectives of the procurement and the market research report the selection of the competition strategy, contract type (fixed price contract, cost-type contract, incentive contract), and contractor requirements (Rothstein and Baldwin, 2001). Further expertise can be availed by contract review boards for important procurements in order to improve the structure of the procurement pre-awards and post-award management of the contracts. Checking products or services for cost and viability through a pilot before dedicating full resources can further improve the success of procurement (Eisenhardt, 1989). Also, in certain cases, a problem-based approach to procurement whereby the procurement describes a problem, as opposed to state requirements, and seeks solutions from bidders may be useful for spurring innovation and highlighting the ultimate goals of the procurement. Governments should come up with systems that will measure the impacts and effectiveness of procurements by the utilizing administrative information and utilizing analytical methods. The government may also establish a baseline based on current performance to help measure the results that it targets to achieve. Where multiple contractors are working toward similar goals, the government can thus create an evaluation system that facilitates comparison of outcomes across contractors to determine which contractors are most active (Cannon, 2000). Utilizing contractor performance records to inform future procurement decisions across departments, including contract renewals, can provide an additional performance incentive for contractors. Moreover, connecting past performance to future contracting decisions helps the government establish a mechanism for allocating limited resources to the most productive contractors over time (Hayden, 2012). Similarly, states can consider rewarding successful contractors with multiyear contracts or with funds for a capacity building to enable them to scale as they continue to improve their performance. The government should manage its procurements in a strategic manner, particularly those that are related to the Mayor or Governor's priority goals or constitute significant spending. For instance, a government might always track the next twenty to thirty key contracts that are at least nine months from expiring and seek to improve them before the next contract renewal. The government will actively work on reforming high-risk contracts, including those that are awarded non-competitively, receive only one bid, or are structured as cost-type (Bratt, 2013). The government should apply results-driven contracting strategies and best practices widely and continually search for ways to innovate and improve its procurement process to drive better performance. In most governments, the position of a contracting officer is seen as an administrator. This should change if governments want to take advantage of the opportunity presented by critical procurements to grow their policy agenda. Contract officers should be supported to judiciously manage the procurement process and the last contract to achieve objectives. Specifically, contract officers should work closely with program officers to ensure that they understand the objectives of the purchase and can structure it to meet the program's objectives (Preuss, 2009). Post-award, governance structures that include the contracting officer and the contractor can enable better management of ongoing contracts and push performance incentives for the contractor. This new focus on strategic activities represents an important shift from contract officers’ current role, which focuses on regulatory and contractual compliance as well as on managing invoicing for providers. This shift may require recruiting qualified staff, training existing staff, and dividing administrative functions from more strategic activities to make the positions more appealing (Cooper, 2003). This will aid in creating a healthy relationship with the public due to the deliverance of quality services and products. Being accountable to residents helps reinforce the relationship between the strategic goals of the state and critical procurements. Having transparency on the objectives and eventual outcomes of supply can give useful results loop which further stimulates support for results-driven contract issuance in the community and eventually increases trust in the capacity of the state to govern effectively and fairly. This could be accomplished by publishing useful information on contracts, such as some bidders for the procurement. Also the awardee, a description of the goods or services delivered, the contract value, any contract amendments, the contract term, and information on the performance of the vendor regarding relevant metrics at the end of the agreement. Educating constituents about the relationship between a procurement and service delivery and increasing their expectations of what well-planned contracting can achieve is critical for the sustainability and broader application of results-driven contracting strategies in the long run (Soundry, 2007). Supply contract management strategies are a series of plans to successfully implement a contract. Companies should aim to make a lasting, positive contribution to the countries and communities in which they operate, to become partners in the future. To ensure peaceful coexistence of the companies and the public, the contracts should be vigilant in observing the rights of all parties involved directly or indirectly in the contract. The government should also ensure that all legal implications for saving human lives and maintaining human dignity are considered in the contract. Therefore, the government acts as the public’s advocate in Private Public Partnerships. 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