Procurement Excellence

Group 5
S/N NAME REGISTRATION NO.

1 Magayi Emmanuel 24/U/GMBA/16115/PE

2 Okaba Kennedy 24/U/GMBA16478/PE

3 Ainebyona Ronald 24/U/GMBA/15650/PE

4 Sandra Anyango 24/U/GMBA/15717/PE

5 Murungi Christine 24/U/GMSC/16222/PE

6 Nyakato Dorothy 24/U/GMBA/16439/PE

7 Byarugaba Maureen 24/U/GMBA/15860/PE

8 Mulamba Teopista 24/U/GMBA/16210/PE

 CONTRACTS
A contract is an agreement between two or more parties enforceable in law.
Contracts are a foundational component of the business and legal landscape
that shape so much of our day to day activities. Depending on the nature of
both the existing and developing relationship between entities, different types
of legal agreements maybe warranted.
 What form can it take

• Simple contract
• Verbal agreement
• The signing of an Accepted order
• Signed and witnessed formal document
 Types and forms of Contracts

Lump Sum (Fixed Price) Contracts :Lump Sum Contracts are used mainly
for assignments in which both the content and the duration of the services, and
the required outputs of the Consultants, are clearly defined. Their main
characteristics are:
Lump sum contracts are widely used for simple planning and feasibility
studies, environmental studies, detailed design of standard or common
structures, preparation of data processing systems, etc.
Lump sum contracts are simple to administer because payments are due on
attainment of clearly specified outputs.
Time-Based Contract: This type of contract is widely used for complex
studies, supervision of construction, technical advisory services, and training
assignments. It may also be appropriate when:
• It is difficult to define the full scope of services, or the input of the
Consultants required attaining the objectives of the assignment;
• The length of services can be precisely defined and deliverables are only
incidental to the main purpose of the assignment;
The services are related to activities by others for which the completion period
may vary.
Payments are based on:
Remuneration: Agreed hourly, daily, weekly, or monthly rates for staff;
Reimbursable: Reimbursable items using actual expenses and/or agreed unit
prices.
Rates for staff remuneration include salary, social costs, overhead, fee (or
profit), and, where appropriate, special allowances.
This type of contract must include a maximum amount of total payments (the
contract ceiling) to be made to the Consultants. The contract ceiling usually
includes a contingency allowance for unforeseen work and duration, and
provision for price adjustments, where appropriate. Time-based contracts need
to be closely monitored and administered by the Procuring Entity to ensure that
the assignment is progressing satisfactorily, and payments claimed by the
Consultants are appropriate.

Retainer and/or Contingency (Success) Fee Contract

Retainer and contingency fee contracts are frequently used when Consultants
(banks or financial firms) are undertaking specialist financial activities such as
preparing companies for sale, in mergers of firms, or in privatization
operations. The remuneration of the Consultant includes a retainer and a
success fee, the latter being normally expressed as a percentage of the sale price
of the assets.
•
Percentage Contract: These contracts are commonly used for architectural
services but may be also used in similar circumstances such as for
procurement and inspection agents.
Percentage contracts directly relate the fees paid to the Consultant to the
estimated or actual project construction cost, or the cost of the goods
procured or inspected.
Contracts are negotiated on the basis of market standards for the services
and/or estimated staff-month costs for the services.
In the case of architectural or engineering services, percentage contracts lack
any incentive for economic design or performance. The use of a percentage
contract format for architectural services is only recommended if based on a
fixed target cost and covers precisely defined services.
• Long term contracts: Long term contracts are contract purchases that are
made on a continuing basis for a specified period of time typically
exceeding one year. Long term contracts can be used in many industries to
manage risk, ensure stability and provide framework for long term planning
• Framework contract: is a legal contract that establishes terms and
conditions for a series of transactions or projects between two or more
parties: Framework contracts are often used to streamline procurement
procedures and save time and resources.
 Essential components of a contract strategy

The Offer: Setting the Stage for the Agreement

Every contract starts with an offer — one party seeking something from
another. This offer defines the responsibilities and expectations of each party.
For instance, Party A may agree to pay a certain price per month to Party B for
renting office space. The offer becomes official when the receiving party
acknowledges it.
Acceptance: Sealing the Deal
Acceptance is the second crucial element of a contract. It is often a topic of
debate, but formally, acceptance occurs when the contract is signed. Any
counteroffer or negotiation of additional terms is considered a rejection of the
original agreement, starting the process anew.
Awareness: The Meeting of Minds
For a contract to hold weight, both parties must be fully aware that they are
entering into a new agreement. This ―meeting of minds‖ ensures that both
sides understand and agree to be bound by the contractual obligations. Lack of
awareness could render the contract void if a party signed it under duress or if
there was fraud, misinterpretation, or undue influence involved.
Consideration: The Heart of the Contract
Consideration is what gives life to a contract. It refers to the exchange of
something of value between the parties, such as property, services, or
insurance. Notably, consideration doesn‘t have to be in monetary form; even
non-monetary exchanges can validate the contract. Consideration often takes
the form of money, e.g. someone paying someone in exchange for a service
or a product or some combination of the two, but it can and often can include
other items like promising to do something or not to do something like
agreeing to not share confidential information or create a competing product
or even something like not selling items within a certain geography.
Capacity: Ensuring Legitimate Agreement
Contracts can be intimidating, particularly when representing a company.
Legal capacity ensures that parties comprehend the obligations, terms, and
consequences of the contract before signing. If a party lacks the capacity to
understand, such as being a minor or under the influence of drugs or alcohol,
the contract becomes void.
Legality: Complying with the Law
All contracts must adhere to the laws of the jurisdiction in which they are
signed. Sometimes, federal and state laws may not align, in which case the US
Constitution will prevail. Ensuring the contract‘s legality is essential for its
enforceability.
 HOW TO MANAGE THE CONTRACT
AFTER IT HAS BEEN AWARDED
Contract management this is the process that ensures that all parties to a
contract fully meet their obligations. In order to satisfy the operational
objectives of the contact and strategic business goals of the customs.
Contract management as a process which aim at successful and profitable
production, project services.
Definition also points on obligation of the parties which should be fully met.
These obligations are not easy to be met as put in writing and as to such parties
are subject to bounded rationality
―Different contractual perspectives due to incomplete information and self-
interest‖
This will lead us into a problem called agency problem.
This is the conflict of interest between the buyer and seller due to;.
Conflicting goals
• Information asymmetry
• Risk allocation
• Moral hazard
• Contracting process; key elements
There are 3 management stages in contract management
• 1. Pre contract stage
• 2. Contact negotiation stage
• 3. Post contract negotiation stage
Pre contractual stages
1.basic design and engineering
This includes activities which are required to arrive at technical specification
for the project e.g. feasibility study, functional design and basic design.
Project description and technical specification
Budget estimates etc.
2.Tendering
At this stage the buyer communicates the future of the project to the market
mostly private to that then the Government project.
Suppliers given time to prepare the proposed risk planning and sub-contracting
suppliers-service providers or supplier vendors.
Contractual stage
3.Contract negotiation and closure
Most bidders will fall off at this stage. The buyer will select 1 0r 2 to negotiate,
having mutually agreed on the base price finally a contract is reached.
Contract execution
4.Detailed project engineering and planning After landing the contacts, the
contractor engineering department will take care of technical specifications
and drawing;.
• Budgets are prepared for man-hours that will be spent.
• The material and material volume that will be needed.
• Sub-contractors that will be needed or hired.
• Clients approval will be nee
• Government permits will be required
• Renegotiation of the delivery date or completion dates
5. Sub-contracting and procurement
After the main contract is secured, material suppliers will be finalized.
6. Project execution.
Project work commences before the contract
7. Testing and delivery
Here now works needs to be tested and delivered
8. Maintenance and guaranteed period
Supplier remains liable for defects and failure
Post contractual stages
9. Claims-long after claims may settle claims for the buyer/subcontractor
depending on the legal outcomes.
 THE ROLE OF KICK-OFF MEETINGS IN
PROCUREMENT
A Kick-Off Meeting is an initial, formal gathering of stakeholders, vendors,
and procurement teams to launch a project, clarify expectations, and establish a
collaborative framework for successful project execution.
In procurement, kick-off meetings are essential for ensuring successful project
initiation. They bring together stakeholders, vendors, and procurement teams
to align objectives, clarify expectations, and establish communication
protocols.
Benefits
• Aligns stakeholders, vendors, and procurement teams
• Clarifies project objectives, scope, and timelines
• Establishes effective communication
• Enhances collaboration and teamwork
• Minimizes conflicts and disputes
• Ensures compliance with procurement regulations
 Objectives

1. Introduce stakeholders, vendors, and procurement team members.

2. Clarify project objectives, scope, timelines, and budget.
3. Assign roles and responsibilities.
4. Establish communication and reporting protocols.
 Key Components

• Project overview and objectives

• Procurement strategy and methodology
• Contract terms and conditions
• Vendor expectations and responsibilities
• Risk management and mitigation
• Communication and reporting plan
• Q&A session
 Benefits

• Aligns stakeholders, vendors, and procurement teams

• Clarifies project objectives, scope, and timelines
• Establishes effective communication
• Enhances collaboration and teamwork
• Minimizes conflicts and disputes
• Ensures compliance with procurement regulations
 Challenges

• Lack of clarity on procurement objectives

• Poor vendor engagement or participation
• Information overload
• Time-management issues
• Unresolved concerns or questions

Conclusion:
A well-planned and executed kick-off meeting is crucial for successful
procurement projects. It sets the stage for effective communication,
collaboration, and teamwork, ensuring that all stakeholders are aligned and
working towards common objectives
Probable Checklist for Procurement Kick-Off
Meetings

• Define project scope and objectives.

• Identify stakeholders and vendors.
• Establish communication protocols.
• Review contract terms and conditions.
• Discuss procurement strategy and methodology.
• Assign roles and responsibilities.
• Establish risk management and mitigation plans.
• Plan for vendor engagement and participation.
 Conclusion

A well-planned and executed kick-off meeting is crucial for successful

procurement projects. It sets the stage for effective communication,
collaboration, and teamwork, ensuring that all stakeholders are aligned and
working towards common objectives
 PREVENTING AND RESOLVING
DISPUTES

• Understanding Contract Disputes

Such disagreements may concern the agreement‘s implementation,
performance, or terms. Worth noting is that although many clashes can involve
deal breaches, not all do; for example, if only a single party wishes to adjust an
agreement or if there is a lack of consensus regarding how to interpret a
particular clause, this might culminate in contractual rows.
• Dispute Resolution Methods
The parties to a contract may choose to settle their grievances in many ways,
including via discourse or through more formal mechanisms, such as litigation
or alternative dispute resolution (ADR)
 How to avoid a contract dispute

• Ensure Contract Clarity

One ideal way to protect all the parties associated with a contract is to craft the
essential document carefully in the first place. If consensus never relies on
partially documented or orally agreed terms, it is easier to prevent problems if
relations between the participants break down since the presence of a
comprehensive, minutely articulated, signed document makes it much more
difficult for one party to bring into dispute what was originally agreed.
• Avoid Hasty, Uninformed Decision-Making
Contractual disagreements frequently arise and escalate due to rash decision-
making and the failure of a participant to carefully consider their liabilities,
obligations, and possible consequences before taking action.
• Negotiation
Negotiation entails alternating exchanges between each party in the conflict to
reach a solution that pleases everyone. Negotiation––with or without the
assistance of lawyers––is normally the initial dispute resolution practice
adopted.
• Mediation
In mediation, an impartial third party, called a mediator, assists the contractual
parties in seeking a mutually beneficial solution.
• Arbitration
Participants involved in a disagreement over the interpretation of a contract‘s
terms or the criteria for their fulfillment can utilize arbitration. This technique
entails submitting the case
to an arbitrator. Similar in some respects to a mediator, the arbitrator
is a nonpartisan third party.
• Litigation
Litigation refers to the formal procedure of resolving a disagreement
via the courts. Concerning contractual disputes, one party may opt to
sue the other to acquire damages or compel the other litigant to fulfill
the deal‘s terms.
 MANAGING PERFORMANCE AND
PAYMENT OF A CONTRACTOR
Performance management is a continuous process of communicating and clarifies job
responsibility, priorities and performance expectations and development planning that
optimizes an individual‘s performance with organizational strategic goals.
In contracts, Performance management involves setting clear expectations, stabling
performance indicators and continuously measuring and assessing progress. It is also a
dynamic process that requires proactive monitoring, timely communication and effective
collaboration amongst stakeholders; it is one of the most important ways to measure success
of a contract.
There are four performance metrics that help measure the efficiency of contract lifestyle,
• Cost. This is the most obvious metric any contractor would want to look at. In business
operations, the success of any contract can simply be determined by whether or not the
contract is resulting in to profits. For example, labor costs, consulting fees, training fees,
and software and technology expenses.
• Punctuality. Time is the most important factor when it comes to contracts. Each party in
a contract should fulfill their contractual obligations on time. In case of failure of one
party, you could wind up with an underperforming contract. Therefore, it is important to
monitor the punctuality of tine other party to ensure the success the contract.
• Reliability. At times finding the right contracting partner and vendor may
be difficult. Are liable working relationship is necessary to ensure success
of your organization‘s operations. Assessing your counterparts is inevitable
contract changes in the pre the pre-signature stages of a contract lifecycles
and tracking post signature contract performance contribute to the
reliability of your contract management system.
• Consistent Quality, It is important to ensure that a contract is completed
in time and ensure that contractual obligations are successfully fulfilled.
Concentrating on a high quality contract output con often lead to poor
quality.
• Payment of a contract. This means any payments to a supplier
 TOOLS FOR ASSESSING THE VALUE OF
SUCCESS AND THE COST OF FAILURE
OF CONTRACTS
How do you measure success of a contract?
This is done through tracking of contract metrics that generate measurable data
KPIs (Key Performance Indicators) letting you access the success, efficiency
and potential areas of improvement. It can be briefed to progress for goals.
Some metrics could include;
▪ Contract cycle time
▪ Compliance rates
▪ Cost savings
▪ Customer satisfaction scores.
The following tools used to assess the value of
success and failure of
a contract.
1. Use of KPIs (Key Performing Indicators);
These measure the qualitable metrics that reflect to the critical success factors
of a contract. Examples are quality, timeline, cost, compliance, risk and
customer satisfaction.
They are aligned with the contract scope, goals and expectations. They should
be SMART (specific, measurable, achievable, reliable and time bound). And
they should be agreed upon by both parties and also documented in the
contract.
2. Data collection methods;
They are ways of gathering and recording information that can be used to
measure KPIs and also evaluate the contract outcome.
These vary depending on the type, source and frequency of data needed. Some
of these methods include; surveys, interviews, observations, audits, reports etc.
They should also be reliable, valid and consistent to minimize bias and errors.
3. Data analysis techniques;
These are methods of processing, organizing and interpreting the data collected
to measure the KPIs and assess the contract performance. They range from
simple descriptive to complex statistics depending on the level of detail
required. They include trend analysis, variance analysis, benchmarking, and
swot analysis among others. They should be appropriate, accurate and
transparent and should support decision making and action planning
4. Report formats;
Report formats are ways of presenting and communicating the data analysis
results and contract performance evaluation to relevant stakeholders. Some
common reporting formats include; tables, charts, dashboards, score cards and
narratives. They should be clear, concise and consistent highlighting the key
findings, conclusions and recommendations.
5. Feedback mechanism;
These are the processes of soliciting and providing feedback on the contract
performance through both parties and other stakeholders. They help to identify
the strength and weaknesses of the contract performance to validate the data
analysis and reporting results. To suggest areas of improvement and corrective
actions.
They include; surveys, interviews, meetings, reviews and audits. They should
be timely, constructive and collaborative, faster trust and learning.
6. Improvement actions;
These are steps taken to address the gaps, issues or risks identified in
the contracts. Performance measurements and evaluation to enhance the
contract performance and value. These actions include; revising the
contract terms, adjusting the KPIs, modifying the data collection
methods, implementing the recommendations and resolving disputes.
Improved actions should be agreed upon by both parties, documented,
monitored and also should be aligned with the contracts objectives and
expectations.
Importance of accurately measuring contract
performance

1. Risk management;
it serves as an early warning system that helps to identify risks like
noncompliance with contract terms, inadequate performance etc. if these issues
are identified early enough, they are addressed before they become major
problems hence preventing financial losses, reputation damage and legal
issues.
2. Value realization;
This is about financial gain and strategic benefits e.g. promoting innovation,
favorable market positions and improving customer satisfaction. The overall
impact of these benefits can significantly impact a company‘s profitability and
potential for long term growth.
3. Relationship management;
Accurate assessment of contract performance is crucial for building strong
collaborative relationships between the parties involved. This creates a
transparent and unbiased basis for discussions and this facilitates a peaceful
and effective resolutions and agreements. This in the end leads to better
negotiations results, better contract terms and also opens doors for joint
projects or strategic partnerships.
4. Continuous improvement;
Regular evaluating the performance of contracts is a ways to get better and
better in an organization. Evaluating performance data helps companies to gain
important
insights into their processes and also find areas where they can make processes
smoother and adjust strategies to improve overall efficiency.
5. Regulatory compliance and reporting;
This is an important part of contract management. Proper measurement of
contract performance ensures that companies can provide detailed
documentation that demonstrates compliance with legal and regulatory
standards. This helps in avoiding penalties and legal compliance actions but
also preserves the company‘s integrity and reputation vis-à-vis regulations,
partners and customers.
 Cost of failure / breach of contracts
Effects / results of contract failure;
1. Damages- the non-bleaching party can claim monetary compensation.
2. Termination; the non-bleaching party can end the contract and seek
damages.
3. Injunction; the court can prohibit certain actions or terms.
4. Specific performance; court may order fulfillment of original contract
terms leading to losses.
5. Liquidated damages; this is an order to terminate the contract permanently
and stetting of compensation amount to be paid by the party hat bleached the
contract.
 COMPLETION AND CLOSE OUT

Completion refers to the fulfillment of all obligations by the contractor,

supplier, or vendor as outlined in the contract. This typically involves
delivering the agreed-upon goods or services according to the terms and
conditions specified in the contract. Once the completion criteria are met, the
buyer can formally close the contract, often referred to as contract completion.
Key elements of completion in procurement contracts include:
1. Delivery of Goods/Services: The supplier must provide the
goods or services as specified in the contract, including meeting the required
standards and quality.
2. Inspection and Acceptance: The buyer or procuring entity
will inspect the delivered goods or services to ensure they conform to the
contract‘s specifications before officially accepting them.
3.Completion Certificate: In some cases, particularly with construction or
large-scale projects, a certificate of completion may be issued, signaling that
the work is done to the buyer‘s satisfaction.
4.Final Payment: After all contractual obligations are fulfilled, the final
payment is made to the contractor. This may include the release of any retained
funds or securities.
5.Post-Completion Obligations: Even after formal completion, there may be
warranty periods, maintenance obligations, or other post-completion
responsibilities.
In procurement, managing completion effectively is essential to ensure all
obligations are met, risks are minimized, and both parties conclude their
contractual relationship smoothly.
 Contract closeout

This is the process of completing all contractual obligations, administrative

tasks, and documentation required to formally conclude a contract. It occurs
after the work has been finished, all deliverables have been accepted, and
payments have been made. Proper closeout is crucial to ensure that both
parties (the buyer and the supplier or contractor) have fulfilled their
responsibilities and that no unresolved issues remain.
Key steps in contract closeout include:

1. Verification of Completion: Confirming that all goods and services

have been delivered, inspected, and accepted according to the contract terms.
2. Final Payment: Ensuring that all payments, including any retainage or
performance incentives, have been made.
3. Release of Liabilities: Issuing formal documentation (e.g., a release of
claims) stating that the contractor has fulfilled all contractual obligations and
the buyer has no further claims against them.
4. Review of Contract Performance: Evaluating how well the contract
was executed, including the performance of the contractor, any delays, and
overall project success.
5. Documentation and Archiving: Finalizing and organizing all contract-
related documentation, such as invoices, delivery receipts, correspondence,
inspection reports, and the contract itself. This is essential for audits and future
reference.
 6. Settlement of Disputes: If there are outstanding disputes, claims, or
issues, these must be resolved before the contract can be closed out. This may
involve negotiations or even legal proceedings.
7. Return of Guarantees/Bonds: Any performance bonds, bank guarantees,
or securities held as assurance during the contract term should be released to the
contractor upon successful completion.
8. Contractor Performance Evaluation: Some organizations conduct a formal
evaluation of the contractor‘s performance, which may be used to inform future
procurement decisions.
The contract closeout process ensures that all contractual obligations have been
fulfilled, liabilities are addressed, and that both parties can exit the agreement with
clear expectations and without pending issues.
 DISPUTE MANAGEMENT AND
RESOLUTION

Contract disputes are disagreements between the parties to a contract. Often,

contract disputes arise when one party fails to fulfill their obligations under the
contract, or when the parties disagree over the meaning of a contractual term.
Dispute resolution is the process of settling disagreements and conflicts that
arise from the elements of a contract. It‘s a strategic approach to making sure
contractual obligations are upheld.
Dispute resolution provides a platform for parties to express their concerns,
negotiate and reach an agreement. This may happen through alternative dispute
resolution (ADR), arbitration, or court proceedings.
 Causes of contract disputes

Format
Contracts do not only arise when the parties negotiate and sign a written
agreement. They can be formed verbally, through correspondence, or by
conduct. Disputes regularly arise over the terms of contracts made in these
manners, or even over whether a contract exists at all.
• Clarity
Well-drafted commercial contracts are clear, unequivocal and plainly set out
the basis upon which the parties have agreed to do business. Even the choice
of the most apparently innocuous words, such as ‗and‘ as opposed to ‗or‘ must
be clearly thought out to avoid issues down the line
• Breach
The parties to a contract must perform their duties in line with the contract. If
they do not, they may be in breach. Examples of instances in which a breach
might occur include when a seller delivers defective goods, or when a buyer
fails make payment on time.
 Prevention of a contract dispute

Prevention is better than cure when it comes to contract disputes. Whilst you
cannot forestall every eventuality, it is crucial to take proactive steps from the
outset of contractual negotiations to minimize the chances of a disagreement.
• Ensuring the contract is watertight
The best way to avoid a contract dispute is to ensure that all your contracts are
clear, unambiguous and accurately reflect the business relationship. Vague, ill-
defined terminology that is open to interpretation can cause significant
confusion and disagreement further down the line
• Ensuring the contract is future-proof
What suits your business now may not do so in the future as you expand and
diversify. Before entering into a contract, consider where you envisage your
commercial operations going over the course of the contract and ensure its
terms do not stifle those goals, particularly if the contract is going to run for a
significant period of time.
• Ensuring Compliance
Those responsible for negotiating a contract on behalf of your business should
have a good understanding of its terms. However, other individuals, such as
employees and contractors, must be informed of their obligations and trained
on the measures required to ensure compliance and avoid an inadvertent
breach.
 Preparing for dispute resolution

• Review your contract: Make sure you know exactly what you agreed
to.Thats the starting point for a straightforward resolution process
• Identify the dispute: Take time to understand the issue at hand.whats the
causing this disagreement?
• Gather evidence: Collect any documents or communication that supports
your position.
• Consider your goals: What outcome are you hoping for? It helps to be able
to state your objective clearly.
• Explore ADR options: Look into alternative dispute resolution methods.
They are often more flexible and less formal.
• Communicate with the other party: Sometimes a simple conversation can
clear up misunderstandings.
• Prepare for formal proceedings: if things escalate, get your documents and
arguments in order.
 Dispute resolution involves three methods

• Mediation
The goal of mediation is for a neutral third party to help disputants come to a
consensus on their own.
Rather than imposing a solution, a professional mediator works with the
conflicting sides to explore the interests underlying their positions.
Mediation can be effective at allowing parties together and sometimes
separately, mediators can try to help them hammer out a resolution that is
sustainable, voluntary and non-binding.
• Arbitration
In arbitration, a neutral third party serves as a judge who is responsible for
resolving the disputes.
The arbitrator listens as each side argues its case and presents relevant
evidence, and then renders a binding decision
• Litigation
The most familiar type of dispute resolution involves a defendant facing off
against a plaintiff before either a judge or jury
The judge or jury is responsible for weighing the evidence and making a
ruling.
Thank you