-67%
Solution
Executive Summary
In this assessment, the contractual terms which is used by Emirates Transport (ET) Company has been evaluated. The contract terms and conditions have been evaluated in terms of their power and risk distribution among the suppliers and the organisation. In order to achieve the evaluation in this report, the areas of interest include force majeure, variation of disputes, pay level, warrant and liability and termination.
By using different tools and models, the findings in this report evidence the scope in which ET has made investments in power balance and risks management for successful contract management. This is evidenced by for instance the scope of disputes management. Further, the findings evidence that the terms and conditions used by ET offer an elaborate guide on relevance of the legal factors for the organisations operations in UAE and in specific Dubai. The process of provision of the contracts is appropriately addressed and put into account.
In this report, various gaps have been evidenced in their contract terms and conditions which could be managed through the application of the recommendations. The recommendations have been identified to include;
- To provide appropriate price regulation approaches in their operations
- Offer sufficient suppliers power for managing inappropriate phenomenon to their disadvantage
- Engaging all stakeholders in promoting ET capacity to improve their contracting process
Table of Contents
1.2 Background of ET Organisation. 3
2.0 Main Clauses in Tyres Procurement Contract 4
2.5 Warranty and Liability. 12
3.0 Conclusion and Recommendations. 17
Appendix 1: Summary of ET Terms and Conditions. 22
1.0 Introduction
As evidenced in the CIPS (2022) report, the contract is a form of an agreement which is enforced in a legal manner amongst two or more individuals or parties in a legal relationship. The main aspects of a valid contract is as shown in figure 1. In evaluation of the effectiveness of PS&M operations, the identified elements are core for promoting the relations and used to address the likely conflicts.
Figure 1:Valid Contract Essentials
1.1 Assessment Purpose
The main purpose of this report is to evaluate a contract used in sourcing of tyres in Emirates Transport Company (ET) as shown in appendix 1 summary. This is with the evaluation of the power distribution and risk of the organisation and their suppliers being evaluated effectively.
1.2 Background of ET Organisation
Emirates Transport Company (ET) was founded in 1981 and include approximately 35,000 vehicles on its fleet and more than 30,000 employees. The main operations of this organisation entail organisation, management and supervision of transport and maintenance services and linked business. The organisation has significantly attained an investment growth and service diversification in the past 38 years of practice. Being headquartered in Dubai UAE, it is identified in ET (2022) as offering their clients who are establishments and individuals with multiple categories of services inclusive and not limited to transportation, vehicle leasing. Today, ET is ranked as the largest organisation in the United Arab Emirates specifically in regard to their nationwide locations providing their clients in service delivery outlets with corporation head office in Dubai. All these work collaboratively in supporting clients happiness and support of the economic and social development in UAE.
2.0 Main Clauses in Tyres Procurement Contract
2.1 Force Majeure
Force Majeure is defined as parties in a contract not being obligated to take the consequences of risk which has occurred hindering the parties success. As identified in Matthew (2020), the Force Majeure is relevant for eliminating liabilities from unplanned occurrences which are a hindrance to the engaged parties to meet set roles. In regard to the Force Majeure, the Terms and Conditions (T&Cs) note that;
As evidenced in cluse 14 of the T&Cs, it is evident that suppliers and ET are not impacted by the occurrence of Force Majeure as they are both appropriately protected. Nevertheless, the clause is relevant in a case where it is not impacted or failure of lacking capacity in making payments or securing appropriate funds.
This clause is used in managing power for parties engaged by eliminating the role of either party from executing the obligation. According to Tai (2018), in line with the STEEPLE analysis, as shown in figure 2, parties lack power for terminating the contract only in an event a proof of terms violation or lacking capacity of attaining the required pay with the issue impacting the party fault. For ET, they as shown in the T&Cs, they leverage on the power of terminating a procurement process when the events highlighted in figure 2 prevail. This is particularly the case when there are delays of an upward of 180 days or 90 days which are consecutive unless when variation order is offered to the organisation.
Figure 2:STEEPLE Factors and Force Majeure aspects
According to Santiago (2021), risks entail the relations of two parties managed through the occurrence of the delays. The T&Cs stipulate that the party whom performance has been interrupted ought to offer a notification to the other party with minimal delaying. The legal aspect is to avert risks incurred in Force Majeure occurrences evidenced in the express terms of the contract with negotiations in terms and conditions pursued inclusive of time of delivering.
The likely risks as stipulated in the clause entail delaying the provision of the services and products amidst the uncertainties. By use of Iron Triangle (Kowet & Ozumba, 2019), in figure 3 summary, core risks arising from the Force Majeure Events would entail the time, costing, and quality levels. A case example is where due to COVID-19 pandemic, there has been a delay in tyres supply to ET organisation. This has elicited negative implication to the organisation operations.
Figure 3:Iron Triangle
The strategy in which power and risks are put into account entail making sure that the approaches adopted and terms and conditions in the noted contracts must be elaborately noted in ET for their successful operations based on possibilities.
2.2 Dispute
An address of the disputes include the contractual provisions specifying on the parties addressing prevalent disagreement. According to Ele and Auquasama (2020), this can be entrenched in the laws and T&Cs or working on Alternative Dispute Resolution (ADR) approaches such as conciliation, mediation and arbitration as illustrated in figure 4 summary. In CIPS (2022), this is noted to be relevant to eliminate disputes prior they occur. The legal characteristics of disputes is based on the fact that they are supposed to be managed without hurting any involved parties. All would need to be treated the same irrespective of their financial capability or scope of operations.
Figure 4:Summary of Potential ADRs to be used
The dispute resolution are relevant for outlining the relevant strategies to organisations operating in UAE business environment with litigation preferred. The organisation terms and conditions notes that;
As evidenced in the chapter 15 of ET terms and conditions, dispute resolution is dependent on faithful relationship of the involved parties. The UAE court and other applicable laws in the country could also be appropriately adopted.
To ensure that ET has power in the dispute resolution, elaborate guidelines are put in place and agreed upon by the vendor/supplier detailing on how the disputes are resolved. Their practice is similar to the provisions in the International Bar Association Rules focusing on Takingwin and Evidence internationally arbitrated. For all engaged parties, informed by the set regulations, they have managed to involve same backgrounds and failing in pursuing judicial authorities for establishing common grounds. The power balance supported by the laws could be evidenced from the point of attaining win-win phenomenon by ET and other suppliers. This is informed by the need to embrace same background in the process of arbitration. In line with the Shen et al. (2019) findings, win-win situation is anchored on gaining a common outcome offering the parties with what they are deserving and appropriate. The scope of recognising and enforcing the contracts in similar grounds offer an opportunity for the parties in conflict resolution to be confident with decisions made. The terms and conditions note;
Further, risk distribution in dispute resolution is attained by documenting the process followed in contract provision. As evidenced in McGahan (2021), this make sure the final judgement bind all engaged stakeholders. The outcome of this is the parties involved conducting the supply of the tyres within the timeline set with less delays. The ethical issues in dispute resolution are also informed by the need for all parties agreeing with the final decision. In particular, the terms and conditions note that all parties involved are safe from obtaining any conservatory or interim reliefs from courts of law with immense and competent jurisdictions.
For the sourcing of types by ET spend category, the emerging disputes are resolved by following ADR (Arbitration, Mediation and Conciliation). Failure to resolve here lead to invoking of legal procedures and addressing the disagreement. In future, for holistic management of all the risks to their disadvantage, this need to be clearly stipulated in their terms and conditions. A different core strategy to resolve disputes entail ensuring ET leverage from an appropriate and cordial relationship with the supplier. The T&Cs note;
Further, as earlier highlighted in the supplier preferencing matrix model, the best practice include appreciating the suppliers values for the organisation. This is by prioritising on what Wang (2017) identify as developing customers, core customer, nuisance customer and exploitable (see figure 5).
Figure 5:Supplier Preferencing Matrix
For the types sourcing by ET, this is identified as a core product. Hence, there would be a need to defend it vigorously and high service and response. This means distributing some of the risks and power to the supplier to ensure they work in active collaboration and successfully.
2.3 Variation
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