-75%
Solution
Table of Contents
2.0 Contract Types and Management 5
3.0 Overview of FIDIC terms and conditions in procurement and supply department 7
4.0 Importance of FIDIC terms and conditions (general construction) 9
4.1 Managing Risks of Poor Quality. 9
4.2 Managing the Risk of Time. 10
4.3 Managing Increased Costs 11
4.4 Managing Unethical Practice. 12_Toc34942108
4.5 Ensuring Monitoring and Management of Performance Measures. 12
5.2 Solving Battle of Forms in Terms and Conditions. 14
6.0 Conclusion and Recommendations 14
Appendix 1: Terms and Conditions. 17
Executive Summary
In contract management, the common issues affecting their implementation include risk of poor quality, an extension of time, costs increase, and unethical practices. Through a focus on the FIDIC organisation, this report has evaluated the extent to which their terms and conditions are applied to mitigate these issues. Apart from the problems identified, how their terms and conditions are used in ensuring an address of the performance measures through appropriate management and monitoring has been reviewed. After this analysis, the FIDIC battle of forms has been reviewed followed by conclusions and relevant recommendations.
From the review of findings and organisation terms and conditions, it is evident that they are critical for FIDIC operations. Their terms and conditions are classified into sourced quality, losses, performance standards, goods rejection, and the time used to deliver the goods and services. To harness their contracting process, they have established a purchasing order which is used to regulate goods delivery. In order to solve the problem of time, FIDIC ensures that their goods are delivered in the required timelines. To mitigate poor quality, terms and conditions require an upfront assessment of the goods before effecting the payments. In regard to the goods supplied without meeting their standards, the organisation has a right of rejecting them or requesting for them to be replaced in accordance with the warrant requirements. Regarding costs increase without an ideal regulation, these are managed by considering how they approach the issue of liability, indemnity, and issuance of insurance cover.
Taking into account the recommendations on the required improvements in contracting, different strategies have been provided. Part of recommendation includes highlighting the areas where the contracting process is negatively influenced and suggesting possible strategies that can be used. Also, there is a need to set a clear contracting agreement process to avoid conflicting views hence mitigating the issue of battle of forms. This also has a positive implication in ensuring that they are identified in the entire process of contracting. Also, FIDIC organisation is supposed to improve on the level of awareness for their staff in following the ideal contracting approach and improving overall competency level in the contract management process. This is on top of strengthening their contracting department to be able to monitor suppliers and standards of goods supplied.
1.0 Introduction
In modern organisations operations, there is a wide array of contracts. These contracts are subjected to rules of contract law, which are the terms and conditions. According to CIPS (2020a), terms and conditions are a very critical factor of contract development, assisting in minimizing the contractual risks and the exposure in doing business. Through strict adherence to terms and conditions, it is possible to leverage from the guidance of the purchasing and supply process, which include contract development and conduct of involved professionals. The advantage of this is mitigating any potential challenge that could occur risking the overall quality, timely delivery, among other legal constraints.
The selected organisation in this assessment is FIDIC. It is an international federation of consulting engineers playing the role of consulting engineering and construction. As noted in FIDIC (2020), FIDIC contracts have consistently been developed in the last 50 years established as an international standard for the consulting industry. Their operations are globally recognized in multiple jurisdictions on all project types. Their core source of success is informed by their capacity to harness a balanced approach to the roles and responsibilities of their leading players and allocation and management of faced risks. Hence, their general terms and conditions are very critical as they form the basis of the thousands of successful projects they have implemented globally. The overall FIDIC contracts are characterized by different guidance presented in their terms and conditions, which include examples of the areas where special provisions are offered in a particular project.
The position of the author in the organisation is a senior contracting officer who is tasked with the responsibility of ensuring that all the contracts are compiled and their purchase process being legally bidding. The learner also provides that there is adequate monitoring of the qualification status of different suppliers involved in the issuance of tenders. The author is experienced with handling different contract documents, which are important in the contracting process and facilitation of the various terms and conditions.
2.0 Contract Types and Management
Contract management is defined in CIPS (2019) as a process of systematically and efficiently managing contract creation, execution, and analysis to maximize operational and financial performance and to minimize risk. For the management of contracts to be effective, there ought to be a high level of flexibility on both sides and willingness to adapt to the terms of contract for reflecting the changing circumstances. It is essential to appreciate that problems could arise, which could not have been foreseen at the time of awarding the contract. For an appropriate scoping, planning, implementing, management, and reviewing of a contract, a lifecycle can be followed (see figure 1).
Figure 1: Contract Management Lifecycle
Source: CIPS (2019)
As illustrated in figure 1, FIDIC ensures that they follow the 12 phases, which allows that they consolidate all resources and activities to achieve their intended goals. The process of management is inclusive of integrating all key performance indicators with all stakeholders being included in their operations. Apart from this cycle, FIDIC adopts different terms and conditions to promote the level of interaction of both internal and external stakeholders. It is hence possible to adhere to different terms and conditions, potentially guiding all involved stakeholders in their engagement.
There are different stakeholders engaged with different roles played as directed by their contract. They are expected to demonstrate high-level competence in terms of communication to be able to appreciate the main points of the contract. The contracts, as illustrated in appendix 1 are equally structured in a manner that they do not affect the obligations of people in an entity. These terms and conditions are also used in identifying the extent in which FIDIC offers payments and incentives to their different suppliers, which could be hindering a successful completion of a contract. Through the use of a supplier relationship management model CIPS (2020b) which ensures a promotion of stakeholders’ interests to improve on their credit profile.
3.0 Overview of FIDIC terms and conditions in procurement and supply department
The terms and conditions focused on are the FIDIC Contract Agreement used for contract. The relevant sections of the terms and conditions of this contract have been presented and summarized in appendix 1. The contract includes all terms and conditions of executing and completing a project in accordance with the contract and remedying defects that could occur. These terms and conditions are all-inclusive in the FIDIC organisation and all departments affected by their implementation.
General Provisions: these are the terms and conditions that touch on the contract, parties and timeline and completion, money and payments, and works and goods.
Performance security: FIDIC organisation owns a contractor who is tasked with the role of giving the parent company a guarantee by the ultimate parent of the contractor and deliver a guarantee to the employer on the data of the contract and engage an employer representative. This is protected by the use of a performance bond.
Delivery time and provision of goods– this is primarily categorized into the delay damages and suspension of work. Irrespective of these factors, FIDIC organisation ensures that all goods are delivered on time as guided in the employer representative.
Suspension of work: In the event of any suspension, the contractor is liable for protecting, storing, and securing the work done against any form of deterioration, loss, and damages.
Communication: the overall process must be communicated in writing, printed, or electronically with all information on the contracts being presented and delivered.
Warranty Period: a contractor is punishable in case of breach of contract warrant, negligence, willful misconduct, fraud, misrepresentation, or violation of the law.
Compliance with Laws: contractor is mandated to provide all forms of notices, facilitate payment of taxes, duties and fees obtaining permits, licenses, and approvals as highlighted in the laws in line with execution and work completion.
Quality of Goods: Changes to the quality and other pending characteristics of any item of work must be communicated in detail.
Liens and Encumbrances: depending on the laws of a country, the plant and materials would become the property of the employer at whichever in the earlier of the following times, free from liens and other encumbrances.
All the identified terms and conditions are implemented based on the set legal contract terms and other roles (see figure 2);
Figure 3: Roles of a Legal Contract
4.0 Importance of FIDIC terms and conditions (general construction)
The importance of terms and conditions in an organisation are informed by the need to offer a clear description of the relationship of involved parties in the contracting process. According to Akinsiku and Akinsulire (2012), to avoid issues with the completion of a project, there is a need for stakeholders to be conversant with terms and conditions to carry out their roles effectively. In FIDIC organisation, the terms and conditions are easier to understand and appropriately guide in addressing all challenges that could influence a successful project completion.
4.1 Managing Risks of Poor Quality
Please click the icon below to access this assessment in full
