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Solution
Executive Summary
In this assessment, an evaluation of ROSHN company contract terms and conditions have been evaluated. By selecting Facilities Management Contract, its effectiveness in ensuring quality issues, time extension risk, costs overruns and unethical practices has been evaluated. Further, the importance of performance measures and management in ROSHN company practices has been prioritised for evaluation. The contract terms and conditions have been quoted for evidencing the success of the contract implementation.
In this assessment, the findings evidence that ROSHN facilities management spend category is characterised by various issues which are stipulated by the terms and conditions. The relevance of this is ensuring success in managing the overall faced challenges. By reviewing the different terms and conditions, the issues related to performance management, force majeure, costs, indemnity, risk management and insurance have been put into account. Additionally, the findings sourced in this assessment evidence that terms and conditions for ROSHN company is that they lead to terms and conditions in procurement and supply departments assuring the organisation for their successful operations. ROSHN has as a result dominated their property and real estate sector fully.
In this assessment, the Battle of Forms have also been evaluated with their importance being noted as harnessing attainment of similar approach in implementing contracts. This is through their terms and conditions as opposed to assuming a hardened position.
From this assessment analysis, different recommendations have been developed and are;
- Ensuring that the facilities management contract is differentiated from other spend categories by having distinct contracts
- Attain a common agreement and understanding of terms and conditions for solving challenges linked with battle of form
- Ensure part of their contract implementation is aligned with various Kek Performance Indicators (KPIs) and contract implementation process
- Integrate use of modernised technology as part of implementing their contracts to avoid some of the identified Force Majeure challenges
- Create an increased awareness amongst the staff of PS&M for the purpose of harnessing an improvement of the capacity of appreciating the importance of terms and conditions
Table of Contents
1.1 ROSHN Organisation Background. 3
2.2 Risk of Extension of Time. 11
2.3 Risk of Increased Costs. 13
2.4 Risk of Unethical Practice. 13
3.0 Performance Measures, Monitoring and Management 14
5.0 Conclusion and Recommendations. 18
Appendix 1: Summary of the Contract Terms and Conditions. 22
Figure 1:Summary of ROSHN Company areas of operations 4
Figure 2:Kraljic Matrix Analysis for the Selected Contract 5
Figure 3:Contract Management Approach. 6
Figure 4:Difference of conditions and warranties. 7
Figure 5:Stakeholders Analysis. 8
Figure 6:4T’s Model of Risks Management 9
Figure 7:Considerations by Procurement in performance measures, monitoring and management 15
Figure 8:Battle of forms summary. 17
Table 1:Risk management matrix. 11
1.0 Introduction
1.1 ROSHN Organisation Background
ROSHN company based in Saudi Arabia operate as a national real estate developer which is powered by the Public Investment Fund (PIF) with their commitment being to deliver a high-level quality communities to the Saudi Citizens. As explained in ROSHN (2022) the organisation intention include to achieve the Vision 2030 of achieving 70% home ownership in entire Saudi Arabia. This is by contributing positively to developing the Kingdom’s real estate sector by ambitious agenda of localisation and job creation. Further, ROSHN company is engaged in offering aspirational living, presenting a holistic city-based experience in a community boasting of unique designs and array of facilities. The areas of organisation operations is as summarised in figure 1;
Figure 1:Summary of ROSHN Company areas of operations
As evidenced in ROSHN (2022a) the organisation operates in active collaboration with multiple stakeholders in different levels. This is through solid partnerships which are customised on generating value for the homeowners, partners, investors and the Public Investment Fund. Hence, as part of their contract implementation, partnership is pursued holistically. This is with a success in identifying, selecting, and working with partners from public and private sectors in equal measures and globally. Hence, for all these operations, the organisation has established appropriate terms and conditions which are intended to ensure that their contracts are successfully implemented. This is to achieve value for money in their operations.
1.2 Contract
As illustrated in appendix 1 section, the selected contract is used for facilities management. The rationale of evaluating on the facilities management category of spend is informed by what ROSHN (2022a) identify as a strategy of raising Saudi Arabia (KSA) home ownership level to 70% in a period of 10 years as supported by the Vision 2030 in the country. In order to identify the importance of the identified category of spend and the contract Kraljic Matrix Analysis can be used. This is defined by CIPS (2022) as a strategic tool applied by procurement and supply chain professionals for identifying and minimising supply risks. Hence, the contract terms and conditions for this contract are informed on how risks are distributed (see figure 2);
Figure 2:Kraljic Matrix Analysis for the Selected Contract
As illustrated in figure 2, facilities management contract which has been selected is grouped in the leverage items. In Saudi Arabia, considering the increased transition from a fully oil and gas industry to venturing in Information Technology and other industries, many facilities management suppliers are coming up leading to high-level competition amongst the suppliers. Hence, low supply risks are evident and as such ROSHN ensure that they clearly stipulate their roles in the contract management. It is their contract terms and conditions which are used to harness the likelihood of negotiating appropriate cost-saving results (CIPS, 2022a). Therefore, in ROSHN operations, they work on developing strategic partnerships as earlier aforementioned not only with KSA Government but also with their different suppliers.
Additionally, considering Facilities Management is a core business area for ROSHN, the expenditure is high with multiple alternatives available and immense suppliers ready to engage them. It is in this light that the contract terms and conditions is used to eliminate the suppliers who do not meet the expected threshold for the purchase requirements. Similar to the UK laws on ‘flexible competitive procedure’ offering a buyer with a freedom of negotiating and innovativeness for gaining in optimum from their private, charity and social enterprise sectors CIPS (2021), in Saudi Arabia (KSA), there equally exists the legislation. ROSHN has integrated limited tendering procedure which is relevant in varying circumstances including extreme urgencies.
1.3 Purpose of the Contract
The purpose of the terms and conditions operated by ROSHN is to achieve what CIPS (2022b) continuous process of contract management cycle. These are used for definition of terms and conditions. These guide both the suppliers and ROSHN in ensuring that the risks are appropriately distributed with contract demands appreciated. Also, the negotiations are core and important for prioritising on various changes in the organisation (see figure 3);
Figure 3:Contract Management Approach
In order to evaluate the importance of the contract and in the different phases illustrated in figure 3, the areas of consideration would include;
Warranties- As evidenced in CIPS (2022c), a guarantee is normally written. Warranties are identified as an implied term in a contract which are not viewed as a condition or a warranty (see figure 4).
Figure 4:Difference of conditions and warranties
For the selected contract terms and conditions, it note;
Termination of contracts- A contract can be terminated by either reaching the contract expiration as illustrated I figure 3, or any other reason at any phase. The terms and conditions of the contract note that;
Hence, apart from lack of the capability of the vendor to supply the demanded goods and services in their right quantity or a dispute which transitions to the justice system.
Clauses types- This can include the express and implied clauses which are varying in different jurisdictions.
Contract type– in the terms and conditions, this is represented by call off and PO based SoW. This is evident model from the contract benefits and drawbacks and the terms contract being prioritised effectively.
2.0 Risks
Adopting the definition of CIPS (2022d), a risk identify the probability of unwanted outcome happening. Considering the different types of risks which are common in a contract such as financial, legal, security and brand risks, their understanding is core for successful contract management process and putting into account of essential steps for identifying, assessing and mitigating them. For a start, the best practice involve identifying the stakeholders who are impacted by the process of contract implementation. This is done through conducting Mendelow stakeholders analysis (Mints & Kamyshnykova, 2019). This is as illustrated in figure 5;
Figure 5:Stakeholders Analysis
Low Influence; Low Interest- For this category, it include the customers and organisations operating in similar sector as ROSHN. Their influence on the risks occurring would be minimal and less interested on approaches adopted in risks management.
High Influence; Low Interest- For the attorneys and accountants of ROSHN and other regulators, they are influenced by the risks incurred. In facilities management, the contracts involve their input hence they are also core towards management of these risks.
High Influence; High Interest- Considering PS&M, technical department and tenants, they are engaged in risks management. These risks would have a direct impact to their performance
Low Influence; High Interest– Considering the HR management and the board of management of ROSHN, despite having less influence on the risks, they play a high role in ensuring successful management of these risks. This is by providing an appropriate facilitation for the risks management.
From the different identified risks, the 4T’S can be used in ensuring that the identified risks are successfully managed (see figure 6). According to Raka and Liangrokapart (2015) this entail the application of aspects of tolerating, treating, transferring and terminating.
Figure 6:4T’s Model of Risks Management
To transfer risk, this is most appropriate when the risk impact is low. This is with the management establishing tolerance levels for most processes and linked risks. Further, termination entail making sure processes and activities creating significant risks as opposed to the benefits terminated at shutdown. This is with treating of the risks entailing management of effective control with financial, reputational and operational losses managed. A risk can also be transferred by engaging an insurance organisation to lower the potential of the risk occurring and mitigating their implications.
2.1 Risk of Poor Quality
As defined in Vedantam and Iyer (2021), the risk of poor quality is identified as the entire technical factors which must be prioritised in a contract and associated with the products and services offered. Simply put, all products and services supplied must be compliant with the terms and conditions set in the contract. These requirements are evidenced in areas of validity, acceptability, capacity and legality. For the ROSHN terms and conditions, they note that;
Considering the relevance of the facilities management quality, a risk management matrix Qazi and Akhtar (2020) is used to monitor and analyse the risks encountered. For example, in the ROSHN procurement of facilities management, there has been several risks which are linked with prevalence of COVID-19 pandemic and other issues hence the need for the risk management matrix (see table 1);
Table 1:Risk management matrix
Further, for ensuring that ROSHN is not directly affected by the risk of low quality product, the terms and conditions identify the importance of insurance for professional indemnity. In specific, the terms and conditions note that;
Also, as evidenced in the contract terms, this is while ensuring that the contract implementation is in line with the ISO 27001 certified fully or compliant. This is while fitting for the purpose in which the facilities management are being sourced to achieve. The organisation terms and conditions note that;
2.2 Risk of Extension of Time
In a contract implementation, Ali et al. (2020) identify the risk of extension of time as delays which are not foreseen when the contract is being initiated………….
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