Project Procurement Management - Week 3

• The lecture covers contracts, a part of project procurement management.
• Tutorials take 1.5 - 2 hours weekly.

Identifying and Selecting Suppliers

• Research and identify potential suppliers.
• Compare suppliers to analyze advantages and disadvantages.
• Analyze the vendor selection criteria which includes cost, delivery times, social and environmental responsibility, safety, service and support, and quality control.

Contract Formation

• There is no standard contract form for all projects, specific industries and jurisdictions have their standard forms.
• The key issues to consider should include:
• The purpose of the contract.
• Details of the contracting parties and organizational representatives who can issue and respond to notices and changes.
• Details of major stakeholders and their interests, including intra-agency relationships.
• A contract details summary, often in an annexure covering contract value, completion time, liquidated damages, and cost escalation.
• The followed objectives, methods, or procedures with location of source documents.
• An updated list of all supporting documents, including their purpose, current version, status, and location.

Key Issues to Consider in Contracts

• Define contract goals, scope, and objectives.
• Identify all involved parties, individuals, and organizations.
• Recognize key entities and people whom the contract affects.
• Give a concise overview of critical terms and conditions.
• Outline step-by-step processes to execute and monitor.
• Attach documents; specifications, schedules, permits.
• How disputes will be resolved should be defined.
• Include early termination provisions, inclusive of penalties and exit conditions.

Contract Types

• Can be adversarial or relational.
• Can be for singular (design) or multiple services (design and construct).
• May include involvement post-completion (design, construct, own, and operate).
• An Australian government says a contract can range from formal written documents to handshake deals, to provide service for a wage.
• Types of contracts under this are written, verbal, part verbal/written, and standard form.

Procurement Management Contract Types

• Fixed Price (FP) / Fixed Fee / Lump Sum: Payment is fixed for an established scope of work
• Sub-types: fixed price intensive fee or fixed price with economic price adjustments
• Hybrid Contracts: A mix of contract types to meet project needs, which can be smart contracts using blockchain tech.
• Cost Reimbursable (CR) / Cost Plus (CP): Payment varies with the actual cost incurred by the seller
• Sub-types are; cost plus fixed fee and cost plus intensive fee.
• Singular vs. Multi-Service Contracts
• Singular service: one service from single vendor
• Multi-service: multiple services from the same vendor under one agreement
• Relationship Contracts are based on trust.
• Adversarial Contracts: Parties act in their own interests if problems arise.
• Lifecycle Involvement Contracts are common in construction project management where a contractor is involved throughout the project lifecycle from design to operation, sometimes decommissioning.

Time and Material Contracts

• Is a construction or service agreement where the client pays for actual time spent measured in labor.

Types of Lifecycle Involvement Contracts:

• Public-Private Partnerships (PPP): Used in large infrastructure projects, and the private contractor handles construction and operations for a set period. Examples of projects; toll roads, airports, hospitals.
• Design-Build-Operate (DBO): Contractor designs, builds, and operates the facility, which includes maintenance and longer-term responsibilities.
• Design-Build-Finance-Operate (DBFO): Similar to DBO, but also includes project financing.

Contract Obligations

• These vary according to purpose.
• Payment: Exchange items or services of value, as consideration.
• This can be one-time or involve up-front/monthly payments.
• Delivery: Other party delivers what they are paid for, with some needing pre-payment.
• Quality: The seller meets certain qualitative standards in the agreement.
• Both parties act fairly and truthfully with one another.

Contract Breach

• Occurs when a party fails to meet their obligations, with compensation options.
• Sue for Damages: Breach of contract allows action in court, for costs to find a new party and prevent delays involved.
• Request Specific Performance: Compel the other party to complete the duty.
• Request Release from the Contract: Release is possible if one party was actively deceived.
• Legal action can result in expectation damages, covering lost value.
• Punitive damages exceeding the lost value are not awarded.
• Courts may order 'administering promissory estoppel', requires a party to fulfill their end of the contract.
• Unjust enrichment occurs when a party unfairly benefits at the expense of another without legal basis.

Contract Delegation

• Contract delegation is where contractual obligations from one party to another while keeping the original contract in place.
• The original party assigns duty to other third party whilst remaining ultimately responsible for the obligation's fulfillment.
• General contractor is hired to work on a hospital, who delegates (subcontracts) the electrical work to a firm (an example of Subcontracting in Construction).
• When Delegation is Not Allowed: famous architect is hired to design a landmark building, an delegating the design work to a junior architect without client approval would be not allowed as this relies on unique expertise, reputation, and creative vision,

Contracts in Project Types

• Waterfall types feature a fixed structure, suited for contracts outlining scope, cost, and timelines upfront like; Fixed-Price (Lump Sum), Time & Materials, Cost-Plus, and Performance-Based (Incentive) contracts.
• Agile projects focus on flexibility, iteration, and collaboration, and need adaptability and accountability like; Time & Materials with Flexibility, Incremental Delivery, Target Cost (Gainshare/Painshare), and Fixed-Price Contract (Flexible Scope).

Tutorial Activity - Contractual Responsibilities

• Tutorials are completed individually during class, with feedback and solutions compiled into a portfolio for assessment in the final semester as a PDF.
• The tutorial work is 50% of the overall grade.

Tutorial Activity and Service Level Agreements

• A Service Level Agreement (SLA) determines the scope of work to keep performance levels to an agreed standard.
• The 3 Service Level Agreements are Customer-based, Service-based, and Multi-level SLAs.
• An SLA is a created between two parties to specify what the provider will deliver to a customer.
• A tutorial focuses on creating a SLA for outsourced Food & Beverage (F&B) services for the Brisbane 2032 Olympic Opening Ceremony and will look at responsibilities, compliance, and the legalities involved.

Basic Elements of Service Level Agreements

• Customer SLA is an external service agreement between provider and client on the services that will be provided.
• Include detailed explanation of service; performance levels; responsibilities; complaints, issue resolution, cancellation processes; and repercussions for poor service.

SLA Tutorial Breakdown

• Include key responsibilities in the SLA, like preparing a F&B responsibilities list. This includes both event organizers and the F&B vendors.
• Create a flowchart mapping SLA responsibilities and actions for non-compliance. This is used alongside last week's specification for legal advisors.
• Design flowchart and SLA terms applicable to any F&B agreement, and specify unique operational details. Address customizations in annexures. Separate annexures for food and beverage vendors, include for additional vendors providing alcohol services e.g., RSA.
• Create list of potential F&B suppliers for the Olympics based on experience, reputation, and capacity from researching past events like FIFA World Cup or the Commonwealth Games.
• Determine the Type of Contract after reflecting on appropriate Olympics factors; cost, risk, and flexibility.