Note.docx

**[Course content]**: - Chapter 1. Introduction to CM - Chapter 2. General matters in CM - Chapter 3. CM Team formation - Chapter 4. Developing a CM plan - Chapter 5. Supply information - Chapter 6. Pre-qualifications suppliers - Chapter 7. Managing risks - Chapter 8. Tender...

**[Course content]**: - Chapter 1. Introduction to CM - Chapter 2. General matters in CM - Chapter 3. CM Team formation - Chapter 4. Developing a CM plan - Chapter 5. Supply information - Chapter 6. Pre-qualifications suppliers - Chapter 7. Managing risks - Chapter 8. Tender evaluation - Chapter 9. Administration of contract - Chapter 10. Relationship, disputes and termination **[Assessment]**: 10% attendance, 30% mid-term test (chap 1-6) + presentation (next week), 60% final exam (MCQs + Case studies) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **CHAPTER 1. INTRODUCTION TO CM** ***The prevalence of contract:*** - [All companies will have contracts with external parties] in the course of doing business. - As contracts are [prevalent] in all businesses, the [proper management of contracts] is an important area of concern (prevalent proper management of contract). 1. **Introduction** - **A glance of supply chain**: in supply chain (interconnection matter contract), contracts entered include **(7 PWC - OMAIT)** - Purchase of goods, equipment - Warehousing - Carriage of goods - Agency agreements - Marketing agreements - IT services - Other outsourcing services - E.g. *Agricultural supply chain does not thrive in Vietnam as farmers [usually break the contrac]t when the price increases* - **What is a contract (5 - LAPLC)**: - Legally enforceable promise between parties, e.g. *insurance policy for subject with high cost Assurance by 2 insurance company with proportion* - Agreement that binds parties to contract - Parties can take action in court to force other party to perform their side of the agreement (*4 ways: mediation, arbitration, litigation, negotiation*) - Legally bound to carry out the duties & obligations - Doing acts for the other party - Not doing something - Giving rights - Contracts can be written, verbal (*call and order*) or behavior (*taxi*) - **Agreement vs. Contract** - Agreement: involves proposal or offer by one party and acceptance of the same by the other party (Agreement = Offer + Acceptance) - Contract: is an agreement with legal obligations (Contract = Agreement + Enforceability at law) - **Definition of contract**: A contract can defined as "an agreement enforceable at law, made between two or more person, by which rights are acquired by one or more to acts or forbearances on the part of the others or others" -- -- 2. **Elements of contract** - **3 main elements**: Offer, Acceptance, Consideration - **Offer**: - Beginning of an agreement. - It is the communication of the clear intention to be bound by a promise to, or not to, do something. - 2 types: free offer (receive no RFQ and send to many customer, often liner), firm offer (receive RFQ and send to certain customer, often tramp shipping -- things offered: vessel, route, schedule, freight) - Within the offer the core terms and conditions are often contained. - An offer must be firm and irrevocable. - Offers can either be made unilaterally (*e.g. posts a reward for their lost pet*) or multilaterally. - One an offer is made, there are 5 ways to terminate: *Revocation, Rejection, Time, Death, Failure of a condition*. - It is an invitation to make a contract. - Example: - *Displaying a take it or leave it to contract online* - *Bidding on eBay* - *Putting a price tag on an item in a store* - Offers can go back and forth (but don't have to) until 100% offer is accepted. - **Acceptance**: - The point at which one party agrees to the other parties offer - Example: - *Clicking that you accept the online contract* - *Winning an eBay auction* - *Buying the item from the store* - Validity: - Must take place while offers is still in force - Must be on same terms as the offer - Must be unconditional - Must be communicated to the offeror - Can only be made by the party to whom the offer was made - Counter-offer - **Consideration**: reciprocal promise (lời hứa đối ứng) - Generally, courts will only enforce a contract if both sides are getting something - What each side gives the other is called "consideration" - A contract is based on an exchange of promises. - Each party to a contract must be both a promisor and a promise. They must each receive a benefit and each suffers a detriment. This benefit or detriment is referred to as consideration. - **Consideration**: Two sided promises given by both parties - **Gift**: A one-sided promise which is not supported by consideration is a gift. The law does not enforce gifts unless they are made by deed - **Chartering procedure**: inquiry or quote offer counter-offer firm offer acceptance & fixture charter party - **Requirements**: oral or writing? - Every contract will reflect the process of creating an [agreement through the exchange of offer and acceptance], much of which takes place orally - Some types of oral contracts are enforceable (if recorded) but some require written evidence for this to be [legally enforceable] - The writing does **not** have to be in any particular form - Modification: Once the contract has been created, [any change to the substance of the agreement], T&C, is in effect a new contract - Does not need to sign contract usually, just include in the Appendix - Genuine assent: Offer and acceptance must not be based on one party's deceiving another, on an important mistake, or on the use of unfair pressure exerted 3. **Types of business relationship** +-----------------------------------+-----------------------------------+ | Transactional relationship | - **Short-term relationship**: | | | Specific transaction/deal | | | | | | - **No special coordination** | | | of work requirement and | | | **connection is done at arm's | | | length** (independant/no | | | close biz relationship | | | manner) | +===================================+===================================+ | Administered relationship | - Kiểm soát có quản lý: **Part | | | of a larger system** for | | | managing activities | | | | | | - **No formal chain of | | | command** (no top-down mana, | | | less structured decision | | | making, coordination) | | | | | | - The initiators [uses economic | | | and social | | | resources] to | | | **coordinate behaviors** to | | | **control compliance** in the | | | market, e.g. *focal company* | +-----------------------------------+-----------------------------------+ | Corporate relationship | - **Vertical integration** | | | (M&A, Joint | | | venture)/**Long-term** | | | relationship | | | | | | - (+) Easier to control, | | | safeguard trade secrets | | | | | | - (-) Costly; focus may be | | | shifted away from core | | | business | +-----------------------------------+-----------------------------------+ 4. **Types of contract** - **Fixed -- price contracts (Hợp đồng cố định giá)**: price is fixed during contract duration - Seller has a strong incentive to control cost - Risk is with seller, so requires less effort for keeping track - Seller can quote less initially to get contract but the change requests can be very expensive later in the project - The scope needs to be clearly defined and the statement of work should have all the details - When to use: [Clearly know the objective] of the contract; [Products with stable price]: Consumer good, machine or manufacturing - 3 types: - **Firm fixed price (FFP)**: doesn't include any award or incentive, apply when the scope is well known - **Fixed price incentive fee (FPIF)**: incentive paid if finish earlier - **Fixed price with economic price adjustments (FPAF)**: award amount has a fixed maximum cap - **Cost reimbursable contracts / Cost plus contract** **(Hợp đồng điều chỉnh chi phí)** - The contractor is reimbursed for [all direct allowable costs] plus an [additional fixed amount] to cover overhead and profit. - Seller can quote less fee as the [cost is covered by the buyer] - All seller invoices must be audited by the buyer increasing the overall buyer efforts - Seller may not focus on cutting costs since [they are reimbursable] so this can turn out to be [costly for buyer] - 3 types: - **Cost plus fixed fee (CPFF)** - **Cost plus incentive fee (CPIF)** - **Cost plus award fee (CPAF)** - **Time and material contracts**: hybrid contract (kết hợp 2 cái trên, cố định chi phí, thay đổi chi phí liên quan đến nhân công và nguyên liệu) - Used to contract labor when the SoW is not clear - **Time** means the seller is paid [on per hour basis] and **material** means seller is paid for the [equipment, machinery, raw materials, and office spaces] being utilized. - Scope need not be finalized before the contract is awarded - May prove out to be [costlier for larger projects] - Seller's work needs to be monitored timely increasing the overall buyer efforts. - **Types of contracts**: - **Letter contracts**: preliminary written contractual instrument that authorizes the contractor to begin performing - **Dealer's agreements**: this is an agreement or contract, expressed or implied, oral or written, which grants the dealer to purchase, sell distribute or service supplier's good - **Service agreement**: used mainly for services such as janitorial, landscaping etc. - Master service agreement: maintenance of capital equipment (e.g. Warehouse agreement) - Professional service agreements: contracts for legal, audit, etc. - Maintenance agreements: for preventive maintenance or repair - Performance-based agreements: contracts for which outcomes or timelines are specified - **Licensing agreements**: examples of licenses include software, patents, technology (use of processes) copyrights, & General (use of logos, brands) - Most software company license the use with limitation and may include updates - **Master purchase agreements**: used in connection with purchase of computers, office supplies and MRO supplies. Negotiated in advance. - **Construction contracts**: include project based performance guidelines. Clauses covers, safety, payment, penalties etc. - **Void contract**: a void contract is the contract that has no legal effect at all. "A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable by law" Cannot ask for compensation as it is void +-----------------------------------------------------------------------+ | **[Case]**: A agrees to sell B a ship load of sugar on | | its way from Cuba to India. Due to heavy storm, the sea water enters | | the ship and the whole sugar gets wet. This make the contract void or | | not? | | | | Void contract as it is not implemented as previously agreed (Depend | | on FM clause first, if not included in the contract) | +-----------------------------------------------------------------------+ - **Express contract**: contracts formed with the words spoken or written, in an express contract - Ex: A tells B on phone that he wants to buy his car for Rs 80,000 and B accepts the offer on phone, this is an express contract. - **Implied contract**: when the offer and acceptance is made by acts or conducts of the parties, it is an implied contract. - Ex: A, a coolie in uniform takes up the luggage of B at railway station and B allows him to do so, then the law implies that B will have to pay for the services of A. This is an implied contract. +-----------------------------------------------------------------------+ | **[Case]**: \[Asanzo advertisement\] Is it a contract? | | Who is the party? Ts&Cs of the agreement? Who can enforce? | | | | If it is the advertised product you buy, the advertisement is the | | contract Express contract (Verbal form). If it doesn't work as | | advertised, you have right to claim. | +-----------------------------------------------------------------------+ 5. **Contract structure** - Articles of agreement: Actual agreement - Recitals : Series of statements setting forward the relevant matters & Facts about the contract - Articles: What the parties agreed to - Contract particulars: Contents eg dates, liability, insurance, amount of damages - Conditions: Define obligations and action in case of dispute 6. **Process leading to contract** - **Conditions for effect contract**: - Legal personality & Legal capacity - Entire volunteer - Content not contrary to law and/or social ethics - Form of agreement if being required by laws: notarization, writing, authorization, signature, seal - **Capacity and legality**: - **Capacity**: the parties must be able to contract for themselves instead of having to use a parent or legal representative - **Legal capacity**: is considered to have power if he is not a minor, suffering from mental sickness, drunk. - **Legality**: the agreement between the parties must be legal (written contract signed by both parties), e.g. agreeing to pay sb to commit a crime is not a contract - **Void and null agreement**: - Against the laws - Against principle of agreement, which are goodwill and honesty - Formality of contract: Authorization, signature, seal +-----------------------------------------------------------------------+ | **[Case]**: | | | | Mr A leases house from Mr. M in 03 years. After 12 months, Mr. M | | wants to terminate the contract to sell it. He said the contract was | | not notarized so it was void. | | | | ❖Team A: Mr. M to build argument to kick A out | | | | ❖Team B: For Company A: build an argument to continue the contract | | | | Team A: | | | | - Without notarization, the contract lacks legal standing and can | | be considered void. Notarization is often required for certain | | legal documents to enhance their validity. | | | | - Mr. M can assert that he intends to sell the property, and the | | termination of the lease is necessary | | | | Team B: | | | | - Verbal contracts, especially those involving lease agreements, | | can be legally binding without notarization | | | | - Mr. A has been fulfilling the terms of the lease agreement, | | paying rent, and maintaining the property → No reason to fire | | | | Solution: | | | | - Negotiation and Mediation: A mutually agreeable solution. This | | could involve extending the lease, agreeing on a reasonable | | termination period, or addressing any concerns raised by Mr. M. | | | | - Documented Communication: Ensure that all communication between | | the parties is documented. This includes any notices served, | | discussions about the property sale, and attempts to find a | | resolution. | | | | - Court intervention | +-----------------------------------------------------------------------+ 7. **Applying the contract**  Defining their **rights and liabilities**, **responsibilities for managing key project risks** **between them**. 8. **Contract management** - Contract management is the stage of the procurement cycle during which [the goods and services are delivered in a manner that satisfies the requirement] stated in the Request for Tender (RFT) or agreed Statement of Work (SoW). - Contract management can be defined as "the process of maintaining control over the contractual arrangements between a department (purchaser) and the appointed supplier (contractor) being the other contracting party by performing the contractual management or administration activities commencing at the conclusion of a contract". - Managing a contract means closely following & monitoring implementation so that you can take immediate action when problems occur or when situation change - Through good contract management you can avoid unexpected costs, delays or poor quality - **Contract administration**: the management of all actions, after the award of a contract, that must be taken to assure compliance with the contract - Scope: Contract management **is part of the Procurement Process**. CM focuses on the contract management activities undertaken during the period **from the award of contract to contract completion**. Where applicable, this period includes the defects liability period and/or warranty period. - With a contract, we manage 4 flows: informational flow, goods flow, financial flow, relationship (arms length, collaboration, coordination, strategic) and 4 activities: sourcing strategy, supplier selection, contract development, and negotiation. - The approach should depend on 3 natures: nature of the purchase, nature of the relationship, nature of the contract. +-----------------------------------------------------------------------+ | **[Case]**: Contract management for Hamburger | | | | Number of vendors required: Wagu beef (Strategic), Egg, Burger, | | Vegetable, Cheese At least 3 vendors for each easy-to-find ingredient | | 15 vendors | | | | Contract requires: At least 5 | | | | When contracts be in place and in use: \[image\] | +-----------------------------------------------------------------------+ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **CHAPTER 2. GENERAL MATTERS IN CM** **Contents:** (1) Legal aspects of a contract, (2) Form of contract/agreement, (3) Process leading to a contract, (4) Contents of contract 1. **Governing law of the contract** - **What is law**: A set of rules which a *society* [regulates its behaviors] and [manage its affairs]. - **Classification of law**: - Local law and regulations - Local laws, e.g. law of marriage if you are married - 12 main laws in Vietnam - International laws and regulations, e.g. CISG, UNCITRAL, E-commerce laws, Intellectual property laws, Contract law, Sales act, Antitrust laws - Law of contract: applied when there is legally enforceable agreement between 2 parties - Law of tort: applied when there is no legally enforceable agreement between 2 parties - Others: - Customs, e.g. *in Common law sector, VN use Doctrine of Precedent (70 cases) while following Civil law* - Morals - Religions and beliefs: Halal, Christianity, Buddhism - Government - Can be divided into: - Civil law: a comprehensive system of rules and principles usually [arranged in codes] and easily accessible to citizens and jurists, must in [written form], e.g. [French colonies] - Common law: also known as [case law], is a body of [unwritten laws] based on [legal precedents established by the courts], 3 essential portions: agreement, contractual intention, consideration, e.g. [countries speaking English] +-----------------------------------------------------------------------+ | **[Case]**: Is Vietnam under Civil law or Common law? 1 | | person in Vietnam can be protected by which laws? | | | | Vietnam follows mainly Civil law, except 70 case law accepted by the | | court. | | | | 12 (Constitutional, administrative, financial, banking, property, | | civil, labor, marriage and family, criminal, criminal procedure, | | civil procedure, economic law) | | | | **[Case]**: | | | |  | | | | - Buyer: High bargaining power as high value order, urgent needs | | basic forms, experience with common law system countries | | | | - Seller: Risk management as we have draft the detail contract | +-----------------------------------------------------------------------+ 2. **Law of contract** - Contract laws exist for the following **purposes**: - Facilitates business by setting framework within which contract can be made and enforced. - Allows for greater business clarity. - Permits commercial arguments to be resolved through mediation, arbitration (each party choose 1 arbitrator, the arbitrator committee include at least 3 arbitrators) or litigation. - A contract **does not necessarily have to be in the form of a written agreement**. It may be in the form of: - An oral agreement, e.g. ordering food from a seller - An agreement implied by behavior, e.g. boarding a taxi 3. **Form a contract/agreement (4)** +-----------------------------------------------------------------------+ | **[Case]**: Import the machine from Singapore, | | Singaporean expertise is asked to train usage in Vietnam | | | | Check law apply: If Vietnam law, see the terms and conditions in | | contract. If Singaporean law, cannot ask as you have receive the | | machine in exchange of money. | +-----------------------------------------------------------------------+ 4. **Classification of contract in law** - Void contract: a [mistake will void a contract]. - Voidable contract: It is binding but one party has the right to [choose to continue or set aside contract]. - Unenforceable contract: [No party can force] the other party to keep promise. 5. **Structure of contract** - Contract: - General agreement (Hợp đồng nguyên tắc): 40 -- 50 pages, 8 main terms and conditions (Commodity, Quality, Quantity, Price, Payment, Shipment, Package, Document) (QQ-PPP-CSD) - Frame agreement - Purchase contract: for every shipment (you are purchaser) người mua soạn thảo, tuy nhiên có những case người mua đưa template qua cho bên bán soạn thảo - Sales contract: you are seller người bán soạn thảo - PI = PO = SC Considered as contract if both parties [agree and sign both] (must include 8 main terms) bank/custom may or may not accept those must show contract - Proforma invoice - Purchase order - Sales confirmation - **Structure of a contract (5)**: - Articles of agreement: actual agreement - Recitals: series of statements setting forward the relevant matters & facts about the contract - Articles: what the parties agreed to - Contract particulars: contents, e.g. dates, liability, insurance, amount of damages - Conditions: define obligations and action in case of disputes 6. **Process leading to a contract** - Condition to effect: - Legal personality and legal capacity: For a contract to be legally valid, the court requires parties to possess legal capacity - A person is considered to have the power if he is not: a minor, suffering from mental sickness, drunk - Entire volunteer - Purpose and content of the agreements are not contrary to the law and/or social ethics - Form of agreement if being required by laws (5): - Notarization (công chứng): encourage - Writing - Authorization (được bổ sung sau) - Signature - Seal (được bổ sung sau)  7. **Contents of the contract** - Terms in the contract: - **Express terms**: are those statements which are made verbally or in writing. When contracts are made verbally, it will be hard to prove what was actually agreed and stated. In most business contracts, the terms are in black and white to minimize uncertainty. - **Implied terms**: terms inserted into a contract by law. These are not stated and agreed by the parties. - **Implied terms** in contract carriage by sea: - Seaworthiness: the carrier must due diligence to make the ship seaworthy. 3 conditions: physical aspect, crews, documents - Deviation: đi chệch đường - Dangerous cargo 8. **Conditions & Warranty** - Conditions: If a condition is breached, then the injured party may [sue for damages] and can [choose to terminate the contract]. - Warranty: if a warranty term is breached, the injured party can [sue for damage] but the [contract will continue]. The violation of a warranty does not justify the termination of a contract. 9. **Changing term in a contract** - Terms cannot be changed once a contract is **signed** [unless both parties agree to change] - Contract contains provisions that [allow the contract to be altered] 10. **Transferring rights and obligations** - Contractual obligations **cannot** be transferred - Only benefits can be transferred 11. **Discharging a contract** - How: - By performance: Parties performed satisfactorily - By agreement: Contract is discharged by agreement e.g. release each other - By frustration: Unable to perform the contract due to unforeseen circumstances - By breach: One party breaches terms and the other party is entitled to compensation - Contracts **can be void** if there are mistakes: common mistake, mutual mistake, unilateral mistake - Dispute settlement: mediation, arbitration, litigation 12. **Misrepresentation** - Before a contract is made, parties made statements to induce the others to enter into a contract - These statements are known as representations - If statements are false, these are known as misrepresentations - False statements. - Untrue statement of facts - Statement of opinions \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **CHAPTER 3. CONTRACT TEAM FORMATION** 1. **Introduction** - [Major projects] need to be [closely monitored] to anticipate, avoid or resolve problems - Formation of a contract management team to [maximize leverage on the skills and competencies] of members - Identify, develop and [nurture contract managers] with the necessary skills and personal attributes - Getting a number of people skilled in different disciplines allows the interplay of views to yield the desired solutions. 2. **Teams** - More flexible and responsive - They could be put together very quickly to carry out a project and disbanded on completion - Easier to do this than to assign the work to a specific department - Facilitates participation in decision making and increases employee motivation - Enables employees to gain new insights beyond what they would normally do - Increases understanding and improves rapport between inter-departmental members 3. **What are work teams?** - **Difference between work groups and work teams** (Ask): - **Group**: are set up primarily to share information - **Team**: interact with a common purpose and a shared sense of responsibility and accountability  - **Why is team needed**: - Maximize expertise and skill of relevant functions - Internal governance requirements legal and compliance team's role - Maximize profit by maximizing operational and financial performance - Minimize lost by minimizing cost, expense, lost - **How is winning team (3)**: - Right person - Clear RACI - Adequate resource - 4 types of teams: - **Problem-solving teams**: - Quality Circle (Plan-Do-Check-Act) became fad - Members met at regular interval to brainstorm problems and work on solution using Fishbone - Used in TQM process - **Self-managed teams**: - Handle everything from scheduling, allocating work, resolving conflict, disciplining members, resolving problems, and working with suppliers and customers - Make supervisor redundant - **Cross-functional teams**: - Such teams are made up of individuals from different departments often within the same hierarchical level - E.g. Committee - **Virtual teams**: - These are made up of members that are physically apart but connected as a team through modern informatics technology and are highly task oriented. +-----------------+-----------------+-----------------+-----------------+ | **Team Type** | **Pros** | **Cons** | **Used when** | +=================+=================+=================+=================+ | **Problem-Solvi | \- Focused on | \- May only | \- Specific | | ng | specific | address | Issue | | Team** | issues, leading | immediate | Resolution | | | to efficient | problems | | | | and effective | without | \- Continuous | | | solutions. | considering | Improvement | | | | long-term | | | | | strategy. | \- Temporary | | | | | Focus | +-----------------+-----------------+-----------------+-----------------+ | | \- Encourages | \- Can be | | | | collaboration | limited by the | | | | and | team\'s | | | | idea-sharing | expertise and | | | | among team | perspective on | | | | members. | the problem. | | +-----------------+-----------------+-----------------+-----------------+ | **Self-Managed | \- High | \- Lack of | \- Autonomy is | | Team** | autonomy | formal | Key | | | fosters | leadership can | | | | creativity and | lead to | \- High | | | innovation. | conflicts or | Accountability | | | | poor | | | | | decision-making | \- Innovation | | | |. | Required | +-----------------+-----------------+-----------------+-----------------+ | | \- Team members | \- Can struggle | | | | are motivated | with | | | | by ownership | coordination | | | | and | and alignment | | | | accountability. | with broader | | | | | organizational | | | | | goals. | | +-----------------+-----------------+-----------------+-----------------+ | **Cross-Functio | \- Combines | \- Differences | \- Complex | | nal | diverse | in department | Projects | | Team** | expertise, | priorities can | | | | leading to more | cause conflicts | \- Innovation | | | comprehensive | and slow down | and Strategy | | | solutions. | decision-making | | | | |. | \- Breaking | | | | | Silos | +-----------------+-----------------+-----------------+-----------------+ | | \- Promotes | \- May require | | | | collaboration | more time to | | | | across | reach consensus | | | | different areas | due to varied | | | | of the | perspectives. | | | | organization. | | | +-----------------+-----------------+-----------------+-----------------+ | **Virtual | \- Enables | \- Can suffer | \- | | Team** | collaboration | from | Geographically | | | across | communication | Dispersed | | | geographical | challenges and | Members | | | boundaries, | lack of team | | | | allowing access | cohesion. | \- Remote Work | | | to global | | Environment | | | talent. | | | | | | | \- Access to | | | | | Global Talent | +-----------------+-----------------+-----------------+-----------------+ | | \- Flexible | \- Time zone | | | | work | differences and | | | | arrangements | lack of | | | | can increase | face-to-face | | | | productivity | interaction can | | | | and employee | hinder | | | | satisfaction. | teamwork. | | +-----------------+-----------------+-----------------+-----------------+ +-----------------------------------------------------------------------+ | **[Case]**: | | | | - Agency arguments: Urgent, Breach of contract Penalty & | | Compensation, deposit is in the scope of contract and is in | | urgent need Do not need to send celeb list and RFP | | | | - Company A arguments: is not informed about deposits of \$10,000 | | Should ask for RFP and list of celeb | | | | Team member: PL, Accounting, MKT, Procurement, Legal & Compliance | +-----------------------------------------------------------------------+ 4. **Criteria to nominate a team member** - Professional aspect: - Deep understanding about goods or services - Technical knowledge - Structures and work-frame of procurement - Mindframe and behaviors: - Share idea and options - Support and encourage other members - Appreciate differences - Share responsibility - Task focus - Target aiming - Cooperative - Skills: - Communication, especially listening - Critical thinking - Persuading - Adaptation - Planning 5. **Factors affecting team performance**  - Context: - Adequate resources - Leadership & structure - Climate of trust - Performance evaluation and reward systems - Composition: - abilities of members - personality (6 Bono Hats) - allocating roles (RACI) - diversity - size of teams - member flexibility - member preferences - Work design: - Autonomy - Skill variety - Task identity - Task significance - Process: - Common purpose - Specific goals - Team efficacy - Conflict levels - Social loafing **In a team**: - You are a part of it - Your role and deliverables are within the team - What the other team members are expected to deliver. 6. **Conflict in work team** - Differences: - Personalities - Agenda - Concepts - Decision making: KPI - Exploitation: - Strengths - Similarities 7. **Profile and work scope of the contract manager (MCQs Mid-term)** - The contract manager may be the person who (ETMCP): - Negotiated the contract up to the award stage of the contract, or - The person brought in at the post -- contract implementation stage  **Robert Katz's 4 skills set** of a manager: Technical, Human, Conceptual, Political 8. **Role of contract administrator** - There are the duties such as providing necessary information to the contractor - Decision making functions such as certification of work properly carried out in which the contract administrator is required to act fairly between the parties and exercise independent judgment - Competent person with who fully understands the form of contract being used to structure the employer's and contractor relationship or between two parties - Responsible for applying the contract to the execution phase to ensure that the two parties act in accordance with their rights and obligations under the contract - Responsible for overseeing the process of varying the contract documents in accordance with the parties' requests for variations - Negotiated the contract up to the award stage of the contract - Brought in at the post-contract implementation stage - Can influence the success or failure of a contract - Implications of **an incompetent contract manager**: - Understating costs - Creating inaccurate or false records - Withholding information - Compromising on workers' safety - Accepting substandard work and quality 9. **Forming contract management team** - **For large contracts**: core teams and extended teams - **Different contracts require** [different managers]: - Arms -- length relationships require people who are good at applying contract law - Co-operative relationships require good people manager - The buyer's team should include relevant functional managers & ideally also end -- users - The roles of each team member will be defined in the contract management plan - The supplier may also set up a contract management team -- buyer's team should be aware of who is responsible for what 10. **Establish purpose for relationship (7 steps)** - Translate into objectives, targets, measures and specific actions to deliver the purpose - **Step 1**: Agree a Purpose for the Relationship - For example, it can be agreed that the purpose of **working together** should be [to create a relationship] that continues to deliver value to both sides. This makes it a mutual strategy and one that continues into the future - **Step 2**: Write Mission statement - [Based on the Purpose] - Example: the mission statement can be that one party will [always be first choice] for the other in commercial matters (the supplier bringing new ideas and innovation to the buyer first). - **Step 3**: Set objectives based on achieving the Mission - To identify gaps in the supplier\'s service offering - To reduce the cost for the buyer in bidding for work - To start open book costing and activity based costing so that the true cost of providing the service can be identified and waste eliminated. - **Step 4**: Develop a Strategy for Achieving Each Objective - Example: to extend the range of services offered to the buyer to start a process of early supplier involvement in setting project briefs that they bid for. - **Step 5**: Monitor the Progress of Strategies - Example: the percentage of the supplier's range of services that the buyer would use in a year. - Or the cost of bidding for new projects. - **Step 6**: Agree on targets - Example: 60% of the supplier's range of services to be used in the first year - Bid costs should not exceed 10% of the contract value - **Step 7**: Develop Initiatives - Mutual development of projects to act as glue to bond both sides \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **CHAPTER 4. DEVELOPING A CONTRACT MANAGEMENT PLAN** 1. **Stages in life of a contract** - **Pre-contract stage**: - This occurs before the contract has been executed. It is during this stage that the [design is developed] and the [tender process occurs] - This stage is critical which is often overlooked. Sales staff in their eagerness could overlook or even ignore the commercial terms which may disadvantage the client. - Contract managers should be drawn in from the beginning to ensure the company's interest is protected from risks. They are the people who understand the legal implications and consequences of contract fulfillment and breaching. - **Post-contract stage**: - This commences as soon as [the preferred tenderer appointed] as the Contractor and the contract is executed between it and the tenderer - Now that the tender exists, it is in this second stage of the contract life cycle in which the form of contract is used [to govern the actions of the parties] - It provides a common reference point that both parties use to remind themselves of their rights and obligations - **Contracting process (8 -- IPI NEM RC)**: 1. Initiation is the first stage in the contract lifecycle when the organization **recognizes the need for a contract**. 2. Planning is the second stage, during which the organization **develops a plan for the contract**. It includes planning a strategy for CLM **depending on the enterprise requirements and resources**. 3. Implementation is the third stage, during which the organization **carries out the plan**. It includes **developing contracts** according to plan and communicating the objectives clearly to all employees. 4. In the negotiation stage, **both parties agree** on the terms of the contract. That is often done **with the help of lawyers** to ensure that all terms are fair and legal. 5. The contract is executed or signed after negotiation. That is when both parties are **legally bound** to the terms of the contract. 6. The management stage is when the contract is in effect, and both parties **fulfill their obligations**. Then, the organization **monitors and manages the contract** to ensure its terms are met. 7. The contract may be renewed if both parties **agree to extend it**. This stage includes **renegotiating** the terms of the contract and executing a new contract. 8. The close-out stage is when the contract is completed, and all obligations have been fulfilled. This stage includes **terminating the contract** and archiving it for future reference. - Contract management phrase of the procurement life cycle:  2. **Contract management matrix** page11image44938032 3. **Guidelines on developing a contract management plan** - Purpose of the plan: - useful tool for administering the contract - executive summary of the roles and responsibilities of the contracting parties - identify who is responsible for the various contract administration activities - flexible and can adapt to changing circumstances - Background: - contract particulars - the organization's objectives - the provider/contractor responsibility to deliver/perform based on certain set standards which may include quantity/quality benchmarks, time frames - contract value, fee, performance incentives as applicable - Other key requirements from provider/contractor in respect of environmental, safety, health, etc. - Use of RFPs(Request for Proposals) - Identification of Key Contract Management Team Leader and Members, Authorities, and Limitations - Defines who the Contract Manager is and the team members involved, - Sets out what their respective responsibilities are. - Shows who to contact and what procedures to follow in the event of problems - Contract details: provider details, performance period, contract value, contract type - Methodologies for Developing, Negotiating, Approving, and Monitoring - Key contract vulnerabilities (Risk) - Post-contract liabilities: guarantess, waranties, budget overruns - Inspection, work certification, acceptance process - KPI - Compliance with **minimum contract requirements** (KPIs can also relate to risks and accident rates in addition to contract completion) - Tie in with **performance incentives** (can be paid out on regular basis, one-off, or in varying amounts in line with performance standards achieved) - Contract transition planning (from contract award to contract performance) - Documentation and reporting requirements - Contract change control process - Invoice review and payment procedures - Contractor litigation management - Ancillary Agreements and Contract Records - Post contract liability - Contract closeout 4. **Simple planning technique** - Work organization chart: - Project delivery schedule:  - Network technique: 5. **Important notice to contract management plan** - Centralize and Systematically Document all Contracts - Ensure the accurate documents align with the contract's process; - Helps you quickly access data when needed; - Track all operational steps in order to make a right and fast decision; - Makes your work more effective in terms of time, 5S, and working motivation. - Strictly Follow all Steps of the Contract Management Plan. - It is crucial that anyone playing a role in fulfilling an agreement understand exactly what their responsibilities are and be aware of all key dates and milestones related to successfully executing the contract - Should have an internal plan for measuring performance, and defining scorecards to identify any performance issues. - Automate As Much As Possible. - Using technology to improve some of the challenges: bottlenecks, forgotten milestone dates and other problems - Software solutions: improve efficiency and prevent important actions **[Case]**: Toll contract: on-spot import export reduce tax, control material, cheaper \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **CHAPTER 5. SUPPLY INFORMATION** 1. **Introduction to supply information** - **Supply**: 2 perceptions - Supply market: material features and more general - Supply information: driving factors of materials, more specific - **Supply market**: - Supply is the [quantity] of a good or service that a producer is willing and able to supply to market at a [given price] in a [given time] period. - In a procurement market, buyers and sellers come together to purchase goods or services. A supply market, on the other hand, is a market where suppliers offer their goods or services to buyers. - The basic law of supply: as the [price of a product rises], so businesses [expand supply] to the market - A supply curve shows a relationship between [market price] and [how much] a firm is [willing and able to sell] - Higher price Supply expansion - Lower price Supply contraction - **Determinants of supply (5)**: market price, input prices, technology, expectations, number of producers - For container shipping line sector, it is the mixed of competitive and monopoly. In context of Vietnam, the domestic shipping line' freight is influenced by 3 large alliances in the word. - Case of IKEA' failures in Vietnam - **Structure or elements of supply market (5)** - Source of supply - Case of Unilever (OMO) and P&G (Ariel) seeks powder supply from Ticolas in Vietnam during jumping Vietnamese market - Case of Samsung in Vietnam with 3 production sites, Vietnam suppliers just supply low value-added material - Market size, quantity - Number of suppliers per category - Locations of suppliers - Current and future of capabilities of supplier (cost, price, technology, value-added) - **Dynamics of supply market (7)**: - Market cycles - Container shipping market, with supply (ships/vessel need 1-1.5 year to build) and demand (change day by day) characteristics of transport sector: [cannot stock the vehicle due to high cost] - Life cycle and how they are changing - Capacity change, history and future - Economics of demand in the supply market, how market is changing and developing potential strategies - External cost drivers in the supply market (3D-printing to reduce cost) - New segment being created, or old ones dying - Growth and decline, profitability changes by segment 2. **Overview of supply market** - Terms: - **Supply market**: can be defined as a [combined collection] of potential buyers and potential sellers [willing to exchange resources]. - **Purchased item**: regarding [how deep and comprehensive understanding] or knowledge a buyer acquires - **Supplier**: regarding our understanding, relationship, to our ["be-in-their-stomach"] level - **Supply of supply market**: regarding our comprehension of materials or i[nput at our suppliers' operation] - **Macro's environment**: regarding all [external factors] which are [out of control] but we and our suppliers [share the consequence] of it. - **Supply market analysis**: comprehensive [assessment of the current market] with the goal of gaining the valuable insight needed to *[develop effective procurement strategies]*. - How markets work - The competitiveness of a market - Key suppliers and the value that suppliers place on the agency as a customer - The direction in which a market is heading - The capacity and capability of a market - How to handle pricing variances with time or between suppliers - The sustainability performance - How suppliers can better fulfill business requirements - **Tool for supply market analysis**: - Porter's five forces - SWOT analysis - Supplier analysis (Benchmarking, RFI, Value chain analysis, Supplier research -- Stable source, unpredictable requirement, CS level, logistics capability, factory capacity, WH, financial status) - Value realization - ***Reduce the total cost*** of externally purchased materials and services over time - Identify ***global sourcing opportunities*** -- low-cost supplier, world-class operations, achieve scale - ***Benchmark*** supplier information for increased competition and enable re-negotiation with suppliers - Help ***make-or-buy assessment*** - Improve ***supplier relationships*** by taking into account (supply base -- local or global, category -- direct or indirect, supplier -- strategic or tactical, market -- competitive or oligopolistic) 3. **Basic knowledge on purchased items** - The buyer should calculate, reckon, provision the parameters: - ***Materials*** to [form the product] (kind, quality, volume, value), ***material*** of [packaging] - ***Technology*** of production - Production ***flow***, including wastage - ***Technical*** ***standards*** - ***Technique*** and method to [pack product], to [transport product] - ***Value*** of that purchased items [in total value purchased] - Benefit: - Provision and ***calculate the price*** (bảng chiết tính giá) if there is any change in the price of material, fuel\... - Suggest ***solutions*** for any obstacles to production, transportation\... - Have the base for any ***improvement*** (product quality, packing, vehicle\...) - ***Share*** the same understanding with Supplier - Increase confidence of Buyer in ***negotiation*** or in tasking with Supplier - Ensure the Contract will be ***executed effectively*** - ***Smoothen*** our supply source - Support the ***Contract Management Plan*** 4. **Business relationship with suppliers** - In today's world of international trade and global competition, where supply chains compete more so than individual firms and products, integration and collaboration (coopetition) have become ***key differentiators*** of high performing supply chains. - Collaboration is dependent on the provision of ***mutual benefit***, but between suppliers it is difficult to achieve in supply chains. - [Supplier play an important role] in our business, however they can also lead us to some ***challenges***: - Increase the price of supply products, services - Unable to meet ad-hoc demand in some situations - Unhealthy services such as late or volume-short delivery, or unstable quality - Non-professionally work with us and our competitors - **Criteria to choose supplier**: - Ability to supply us sustainably - Their ***source*** of material - Their level of ***inventory*** - Their ***capacity*** (with any expansion) - Their reaction to our ad-hoc or seasonal demand - Service level - Any improvement after our suggestion, contribution - KPI of contract execution - Reaction to our strategy of increasing the number of suppliers or sharing their current volume with us with other suppliers - The probability we can escape from Bottleneck Quadrant  - **Sourcing strategy**: - Sole sourcing: 1 supplier, no choice - Single sourcing: 1 supplier, many choices - Multiple sourcing: many suppliers, many choices - 6 stages in a contract relationship (Ask) - **Stage 1**: Communication and bargaining - **Stage 2:** Power and justice - **Stage 3**: Norm's development - **Stage 4**: Expectations - **Stage 5**: Greater inter-dependence by both parties - **Stage 6**: Commitment 5. **Macro economy** - 5 factors (PESTLE) of macro environment - Political environment - Economic environment - Technological environment - Socio-cultural environment - Ecological environment 6. **Techniques to ensure execution of contract conditions** - Mastering supply information has potential benefits: - ***Transparency***: material, purchased items - ***Autonomy***: automatic adjustment - ***Efficiency***: save time and resources - ***Lower*** ***Cost***: transaction costs, increase both sides's competitive ability towards market - ***Risk mitigation***: data or information must be evaluated promptly and effectively - ***Increase*** of Buyer and Supplier ***Capacity*** - Most important: Can Do Attitude - Teamwork - Documents on the table - Market study in alert mindframe - Non-stop building team's capacity - Professional tasks: double check, share information accurately, on-time to right people +-----------------------------------------------------------------------+ | **[Case]**: | | | | - Which quadrant in Kraljic need price calculation? Strategic & | | Leverage | | | | - Who will calculate the price? Buyer | | | | - When should company adjust price calculation table? Change in | | internal, market, supplier, etc | | | | - What are the real effect of the price calculation table? to | | identify the most cost-effective suppliers into Kraljic, to | | provide basis for negotiation strategic procurement | +-----------------------------------------------------------------------+ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **CHAPTER 6. PREQUALIFCATION OF SUPPLIER** 1. **Introduction** - Procurement expense: 50-60% - **Why pre-qualify suppliers?** - The seller may take your payment and then fail to supply the goods in the quality or quantity ordered. - The buyer also needs to verify the suppliers' capabilities and reliability to ensure the supplier will perform according to the contract and has the capacity to do so. - Find and develop competent suppliers. - Provide an uninterrupted flow of materials, supplies, and services required to operate the organization including tenders. - Getting involved in the tender process to ensure the maintenance and improvement of quality. The need to improve supplier quality continually so that products and services can compete effectively. - Purchase required items and services at lowest total cost - Improve the organization\'s competitive position. - Reduce supplier risks - **Organization assessment company**: Coface - Package 1: I only (Information) - Package 2: I + E (Evaluation) - Package 3: I + E + S (Solution) - Failure to adequately manage third party relationships could result in business interruption and exposure to risk - Multiple globally applicable laws covered eg. Human rights, ACAB (Anti corruption, Anti binary), competition law\... - Multiple assessment and controls on vendor such as ACAB and other significant risks: competition law, human rights, ACAB, Information security, privacy law\... 2. **Selection and assessment process** - **Vendor selection**: - Generate a Portfolio of Potential Suppliers: Trade journals, word-of-mouth, internet, etc - Shortlist Suppliers, based on ***Evaluation Criteria*** - Request for Quotation from Suppliers: Negotiation versus Competitive Bidding - Select Suppliers: Evaluation Criteria + Value-Added Services, Written contract versus verbal agreement - **Vendor assessment**: - Supplier qualifications: - Looking at ***certification, license*** (Supplier certification, independent certification, process standard certification, ISO 9000 quality standards) - Doing ***spot audits*** - Carrying out ***site inspections*** - Checking out ***history*** - Look for ***word-of-mouth*** recommendation (VCCI) - Checking ***financial statements*** - ***Corporate structure*** and ***management structure*** - Company ***charter*** - ***Red flag***: right, responsibility, operation - Evaluating suppliers: - The ***attitude of the supplier*** (willingness & ability to respond to your needs, quality of their consultation on new product dev, quality of market information they supply, initiatives in making cost reductions) - Their ***technical ability*** (technical competence, process capability, control of those processes) - ***Commercial consideration*** (delivery lead time, location of supplier, delivery frequency, MOQ, supply risk, purchase price) - Their ***financial standing*** (credit terms, credit rating, key financial ratios such as liquidity ratio, return on capital, profit margin) +-----------------------------------------------------------------------+ | **[Case]**: Trang Ti | | | |  | | | | - Team A: Legal issue, Change the image (costly), life cycle is | | short, use another image (should be chosen) | | | | - Team B: famous image, focus on product, purchase another image is | | costly, another country & culture | +-----------------------------------------------------------------------+ - **Vendor list**: - **Step 1**: Select factors (Number of criteria must be the odd number) - **Step 2**: Assign weight - ***MIGHT***: 2 least important (10%) - ***SHOULD***: 2 least important in 5 main feature (25%) - ***MUST***: 65% (all criteria has higher weight than might & should) - Max weight of MIGHT \< Min weight of SHOULD - Max weight of SHOULD \< Min weight of MUST - Weight among MIGHT, SHOULD, MUST must be different - **Step 3**: Rate the suppliers for each factor (Usually scale of 1 to 10) - **Step 4**: Rank the suppliers (ranking value = weight\*rate) - **Step 5**: Total ranking and select +-----------------------------------------------------------------------+ | **[Case]**: | | | |  | | | | **[Ans]**: | | | | 1st offer: V = (C+F)/(1-R) = (2410+12)/(1-0.25%) = 2428.07 Choose | | | | 2nd offer: I = 18.37% i = 1.53% (month) | | | | V = 1750/(1+1.53%)\^1 + 750/(1+1.53%)\^4 = 2429. 43 | +-----------------------------------------------------------------------+ 3. **Sourcing strategy** - **What should you ask when you buy things? (7)** - What to buy - How many to buy - How many source of supply - Service (Case of Parker pen) - Delivery terms (affects the price) - Payment methods (depends on buyer normally) - Price - **Factors to determine sourcing strategy (5)**: - Type of material need to buy - Risk level of buying decision (depends on number of supplier) - Power and attitude of suppliers - Procurement division capability - Ability to maintain a stable supply without increasing risk - Kraljic matrix **[Case]**:  **[Group discussion]**: +-------------+-------------+-------------+-------------+-------------+ | **Quadrant* | **Character | **Our | **Types of | **What | | * | istics | sourcing | contract?** | makes us | | | of good | strategy?** | | afraid of | | | purchased? | | | most in | | | Risk of | | | that box?** | | | supply?** | | | | +=============+=============+=============+=============+=============+ | **Routine** | Low profit | Single | Spot | Complex | | | impact | sourcing | contract | procedure | | | | | | | | | Low | Little | Less | | | | supplier | inteference | binding | | | | risk | | contract | | | | | | | | | | Standard | | | | | | product | | | | +-------------+-------------+-------------+-------------+-------------+ | **Bottlenec | Low profit | Single | Fixed/Term | Depends on | | k** | impact | sourcing | contract | supplier's | | | | | | ability to | | | High | Nice | | supply | | | supplier | customer | | stably | | | risk | | | | | | | | | | | | Special | | | | | | product | | | | +-------------+-------------+-------------+-------------+-------------+ | **Leverage* | High profit | Multiple | Framework/c | Depends | | * | impact | sourcing (2 | all | much on | | | | -- 3) | off | supplier | | | Low | | contract | | | | supplier | Cooperation | | Price | | | risk | | (Flexible | increase as | | | | | terms & | we have | | | Standard | | conditions, | established | | | product | | fixed | strategic | | | | | price) | alliance | +-------------+-------------+-------------+-------------+-------------+ | **Strategic | High profit | Single | Strategic | Supplier | | ** | impact | sourcing | partnership | become | | | | | contract | competitor | | | High | Partner | | | | | supplier | | | | | | risk | | | | | | | | | | | | Not | | | | | | standard | | | | | | products | | | | | | and | | | | | | services | | | | +-------------+-------------+-------------+-------------+-------------+  - Too much items on the Bottleneck and Strategic are risky Effort to find more supplier - **Risk that can impact the buyer**: geo-political issues, transportation problems, currency fluctuations, quality and safety concerns, strikes and labor shortages, and issues of force majeure (due to the nature of globalization and the production of parts spread over different countries) - **Sourcing inertia**: serves as a reality check and can be used to pressure the supplier to reduce its price. - **Hedging your purchase**: to safeguard from commodity price fluctuation and currency appreciation/depreciation. 4. **Global sourcing** - 4 key drivers: - Technological advance - Declining communication and transportation costs - Widespread access to vast information Growing connectivity btw supplier and customer - Entrepreneurship and rapid economic transformation - **Decisions**: - Outsource or not? - Where in the world should Value-adding activities be located? - Benefits, challenges, risks:  \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ **CHAPTER 7. MANAGING RISK IN CONTRACT MANAGEMENT** 1. **Definition of risk** - A risk is a **potential problem** -- it might happen and it might not happen - Conceptual definition of risk - Risk concerns about **future happenings** - Risk involves a **change** in mind, opinion, actions, places, etc. - A risk is **not certain** -- Its likelihood can only be estimated - Two characteristics of risk - **Uncertainty** -- the risk may or may not happen, that is, there are no 100% risks - **Loss** -- the risk becomes a reality and unwanted consequences or losses occur - Formula: Risk = probability of occurrence x consequences - Type of risks: contract risk (how to manage relationship with suppliers about time, cost), business risk (no profit, loss only), market risk, environmental risk, legal risk, HR risk 2. **Contract risk** - Contractual issues are problems arising from a contract you entered. - Contract risk hurts the operations and outcomes of a contract, and a key part of contract management is managing and minimizing these risks:  - The risk associated with the **management** of the contract - Contract risks consideration: - Every contract brings **risks and benefit** - The words used in a contract have **legal** consequences - **Legally unsound** contracts heavily **biased in the provider's favor**. - **Unproductive use of human** resources - **External risk**: politics (sanction & export control), economic, social--cultural\.... - Supplier performance bond - Guarantees procedure - Documentation flow, control, and filing/retrieval - Audit control procedures - Loss reporting, deviation reporting, non- compliance reporting - Contract schedule and timelines - Delay in payment - New interpretations of law: WTO, Thuy Loc cosmetic **[Case]**: Market research purchasing project. However: - Budget of company: VND 2 billion - Capital of partner VND 200 mil - Do you pay in advance? Is there any risk? If not deposit, there is high chance of business risk from the partner If deposit, there is high chance of liquidity risk (rcm) 3. **Overview of risk management process** Homework: based on risk matrix, option 2