Unit Code: BSS054-6

Risk and Procurement

Management

Level 7
Credit Value 30

Unit Coordinator
Session 13 Dr Jasmine Tehrani

Managing Supplier
Contracts
SESSION OBJECTIVES

• Understand the foundations of legally binding contracts in

UK law

• Explore the importance of the tendering process with

regard to the BBC News Article Case Study

• Understand the tendering process and required

documentation and preparation
1.
Understanding
Supplier
Managment
Managing supplier relationships

• Measures/communication/risks will change at each stage

• Formation of relationship forming

• Early stages storming and norming
• Maturity stage norming and performing
• Termination and transition stage

• Phase out and winding down for smooth transition

 Supplier’s
Interest
Level

Identify
Specify Source Tender Negotiate Contract Performance Payment
Need

Stages of the Procurement Process

Keeping suppliers motivated
• What are the implications of the graph on the preceding
slide?
• Do you agree with this view?
• How can buyers ensure suppliers stay motivated?
• After winning the business?
• When the contract is nearing its end?
• When they have lost the re-tender and are expected to
assist the new incumbent supplier?
Improving Performance

• Supplier performance =
Ability x Motivation

• Mindset - “I want to do well, I’m expected to do well

and it will be noticed if I do well”
Factors that influence commercial relationships
• Nature of product/service bought
• Spend and criticality of item
• Relative size of buyer and seller
• Geographical location
• Strategic stakes and symbolic reasons
• Time frame
• Government regulations
• Supply market conditions
Relationship Variables
• Length and nature of contract
• Frequency of contact and level of contact
• People and functions involved
• Type of information exchanged
• Nature of communication
• Co-operation e.g., finance, specifications
• Public support and references
• Joint problem solving and taskforces
Procurement Strategies
Low
Bottleneck Critical
Ensure supply Strategic
Risk
Alignment
y
Suppl
Routine Leverage

High Minimise Minimise

attention Spend

Low Relative Spend High

Supplier Perspective
2.
Group Exercise
Group Exercise 1
• “Disputes between buyer and supplier are inevitable in
commercial relationships, its how these disputes are
managed that is important”
• “Disputes between buyer and supplier are almost
inevitably the result of poor planning, poor supplier
selection or poor administration”

• Debate these statements and come to a reasoned view to

present to the class
3.
Contract problems
and disputes
Importance of feedback

• Contract managers have a key role in ensuring

procurement is kept informed on contractor
performance
• Poor supplier performance will be encouraged if
feedback is not received
• Good supplier performance will be discouraged
if feedback is not received
Reviewing contractor performance

• Frequency of formal reviews

• Setting targets
• Reporting contractor performance
• Allowing for contractor feedback about buyer!
• Keeping records
Reviewing contractor performance

• Remember to focus energy on the key supplier

relationships

• Key factors for success:

• professionalism, ethics and propriety
• mutual trust, respect and understanding
• openness and excellent communications
• a joint approach to managing delivery
Common causes of problems

• Insufficient support from senior management

• Failure to anticipate major risks or changes
• Changes to requirements
• Changes to the supplier's mgt team (or
organisational structure)
• Inaccurate original assumptions
• Failure of the contractor to deliver
Common solutions for problems

• Early identification and remedial action

• Regular reviews with both users and contractors
• Clearly defined roles and responsibilities
• Effective change management
• Problem escalation to senior levels when
appropriate
Source of contract disputes

• Specification and scope of work

• Perception’s of suppliers performance
• Changes and variations to contract
• Prices and payment
• Third party involvement - sub contractors
• Personality clashes
Simple Conflict Management Approach

• Get the facts

• Evaluate the current situation
• Evaluate the overall relationship
• Determine objectives
• Contact (Meeting)
• Resolution (Negotiation)
Dispute Escalation

• Negotiation (operational level)

• Referral upwards and further negotiation (next or
higher level)
• Mediation (third party to facilitate)
• Conciliation (third party to resolve tensions)
• Adjudication (non binding external expertise)
• Arbitration (binding external expertise)
• Litigation (courts system)