MARK1202 International Logistics And Supply Chain Management

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MARK1202 International Logistics And Supply Chain Management

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MARK1202 International Logistics And Supply Chain Management

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Course Code: MARK1202
University: University Of Greenwich

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Country: United Kingdom

Question:

NHS Practitioner Handout 2 – Developing Contracts 
Suppliers and purchasers often transact by email – particularly in fast-paced, price-sensitive industries where materials need to be sourced quickly. Care is needed in negotiating such deals as it is all too easy to become inadvertently bound in contract.
If there’s a dispute about whether a contract has been formed, a court will consider how you conducted yourself and the words you used in negotiation to assess whether you intended to create a binding contract and agreed all the key terms.
Your behaviour and the language you use are therefore very important. Bear in mind that there need not be a signed contract – nor agreement on every term – for a binding contract to be created. Lesser details can be agreed later.
In a recent case, Proton Energy Group v Orlen Lietuva the court found the parties’ email negotiations amounted to an enforceable contract. Although there still remained important points to agree on, the defendant found itself locked into an unwanted contract.
Task:

Explain how they help the organisation to ensure that the risks of poor quality,extension of time,increased costs and unethical practice are managed effectively  the relevant performance measures are monitored and managed.Outline the battle of the forms and explain how you would ensure that any agreement is carried out under the organisations own terms and conditions.

Answer:

In the second schedule, there is the provision on warranties that spells out some of the important aspects that will ensure that the risk of poor quality is prevented. For instance, the supplier gives an assurance that the staff will have the required qualification and licenses that are required to fulfil the obligation within the contract. In a more specific way, supplier warrants that well-documented system of quality controls as well as process covering all the contents of the obligations within the contract will be kept and complied with at any given time (Uher & Davenport 2009, p. 42). Additionally, the terms and conditions ascertain the warranties by the supplier that there will be no significant changes to the existing quality controls and process without informing NHS within 21 days in advance (GOV.UK. n.d.). That way, the organisation will be sure that the control and operations remain of the quality desired and any possible changes that can alter the expected quality are prevented.
Risk Extension of Time
The extension of time is one of the problems that most of the organisations face when dealing with procurement challenges. Most suppliers may have a genuine reason for the extension of the delivery date but some extend the time for their own convenience at the expense of the buyer (Burr 2016, p. 289). As such, there is always the need to set specific terms and conditions in the procurement contracts that ensure that any unnecessary extension of time is prevented. However, if the extension of the contract becomes unavoidable, such changes in the contractual period have to be communicated in time to prevent any inconveniences that may result from such changes.
The NHS terms and condition has been designed such that risks associated with the extension of time are significantly minimised. For instance, there is the start date specified in the contract and the end date of the contract upon which the contract is expected to culminate. Schedule 1 section 2.1 requires that the expiry date for the contract is specified and the provision for extension is given but must not be longer than a specified period. The agreement specifies the conditions upon which the commencement and completion date can be changed and the specific consequences of going against such provisions (Knight et al. 2003, p. 83). The authority is allowed to extend the term on one or more occasions only through a written notice that is not less than three months before the date the contract was expected to end. In that case, the organisation is expected to reorganise its operation and adjust the schedule without necessarily affecting the normal flow of activities.
The NHS terms and condition provides direction on the most effective way of dealing with issues regarding the termination of the contract. Section 15.4 of Schedule 1 provides that any party in the contract have the opportunity to terminate the contract through a termination notice to the other party should that party commit a material breach of the terms within NHS contract (Schwartzkopf & McNamara 2000, p. 110). For instance, when such violation is such that they cannot be remedied or when a breach that can be remedied is not remedied as per the remedial proposal. According to 15.5 of the same schedule, the authority has the power to terminate the contract at once by giving out a termination notice if the supplier fails to commence delivery within the longstop date as specified in the contract (Robinson 2011, p. 121). The same can happen when the supplier has failed in any material way to abide by the obligation based on the opinion of NHS business service authority. As such, there are specifications for the extension of time and the way the contract can be brought to an end, which makes it easier for the NHS to plan without any significant disruptions.
Risk of Increased Cost
Procurement contracts always come with high direct and indirect costs that must be appropriately managed to avoid running into the unprofitable venture. The NHS terms and condition has been expertly drafted to address any possible risk that may result from a probable increase in the cost of sourcing for relevant products and services (Ballati 2001, p. 25). Even though an organisation is expected to use vast sums of money to purchase healthcare materials to be able to meet the high demand of those looking for such services, another cost may come as result of failure to comply with some contractual obligations. Additionally, some costs are likely to be incurred due to the inadequacy of the contractual terms to block any possible loopholes (Humbert & Mastice 2015, p. 34). Some of the suppliers are likely to take advantage of the poorly drafted contract terms to evade paying for their mistakes throughout the process.
The NHS terms and conditions under schedule two section 12 outlines that the supplier will be legally responsible and will make the authority liable should there be any instances of injury or death in the cause of the contract. Additionally, the supplier will be expected to pay for any loss or damage of the property regardless of whether it is real or personal. In that case, there will be no right to claim expenses, costs, damages, or losses that relate to the contract whether through negligence, tort, or breach of contract obligations (Cibinic, Nash & Nagle 2006, p. 245). However, the NHS agrees for recoverable losses when it accrues from purchases of replacements or alternative services. Additionally, it also allows for recovery of costs that are linked to screening, treating, advising, testing, and such like expenses during the contract term (Cummins, David & Kawamoto 2011, p. 54). The cost of additional management time and losses of income that results from an inability to provide services required in healthcare are equally considered recoverable. Section 13.4 of module 2 provides that every party must work hard to reduce and mitigate any loss that would otherwise lead to claim against the other party. Section 13.5 of the same schedule defines the total contract price that needs to be paid or the amount that authority has already paid to the supplier during the term. That makes it easier for the organization to have a proper budget for the contract because it is easier to know the minimum and maximum amount.
The NHS terms and conditions have equally specified the insurance plans that supplier is expected to maintain in force at their own cost. The insurance is supposed to be from a highly reputable commercial insurer to ensure the liability of the employer, public liability, as well as professional indemnity (Bunni 2013, p. 15). The supplier will not be able to shift the cost of any damages caused during the course of the contract as the supplier warrants that there will be no action is taken or failure to make any reasonable action or even allow staff or any other to take any action that would quickly render insurance void, enforceable, voidable, or also suspended. This is one of the sure ways of ensuring that the organisation does not incur any unnecessary cost due to the negligence or tort caused by the supplier.
Risk of Unethical Practice
Doing business has been associated with numerous incidences of unethical practices that are intended to serve individual interests. The desire to maximise profit sometimes comes with immoral and unprofessional practices that may include providing low-quality products or services at the same price (Monczka et al. 2015, p. 601). In that case, the chances are high that the suppliers of vital services and products to the NHS must be given strict terms and conditions to ensure that the relationship between supplier and the company is grounded on professionalism and are ethical (Svedin 2015, p. 105). To ensure that the procurement process is done as required, various provisions that provide for the quality control and the insurances had to be clear. For instance, suppliers are required to take work hard and prevent any situation where any staff would act or fail to take action that would quickly render the insurance void or voidable.
Terms and conditions equally highlight issues of intellectual property rights regarding outputs, deliverables, and materials that are used in the contract. The supplier and staff are expected to ensure that the property rights are protected and not used for the purposes for which they are not intended during and after the contract (Mandal 2010, p. 126). This area can be easily abused when not adequately regulated and can lead to legal cases that can be very expensive for the organisation. The supplier and staff are expected to read and understand the nature of engagement and confirm that they are ready and willing to comply.
Unethical practice includes a possible unnecessary extension of the contractual period for the purposes of increasing the cost (Cohen 2008, p. 25). However, through the NHS terms and conditions, it is evident that there is a specific provision that prevents any extension of time of the contract beyond the agreed longstop date, which is also subject to the agreement between the organisation and the supplier. Consequently, NHS can be said to have designed terms and conditions that would help prevent any cases of unethical practices.
The Battle of the Forms and ways of Ensuring that the Agreements Conform to NHS Terms and Conditions
As already identified, the NHS terms and conditions are highly comprehensive to the extent that it can protect the organization from numerous risks that come from the provisions of services. As one of the largest organisations in the entire world, NHS relies so much on its provision of goods and services and at the same time, it procures several products and services from major suppliers (England.nhs.uk. n.d.). Even though the terms and conditions are highly comprehensive, some of the battles that come with the form include the numerous clauses that must be carefully monitored. It only shows that the risk that the organisation is exposed to is so wide and the chances are high that some of them can be easily breached (Saxena 2008, p. 160). For instance, there could be no problem with the information and data provisions, but the issue can be with the commercial schedule. It is, therefore, the responsibility of the NHS to work hard and ensure that the agreement is carried out based on the organisation’s terms and conditions.
It is through contract management that NHS will be able to ensure that the contract conforms to the terms and conditions. The main aim of contract management is to identify those who are supposed to take responsibility for the control of the contract both internally and the externally. Therefore, it calls for the identification of the critical stakeholders in the contract, which can be categorised into internal, connected, and external or secondary stakeholders (Vitasek 2011, p. 18). That leads to supplier relationship management (SRM) that involves a wide range of stakeholders such as the government, law enforcement agencies, and the insurance firm.
The NHS as an organisation will have to demand a final product from its representatives that are involved in the contract based on the prescribed terms and conditions. Both the organisation and the supplier must be fully informed about the provisions in the contract and agree to comply with every single section of the agreement (Vitasek, 2016, p. 43). Being able to understand the terms of the agreement is one sure way of allowing the other party to decide whether to agree or not. For instance, the one who accepts it must be fully aware of the consequences of going against the provisions of the terms and conditions.  
The case of Proton Energy Group v Orlen Lietuva is an example of how to ensure that the agreement entered into is followed as required (Baatz 2014, p. 95). It highlights some of the possible mistakes that can be done that may efficiently prevent the organization from having a contract that is not within its terms and conditions. For instance, the NHS will have to avoid cases where the negotiations are entered into without having the formally signing the contract. In that case, any discussion about the contract must always have the word ‘subject to contract’ whether discussing phone calls or in private meetings (Clarke et al. 2017, p. 433). There has to be a confirmation of the oral negotiations in writing, and the correspondents marked ‘subject to contract.’ The conduct of the NHS and that of the team representing it must ensure that the party under the contract knows that there is the intention of having a legally binding contract as per the specified terms and conditions.
There has to be a proper choice of words when entering into the contract so that the other party understands that the organisation will not accept any agreement other than those that are specified in the contract form. In that case, those who are agreeing will be ready to conform to every single part of the agreement as spelt in the way (Opelt et al. 2013, p. 45). The NHS must only be legally bound when the supplier is ready to contract under its terms and conditions, and that must be made clear from the beginning of negotiation through to the end. It is through these means that the organisation can be sure that the agreement is carried out under its terms and conditions.
Conclusion
Contract development is one sure way of ensuring that procurement and supply are conducted according to the needs of the organisation. As such, most of the organisations have worked so hard to develop comprehensive terms and conditions for their engagement in procurement and supply contracts. Some of the risks that organisations are exposed to include poor quality, an extension of time, increased cost, and unethical practices. However, with elaborate terms and conditions such as that of the NHS, which is one of the largest employers around the world, it is easier to prevent such risks from occurring. Issues of quality can be addressed by setting specific quality assurance details in the contract that would compel the supplier to focus on providing a high-quality product.
Regarding time extension, the NHS has specified in the agreement that the commencement date and the end date for the contract are agreed upon in prior. There is also the provision for which the deadline can be extended but must not go beyond the longstop date. Even though the contract can be an effective way of preventing multiple risks associated with the agreement, the organisation must ensure that the negotiation is legally binding by putting it in writing. The negotiation and any form of agreement must be accompanied by words such as ‘subject to the contract’ to make sure that the contract is made as per the organisations own terms and conditions. This is exactly what the NHS has to do to have its set conditions adhered to by the party for which it enters with into any form of contract.
References
Baatz, Y. ed., 2014. Maritime law. CRC Press.
Ballati, D., 2001. Privatizing governmental functions. Law Journal Press.
Bunni, N.G., 2013. The FIDIC forms of contract. John Wiley & Sons.
Burr, A., 2016. Delay and disruption in construction contracts. Informa Law from Routledge.
Cibinic, J., Nash, R.C. and Nagle, J.F., 2006. Administration of government contracts. Chicago, IL: Wolters Kluwer/CCH
Clarke, M.A., Hooley, R.J.A., Munday, R.J., Sealy, L.S., Tettenborn, A.M. and Turner, P.G., 2017. Commercial Law: Text, Cases, and Materials. Oxford University Press.
Cohen, S., 2008. The responsible contract manager: Protecting the public interest in an outsourced world. Georgetown University Press.
Cummins, T., David, M. and Kawamoto, K., 2011. Contract and Commercial Management-The Operational Guide. Van Haren Publishing.
England.nhs.uk. n.d.. NHS England » About us. [online] Available at: https://www.england.nhs.uk/about/ [Accessed 21 Aug. 2018].
GOV.UK. n.d. NHS terms and conditions for procuring goods and services. [online] Available at: https://www.gov.uk/government/publications/nhs-standard-terms-and-conditions-of-contract-for-the-purchase-of-goods-and-supply-of-services [Accessed 21 Aug. 2018].
Haapio, H. and Siedel, G.J., 2017. A short guide to contract risk. Routledge.
Humbert, P. and Mastice, R. 2015. Good Contract Terms and Conditions are Vitally Important and Need to Reflect Both Good Risk Allocation and Post Execution Contract | The European Financial Review | Empowering communications globally. [online] Europeanfinancialreview.com. Available at: https://www.europeanfinancialreview.com/?p=4102 [Accessed 21 Aug. 2018].
Knight, D.L., Caldwell, D.N., Harland, C. and Telgen, J., 2003. Government Reform and Public Procurement. Budapest: Hungary.
Mandal, S.K., 2010. Ethics In Business & Corp Governance. Tata McGraw-Hill Education.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.
NHS.UK. 2016. About the NHS. [online] Available at: https://www.nhs.uk/using-the-nhs/about-the-nhs/the-nhs/ [Accessed 21 Aug. 2018].
Opelt, A., Gloger, B., Pfarl, W. and Mittermayr, R., 2013. Agile contracts: creating and managing successful projects with Scrum. John Wiley & Sons.
Robinson, M.D., 2011. A Contractor’s Guide to the FIDIC Conditions of Contract. John Wiley & Sons.
Saxena, A., 2008. Enterprise contract management: a practical guide to successfully implementing an ECM solution. J. Ross Publishing.
Schwartzkopf, W. and McNamara, J.J., 2000. Calculating construction damages. Aspen Publishers Online.
Svedin, L. ed., 2015. Ethics and Risk Management. Charlotte, NC: Information Age Publishing Inc.
Uher, T.E. and Davenport, P., 2009. Fundamentals of building contract management. UNSW Press.
Vitasek, K. 2011. The vested outsourcing manual. New York: Palgrave Macmillan.
Vitasek, K., 2016. The vested outsourcing manual: a guide for creating successful business and outsourcing agreements. Springer.

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