Contract

1
Contract Risk Management Process
2

• Structured process to develop bespoke contracts
  from standard models initially for strategic
  direct materials, later for all strategic spend.
  Non pareto spend covered by purchase order TCs

Contract Management Procedure, Guidelines
Standard Forms (available on intranet)

• Generic Contract Frameworks
• Direct Goods
• (e.g. Raw Materials Packaging)
• Indirect Goods
• Services
• (e.g. Development Services)
• Capital Equipment
• etc.
• (available on intranet) (Legal)

Purchasing to become a key interface between
budget holders, to facilitate the evaluation of
risk and specify requirements including target
service levels and Legal (Sheila)
Examples of good practise become future standards
(Legal Purchasing)

• Risk Evaluation
• Risk
• Scale of Likely Impact
• Probability of Occurrence
• Prevention
• Mitigating Action
• etc
• (Purchasing Internal Customer)

• Bespoked Schedule/s
• Commercial Specification
• Service Level Agreement
• Prices Incentivisation
• etc.
• (Purchasing Legal)

Bespoke Contract To be used for invitation to
tender (ITT) contract negotiation.

• Guidelines for Drafting
• Purchasing Specifications
• -including Service Level
• Agreements (SLAs)
• (available on intranet)
• (Purchasing)

On-line Contract Repository Signed contracts to
scanned be held in .pdf form on a
central Server i.e. accessible to Legal,
Purchasing, etc. with change control procedure.
3
Contract Management Procedure, Guidelines
Standard Forms (available on intranet)

• Generic Contract Frameworks
• Direct Goods
• (e.g. Raw Materials Packaging)
• Indirect Goods
• Services
• (e.g. Development Services)
• Capital Equipment
• etc.
• (available on intranet) (Legal)

Purchasing to become a key interface between
budget holders, to facilitate the evaluation of
risk and specify requirements including target
service levels and Legal (Sheila)
Examples of good practise become future standards
(Legal Purchasing)

• Risk Evaluation
• Risk
• Scale of Likely Impact
• Probability of Occurrence
• Prevention
• Mitigating Action
• etc
• (Purchasing, Internal Customer
• Legal)

• Bespoked Schedule/s
• Commercial Specification
• Service Level Agreement
• Prices Incentivisation
• etc.
• (Purchasing Legal)

Bespoke Contract To be used for invitation to
tender (ITT) contract negotiation.

• Guidelines for Drafting
• Purchasing Specifications
• -including Service Level
• Agreements (SLAs)
• (available on intranet)
• (Purchasing)

On-line Contract Repository Signed contracts to
scanned be held in .pdf form on a
central Server i.e. accessible to Legal,
Purchasing, etc. with change control procedure.
4
Workshop to Analyse Key Risks/Results/Preventive
Actions

• and to identify how the contract model should
  be bespoked to specific risks of a unique
  supplier relationship.
• Attendees
• Purchasing Manager involved
• Budget Holder/s
• Legal
• Outputs
• Risk analysis e.g.
• Should consider technical, commercial, safety,
  risks etc.
• Bespoke clauses to address specific risks.

• Key Risks Potential
  Results Restorative Actions
  
• Line Stop ( xxx per hour lost contribution)
  Liquidated Damages
  
• Product Recall Client
  Company incurrs cost of recall Cost deducted
  from payments to supplier
• Etc. Etc. Etc.

5
Contract Management Procedure, Guidelines
Standard Forms (available on intranet)

• Generic Contract Frameworks
• Direct Goods
• (e.g. Raw Materials Packaging)
• Indirect Goods
• Services
• (e.g. Development Services)
• Capital Equipment
• etc.
• (available on intranet) (Legal)

Purchasing to become a key interface between
budget holders, to facilitate the evaluation of
risk and specify requirements including target
service levels and Legal (Sheila)
Examples of good practise become future standards
(Legal Purchasing)

• Risk Evaluation
• Risk
• Scale of Likely Impact
• Probability of Occurrence
• Prevention
• Mitigating Action
• etc
• (Purchasing, Internal Customer
• Legal)

• Bespoked Schedule/s
• Commercial Specification
• Service Level Agreement
• Prices Incentivisation
• etc.
• (Purchasing Legal)

Bespoke Contract To be used for invitation to
tender (ITT) contract negotiation.
On-line Contract Repository Signed contracts to
scanned be held in .pdf form on a
central Server i.e. accessible to Legal,
Purchasing, etc. with change control procedure.

• Guidelines for Drafting
• Purchasing Specifications
• -including Service Level
• Agreements (SLAs)
• (available on intranet)
• (Purchasing)

6
Checklist for Drafting Purchasing Specifications

• General Product/Service Specifications and
  Objectives
• Product/Service Specification (e.g. product
  specification, engineering drawings, technical
  standards, description, bills of materials etc.)
• Standards Referenced
• Objectives, Quantifiable Targets, Service Level
  Agreement (SLA)
• Cost (target prices internal acquisition cost
  targets)
• Delivery (OTIF, delivery lead time)
• Quality (PPM scrap/rework/defects/concessions,
  Warranty Claims)
• Service/Added Value ?
• Performance improvement review process and
  incentivisation mechanism
• Packaging Specification
• Documentation required
• Transportation requirements (e.g. Milk Run, Hub
  Spoke)
• Supplier Quality Assurance (SQA) standards/audit
  procedure
• Supplier Product Quality Assurance (SPQA) /audit
  procedure
• Acceptance Procedure e.g. GI Quality Control,
  Inspection Test Procedures, Timesheet sign-off
  etc.
• Consignment Stocks
• Supplier Shelf Management/Vendor Managed
  Inventory
• Environmental Health Safety (EHS) standards
  (e.g. Safety Data Sheets)
• Project Plan (key milestones, critical path
  activities identified, ownership of work-packages
  assigned clearly)

7
Checklist for Drafting Purchasing Specifications
(cont)
Specific to Capital Equipment Total Cost of
Ownership Model Installation, Commissioning,
Calibration Acceptance procedure Warranty
parts/parts labour (identify exclusions),
service levels etc. Service engineer service
level agreement Planned maintenance
schedules Schedule of critical/recommended
spares Overhaul/rebuild Safe disposal of waste
by-products Training Documentation, manuals Stage
payments Means of recourse in the event of
non-compliance with specifications e.g.
liquidated damages. Specific to On Site
Contractors Supplier staff working on site
(in-plants) or site visits Client Company HR
policy Behavioural ethical standards Disciplinar
y/escalation/resolution procedures Union
membership policy Expertise, Experience, Skills
and Qualifications required for
contractors Client Company induction
programme Appropriate supervisory
levels/procedures for contractors Use of Client
Company facilities Times of work/access Timesheets
(frequency) / acceptance procedures Reporting
requirements Ownership of intellectual property
produced Suitability of plant and equipment to be
used by contractors IR35 risk mitigation Professio
nal indemnity insurance Confidentiality Standards
for suppliers recruitment process Ethical
standards e.g. conflicts of interests
8
Checklist for Drafting Purchasing Specifications
(cont)
Contractual Framework Which model contract will
be used? Has a risk analysis specific to the
proposed supplier relationship been conducted
with the internal customer and legal? Confirmation
of acceptance of Client Companys TCs ? E.g.
acceptance of Client Company TCs as a
pre-requisite to quotation? Supply copy of the
proposed contract with the invitation to tender
or a top level summary of he key points that
suppliers need to be aware of when quoting
prices. Identify Client Companys right to
terminate for persistent breaches of performance
targets (e.g. x times in x months) Risk during
transportation lies with the supplier otherwise
need to ensure safe packaging and
transportation Title/ownership transfers upon
payment Safety stocks Maximum contract
termination period required for us Maximum
contract termination period for them Contract
term/length Assessment of formula for, and limit
to, liquidated damages.
9
Contract Management Procedure, Guidelines
Standard Forms (available on intranet)

• Generic Contract Frameworks
• Direct Goods
• (e.g. Raw Materials Packaging)
• Indirect Goods
• Services
• (e.g. Development Services)
• Capital Equipment
• etc.
• (available on intranet) (Legal)

Purchasing to become a key interface between
budget holders, to facilitate the evaluation of
risk and specify requirements including target
service levels and Legal (Sheila)
Examples of good practise become future standards
(Legal Purchasing)

• Risk Evaluation
• Risk
• Scale of Likely Impact
• Probability of Occurrence
• Prevention
• Mitigating Action
• etc
• (Purchasing, Internal Customer
• Legal)

• Bespoked Schedule/s
• Commercial Specification
• Service Level Agreement
• Prices Incentivisation
• etc.
• (Purchasing Legal)

Bespoke Contract To be used for invitation to
tender (ITT) contract negotiation.
On-line Contract Repository Signed contracts to
scanned be held in .pdf form on a
central Server i.e. accessible to Legal,
Purchasing, etc. with change control procedure.

• Guidelines for Drafting
• Purchasing Specifications
• -including Service Level
• Agreements (SLAs)
• (available on intranet)
• (Purchasing)

10
Contracts for Purchased Goods Services
N/GROUP/
Contracts for Purchased Goods Services
Client Company Model Contracts
Global
Local
Paris Benelux
Hengoed Client Company Ltd.
Dreux Client Company Pharma SA
Direct
Indirect
D Au CH
Harefield Client Company Pharmaceuticals Ltd.
Direct
Indirect
Direct
Indirect