Contracting Excellence Magazine - Feb 2011
Coping With Uncertainty
We live in an age of increased uncertainty. Many of our traditional assumptions appear threatened – and this has had a major impact on how we perceive our career path and opportunities. In fact, over the last year, the percentage of those in the world of contract management, legal and procurement who feel they lack clear career opportunities has more than doubled.
On one level, the growth of economic and political uncertainty should play right into the hands of the IACCM community. The contracts and commercial professional has a major role to play in the management of risk, the structuring of agreements and relationships that cope with regular and unpredictable change.
Yet for many, that is not what their current job is about. Rather than today's uncertainty promoting them to be a core member of the leadership team, they feel instead that their burden of administrative work has increased and they remain frustrated by an overall lack of clarity over organizational roles and responsibilities. This is further reflected in the feeling that their company 'fails to invest in developing its people'.
Many recognize that they would benefit from improving their communication skills, their ability to influence teams and to increase interpersonal and relationship qualities. But this list has altered very little in the last 5 years, so it appears as if many practitioners are struggling to execute on the improvements they view as necessary.
75% of practitioners enjoy their job and find the work challenging. They continue to be highly qualified, with some 40% now boasting advanced degree qualifications. The experience level is increasing, as more people defer retirement and new recruitment dries up. But for the profession to progress, and for career opportunities to multiply, there must be change.
The biggest challenge that I observe continues to be the relatively low level of professional collaboration and the absence of a strong commitment to on-going research and development. Sustained career opportunities tend to fall into two categories. One is of talented individuals who rise as a result of their personal skills, connections and demonstrated achievements. The other certainly requires some element of these attributes, but is driven more by the specific knowledge and techniques associated with professionalism.
Today's contracts and commercial community is rarely associated with innovation and creativity. It is viewed more often as a control function, implementing the decisions of others. Therefore we may be useful in managing the consequences of uncertainty, but we are rarely seen as the source of new solutions. To alter that perception – and to gain the investment needed to feel more secure in our career path – we must turn our collective knowledge and talents to developing new instruments, tools and methods that address the commercial realities of business today.
In many respects, the business world has undergone a revolution in recent years, impacted by globalization, new technologies, dramatic shifts in organizational structure and changing measurements and social expectations. Yet through it all, many of the vehicles through which business relationships are defined, negotiated and managed have seen relatively little development. And it is that failure to keep pace which lies at the root of our insecurity.
It is a problem that can readily be fixed, so long as the community unites in its determination to explore, advocate and adopt new tools and systems, new approaches to analyzing relationships, new contracting structures and terms. We must also escape the trap of transactional support and personal talent, to focus instead on strategic relevance and community status. This is the way to enhance security and ensure that our skills and knowledge remain in step with the needs of an uncertain world.
This article is based on the findings of the IACCM Talent Survey for 2010, a copy of which can be accessed in the IACCM Member Library.
How Procurement Professionals Can Protect Themselves From Changes In Vendor Service Policies
The Consumer Protection Act: South Africa
INTRODUCTION: HISTORY – AIM – WHO CAN LODGE COMPLAINTS – WHEN IT IS APPLICABLE & WHEN NOT – DATES
The South African Consumer Protection Bill (No. 28629 dated March 15 2006) (‘the CPB’) and the subsequent Consumer Protection Act (No. 68 of 2008)) (‘the CPA’) were signed into law April 23 2009 (but only became effective in part April 24 2010 and only becomes effective in the whole April 01 2011). The content is now very much ‘cast in stone’ although there is no doubt that many issues still have to be and should be addressed in the regulations, the latest issue of which appeared for public comment on November 29th, the deadline for such comment being January 31 2011.…. Only time will tell!!
Even though the CPA only becomes operative April 01 2011 (the so-called general effective date) it is nevertheless imperative for all business to peruse it, analyze it, ascertain how it impacts on its business & to start ‘implementing’ it as soon as possible which is the legislator’s stated intention. This means not only assessing ALL your business forms, contracts and advertising material for compliance, but also training your staff pertaining to such documents and any interaction with any potential and actual customers.
The main motivation for the CPA is the fact that by and large existing consumer protection was woefully inadequate and in dire need of review. It was motivated by inter alia ‘discriminatory and unfair market practices; proliferation of low quality and unsafe products; lack of awareness of rights; limited redress; inadequate protection for consumers and weak enforcement capacity’.
It is interesting to note that the CPA not only endeavours to consolidate various other existing consumer and related legislation, but it also based on extensive research carried out on corresponding overseas legislation. Let’s have a look at the latter: the DTI studied legislation from countries such as Argentina, Brazil, Chile, India, the UK, Finland, Botswana, Malawi, Uganda and Canada. Simultaneous consumer surveys were conducted to ascertain consumer awareness and needs as well as analyzing case studies and existing complaints processing to determine trends.
The CPA has successfully considered and indeed combined all or certain aspects that were previously contained in some 7 different statutes (and in the process ’70 pieces of legislation was reviewed’!) as well as making ‘consequential amendments to various other Acts’! The approach decided upon based on international trends was to a rights based approach and following extensive consultation with various government and NGO bodies, this resulted in the Draft Green Paper in 2004. Following extensive consultation via nationwide workshops, the Consumer Protection Bill (‘CPB’) was published for comment in 2006. Despite the deadline for comment being mid (June 01) 2008, based on my observation of the flurry of activity the past 6 months, I believe that commerce and industry did not do enough and certainly not early enough to ensure adequate input in the content of both the CPB and CPA. However having effectively ‘made their bed’ commerce and industry must now find a way to make this rather uncomfortable bed comfortable! All and all I believe a more readily available and hopefully effective enforcement structure has also been provided for.
It is important to understand the purpose and aim of the CPA. Whilst on the one hand it endeavours to protect the consumer by promoting equality and access to information, fair marketing and business practices, it also requires responsible behaviour from the consumer on the other. This means the consumer cannot act willy nilly and that the common law principles of caveat emptor and caveat subscriptor are still very much alive!
Individuals who are disadvantaged whether historically or due to various handicaps are specifically provided for and there is a strong focus on misleading, fraudulent, unfair and deceptive business practices, something which is rife and not only as far as the illiterate members of society are concerned. It encourages the bodies adjudicating disputes to develop a legal framework that meets the aforesaid aspirations, a ‘consumer common law’ and such bodies are directed to consider any international conventions and foreign law. Individuals who are disadvantaged whether historically or due to various handicaps are specifically provided for.
A variety of persons and bodies are empowered to lodge complaints. This ranges from the affected individual, his duly authorized representative or a group of equally effected individuals in what is know as a ‘class action’ (‘a group or class of affected persons’)(section 76), a new development in RSA law. Likewise an ‘accredited consumer protection group’, having met the prescribed criteria and thus accredited, can precipitate actions or any association ‘acting in the interest of its members’. It thus bodes well for the latter to be taking a more pro-active role on behalf of its members but it should be borne in mind that the activities of such associations must be read in conjunction and aligned with the required industry codes. The prescribed minimum requirements for such codes appear in the recently published regulations.
When does and when doesn’t the CPA apply? It is important to note that if there is other legislation that provides greater protection than the CPA in certain circumstances, such other legislation will apply. The CPA applies to the following:
· All transactions* concluded in RSA (* which includes ‘any agreement for the actual or potential supply or performance of goods or services’)
· All thepromotion of goods & services (or the suppliers thereof) in RSA
· Allgoods supplied & services provided in RSA IFthe transaction is subject to the CPA
· Even if the supplier’s principal office is overseas
· All franchise agreements irrespective of whether the juristic person involved is above the prescribed threshold (There are of course specific sections of the CPA where it is indicated that they do not apply to franchise agreements)
The CPA does NOT apply to the following:
· Credit Agreements– the agreement per se is exempt BUT the CPA is applicable to goods & services provided in terms of such an agreement
· Goods supplied or services provided to state i.e. the state is not a consumer
· Exempted industries
- Upon application from regulatory body due e.g. duplication of legislation
- Currently an example of such an industry is insurance but they have a window period within which to comply i.e. to bring their statute (‘FAIS’) in line with the CPA
· Employment & collective bargaining agreements
· A consumer who is juristic person and who is equal to or above threshold
- R3m turn-over per annum or asset value
- at time of transaction
· Even if the transaction is exempt, any goods supplied in RSA and the importer, distributor, producer and retailer and nevertheless subject to sections 60 & 61 (i.e. safety monitoring and recall and absolute liability)
What are the important dates for the implementation of the CPA?
· APRIL 24 2010 – this is described as the ‘early effective date’ & pertains to absolute liability
· OCTOBER 24 2010– ‘generally effective date’*
· EXTENSION*– This date has now been extended to APRIL 01 2011
- These were initially published early September 2010
- A revised version was published November 29th and the deadline for comment is January 31 2011
The implications for business are in essence the following:
· Even though the CPA (in its entirety) only becomes operative April 01 2011 it is nevertheless imperative for all business to start ‘implementing’ it now which is the legislator’s stated intention.
· This means not only assessing ALL your business forms and contracts for compliance, but also advertising material and strategies and training your staff and assessing all contracts with your suppliers, whether local overseas.
· The CPA refers to the 12 and 18 month periods (from April 2009) respectively between the date of signing of the CPA by the President and the ‘early effective date’ (April 24 2010) and the (initial) ‘general effective date’ (October 24 2010) as having the following purpose:
‘to afford reasonable time for both suppliers and the regulators to adjust their practices and systemsto accommodate the new requirements of the Act’
As with all legislation there are shortcomings & lacunas and in my humble opinion the following are but a few of what I believe to be shortcomings of the final draft of the CPA and the latest draft of the regulations:
· Some of the definitions are vague or inadequate e.g.
o Use of the words ’arrangement’ and ‘understanding’ in the definition of ‘agreement’ – it may well play havoc with the concept of ‘consensus’ and give the traditional so-called ‘gentleman’s agreement‘ greater legal standing as it has had before
o ‘Consumer’ has understandably been extended to the end-user of service or product – the problem is the concept that it is irrespective of whether such a consumer was a party to the original transaction – it is thus a real challenge (via labels, etc) to bring to bear on such a third party (at least the most relevant) terms and conditions of the original transaction!
o ‘Consideration’ includes barter but then when a franchise agreement is defined, is refers to the ‘payment’ of a ‘consideration’ thus apparently not accommodating the barter concept
· Some qualifications are incongruous – let’s take the case of intermediaries as opposed to franchisees:
o As indicated above there is a R3 million ‘ceiling’ above which a juristic person is deemed not to be a consumer (section 5 (2) (b))
o However it would appear that the CPA will apply to all franchise agreements and transactions pertaining thereto, regardless of the juristic person’s net asset value or turn-over (Section 5 (7)
o A franchisee will thus always have the protection of the CPA whereas the intermediary, such as a minor travel agent, whose turnover fortuitously due to the cost of the plane tickets and travel packages quickly exceeds R3 million per annum, ‘loses’ consumer status and is thus ‘powerless’ vis a vis large suppliers!
o Then, to add insult to injury, the regulations require unbelievable transparency of such intermediaries such as:
o Basis for calculating fee
o Other costs intermediary entitled to recover from consumer
o Any information relevant to consumer i.e. to buy or continue relationship
o Commission, consideration charges, brokerage due
o Any relevant information
o Details of principal & mandate
o Cooling off rights & procedures
o Personal interest that may lead to conflict of interest
o Code of conduct
o Complaints procedure
· The limitations on fixed term agreements do not apply between juristic persons
· Some of the CPA provisions still need to be detailed in regulations
It is nevertheless a most welcome & carefully drafted document and we’ll simply have to wait & see as the proof of the pudding is in the eating!
PLEASE NOTE: THE ABOVE IS ONLY A VERY, VERY BRIEF OVERVIEW OF THE SALIENT POINTS OF THE CPA & SHOULD NOT BE REGARDED BY ANY STRETCH OF THE IMAGINATION TO BE A COMPREHENSIVE SUMMARY. NO ACTION OR OMISSION MUST BE BASED OR TAKEN BASED ON THE ABOVE, WHICH SHOULD ONLY BE DONE ONCE THE ENTIRE CPA HAS BEEN PERUSED AND WITH SPECIFIC REFERENCE TO THE READER’S BUSINES AND RISK PROFILE AND THEN IN CONSULTATION WITH A SUITABLY QUALIFIED PROFESSIONAL
© ADV. LOUIS NEL
JANUARY 29 2011
PH 27 11 463-4556
FX 27 11 463-4557
MOB 27 83 679-4556
Real-World Business Cases For Real-Time Visibility Across Oil And Gas Supply Chain
As I highlighted in a previous posting, without accurate and timely information about the location and integrity of needed parts, equipment, tools and supplies, Oil and Gas owner/operators and their partners face a number of major risks, including environmental and safety risks, operational risks as well as economic and compliance risks.
Today, I want to turn the spotlight on some industry-leading projects that are leveraging innovative and practical solutions to address these challenges and risks. Owner/operators and their equipment and service providers are increasingly utilizing a widening array of wireless tracking and sensing technologies (e.g., sensors, RFID, GPS and SatCom) tied to software platforms. These solutions help them reduce risks while also squeezing greater efficiencies, cost savings and profits from their operations and capital projects.
Business Case Studies for Smart Asset Management
Ensco International, a global offshore oil and gas drilling contractor, wanted to replace its manual inventory processes with an automated system for its warehouses and fleet of 52 rigs, including six ultra-deepwater rigs under construction. Ensco had excessive spare parts and challenges managing inventory and preventive maintenance on spares.
Its existing Enterprise Resource Planning (ERP) software contributed to these challenges because of its delayed data entry, exhaustive paper work requirements, and the complexity of workers using the software in the field.
By simplifying workflows, leveraging data from barcodes and RFID, and extending its ERP system to the "edge" of the enterprise with agile supply chain execution software, Ensco now has a fully automated system that synchronizes inventory information in near real-time among its warehouses and rigs. This integrated approach, which eliminates the white space between ERP and operational activities at the execution level, automatically collects and utilizes data end-to-end across operational areas.
As a result, Ensco is now able to reduce and consolidate inventory while equipment is on the move to a new drilling location. At the same time, the company has improved its efficiency and the ability to find equipment when it's needed. "Ongoing communications and the ability to know where everything is allows us to work more offline now where it really counts," said Dave Pascoe, Rig Manager for Ensco International.
FMC Technologies is one of the world's largest oil field service providers and manufacturers of parts and inspection and repair services for hydraulic fracturing jobs. The company wanted to use RFID to address pain points such as redundant inspections, job delays, and job cancellations due to non-compliant parts. By attaching RFID tags to oil field parts, such as pipes, valves, swivels and other components connected to manifold trucks and pumps, FMC had a new means of automating the identification process and dramatically decreasing the time it took to process equipment into and out of the field.
"The intent is to increase safety and efficiency while also realizing cost savings for our customers," said Adam Berg, FMC Technology's Engineering Service Manager.
"FMC has developed a comprehensive business case behind the technology and its use within the hydraulic fracturing industry. This includes estimates of $60 million in savings per year industry-wide. RFID technology provides our customers with substantial improvements in their ability to address and improve some common industry pains around parts inspections and identification. The ability of RFID to alleviate or eliminate these issues is key to our business case".
At the Dow Chemical Company, the company wanted to track a wide range of assets, ranging from cylinders throughout the extended supply chain - from suppliers to end-users and back - as well as to monitor hazardous rail cargo in real time. In the latter case, Dow wanted to address the high cost of "exception" events or potential critical failures and stay "ahead of the curve" with impending government regulations to improve safety for hazardous material transport. By incorporating GPS, satellite communication systems and sensors affixed to tank cars, Dow is now able to "ping" on demand or receive automated alerts of possible security breaches. Geo-fencing capabilities that leverage satellite images enable identification of the nearest first responder in the case of an emergency or security threat.
"Dow places the highest priority on safe production and transportation of hazardous materials," said David Kepler, executive vice president, chief sustainability officer and chief information officer of the Dow Chemical Company, "and we are working aggressively to reduce risk and improve performance. The Chemical and Petrochemical industries should set the highest standards with advanced technology solutions like this to address concerns and ensure safe passage of chemicals in-transit or at rest."
The Dow project has become a role model in its industry. Because of this project, federal funds are now available in the chemical industry to help implement similar types of solutions.
Summarizing the Benefits
The deployment of automated asset visibility in supply chain fulfillment, from requisition to rig, can help owners/operators attain four overriding benefits:
1. Reduce costly expenses of "hotshotting" equipment and expedited resources: hotshottings directly to the rigs; expediting resources on the rig and throughout the supply chain.
2. Reduce lost production: Having real-time information on equipment and parts, reduction in search and receiving time will prevent a subset of the root cause of lost production.
3. Enable safety and fiscal regulatory compliance: In more and more international operations, audit trail and receipt records are required for safety reasons and fiscal and customs compliance.
4. Reduce errors and reduce inspection resources: Automating inbound, handling and outbound processes from requisition to rig.
Upstream production facilities in remote locations present especially challenging operational and supply chain risks. As Sid Snitkin, VP at ARC Advisory Group, said in a recent conversation, "Offshore rigs, for example, have scarce storage space.
The rigs essentially have to treat the supply chain as their lay down yards." Delayed or lost parts, such as drill bits or pipe, can cost operations and capital projects hundreds of thousands or even millions of unrealized dollars.
The breadth and depth of deploying such Req-to-Rig solutions can be for a few sites or across regions, depending on the scope of operations and the benefits of shared or aggregated visibility. Partners such as service and equipment providers and 3rd party logistics providers, in striving to serve the owner/operators better, can also attain tremendous benefits, which I will discuss in a future posting.
Terence Leung is the Director, Industry Solution Management for Commercial Industries at Savi Technology, a Lockheed Martin company. His keen interest is to bring ground-breaking and practical solutions to asset-intensive companies. Previously, he was responsible for solutions and marketing at NRX, an SAP solution partner serving asset-intensive industries in the area of asset information management. Terence was also with the High Tech business unit of i2 Technologies and supply chain and manufacturing practice of Deloitte Consulting.
Brought to you by ARC Advisory Group
Posted on Nov 18 2010 | By Terence Leung
Partnering for Performance: the key to our success
Join us for insights into innovation and best practice in contracting, negotiation and relationship management at the 8th annual IACCM Americas Conference. This year our event focuses on outsourcing and services contracts, and evolving organizational capability. Please note that IACCM will be separately staging its first Global Forum for Contracts and Commercial Management in Arizona, in October 2011, which will be a worldwide, cross-industry event.
Why join us in Orlando?
Engage with experts from the highest performing companies in the world, and discuss the biggest and most current issues that you face every day. Don't miss the opportunity to network with the creme de la creme of the contracts, procurement and outsourcing world. Collaboration, networking and commitment to professional excellence are the keys to success, so join us as we partner for performance.
Have A Woman Negotiate Your Next 3PL Contract?
Congratulations to Bob Sparks, who cycled the battlefields of Flanders to raise money for charity...
American Bob Sparks, currently MD of CLM Matrix in the UK, is firmly embedding himself into the English passion for having fun whilst raising money for charity. An active member of the Harpenden Round Table, he and 16 colleagues recently undertook the rigorous challenge to cycle across the WW1 battlefields of Flanders, covering the 120 miles in two days. On route, stops were made at Tyne Cot Cemetery and the Menin Gate Memorial in Ypres, a moment for synonymous reflection as the funds raised were donated mainly to 'Help for Heroes' in support of soldiers injured in Iraq and Afghanistan, and to the Second Harpenden Scouts. Between them, Bob and his colleagues raised the commendable sum of £11,000 ($17,700 USD) and paid all their own expenses to ensure every penny raised went to the charities.
Outside contracting — contribute to this column
Do you have a special activity or achievement in your life outside of contracting? If so, send photos and a 100-word description to Suzanne Birch at email@example.com for consideration to publish in this column.