Hello, this is the type of contract structure my company has used for a while, Master terms, often evergreen, with annual Product and Service Agreements falling under it. I find it really helps create flexibility for purchases through sub agreements since anything that falls under the Master tends to be a shorter document. Generally, the Master governs unless it's a service or product specific term that the Master does not speak to, but we make that all very clear in the body of each section of the agreement. We also make it clear that any agreement falling under the Master only stays in effect as long as there is a Master in effect; though I have seen agreement terms that state until the end date of the sub agreement the Master terms still govern even if that Master has expired.
For Order of precedence I've seen it done with a list, as already mentioned, we try to keep things as uncomplicated as possible, so sub agreements just refer back to the specific Master, which supersedes any PO terms, and each sub agreement only speaks to one topic.
I don't have much of an issue with PO/SOW (for me, service agreement) alignment, ours is a pay at the beginning of the term, after agreement execution, so PO creation can occur after the service term has been set, but I would imagine there should be some sort of language you could include in your SOW that would address that concern...
Hi, I would be willing to have a chat about this. I am a lawyer with more than 20 years experience and although I have not worked extensively with modular contracting, I should be able to provide some advice. Please reach out to me at firstname.lastname@example.org.
If I understand the question correctly, it is asking about the benefits and challenges of breaking contract terms into, for example, POs/SOWs, Master Agreements, Terms of Service, Data Processing Agreements, etc. This has certainly become the norm in the technology industry allowing for multiple purchases under a single master agreement, with the added benefit of allowing companies to amend the ancillary agreements on notice or website updates. Most deal with the order of precedence by listing the agreement order. It may, however, be better to set the order based on the nature of the term, so that updates to data processing agreements take priority over all other agreements. With respect to survival, the most common approach is to extend contractual terms until the expiration of the last PO or SOW or some period following such expiration.
Great question. You have certainly come to the right place for some expert advice. I hope others jump in as well. You can find an array of resources at your fingertips (including case studies).. if you go into the resource library (Resources > Resource Library) and search by category = Negotiation. I would particularly recommend:
IACCM Dubai Member Meeting April 2019 Presentations
Ask The Expert: Negotiating and Contracting in the Middle East
The Power of Intent Workshop - IACCM APAC Conference 2019
Do Procurement practices cause dishonesty?
Negotiating in a time of coronavirus
In Negotiations, Givers Are Smarter Than Takers
In addition, you may wish to consider our new Managing Contracts Virtually training program (which is currently included as a member benefit) .. Training > Managing Contracts Virtually.
If you need help accessing any of these materials, please contact me at email@example.com.
Hi - great question - and perhaps if I reply with a perspective from New Zealand.
I think that the leading company see opportunities where demand is no longer the lowest price or most recent tender - but on availability and quality within a short space of time - and often local ! There are good examples of firms here changing up their business models - making masks and other protective gear - when their tools and workers would otherwise be idle as a business that is not deemed essential, and can't therefore operate.
Some others seem happy to wait it out, but it's fair to say that early signs are that the landscape for both work and production within the economy will change post COVID. Even from a work point of view, many are going to question why they need to come into an office each day to do their work.
Hi Darren, for the last few weeks I have been reading bedtime stories to'the children of IACCM' (though given time differences, it is a funny bedtime for some). It happens three times a week and they keep turning up .... I'm also an accountant by background - so maybe that is what makes it effective!!!
I wish I could better balance my work life and home life, there have been a few too many midnight finishes of late!
Alma, my apologies for not spotting your post earlier!
The elements you mention are components of a Commercial Management process. To gain a comprehensive overview, you may find the IACCM 2019 Benchmark Report helpful - it sets out the various activities associated with the contracting and commercial lifecycle.
If you would like to discuss how you might best approach building the Commercial function, I'd be delighted to arrange a call. You can contact me at firstname.lastname@example.org
Hi - at my workplace we are mainly dealing with FX related claims that are being submitted as force majeure. In these cases, they are (b) - in that did the party have an opportunity prior to the FM event occurring to reasonably speaking, manage and treat the risk.
! disclaimer - I don't know anything about Australian law !
but I don't see how option a) can be reasonable.
Risks can appear as time goes by due to changing circumstances and something that is not reasonably foreseeable at one point in time could well be later on.
My apologies for the delayed reply to your question.
In general, the clause is referring to an issue that you could reasonably have anticipated and therefore could have prepared for it in some way. That means not only before inception of the contract, but also during its performance.
Even in a case where Force Majeure applies, there is a duty to take reasonable measures to mitigate its effects.
In the case of the pandemic, there are many debates over whether and in what circumstances it represents a Force Majeure event. However, even when disallowed, there may be grounds for claiming frustration of contract or impossibility of performance due to related events.
We have also launched a survey today which has already generated hundreds of responses and we will be putting out a report on the results early next week so please watch out for that.
I hope this helps and please do let us know if you have further specific questions.
• Cadent Gas Ltd
There are multiple ways to be honest, including Force Majeure clauses and Business Continuity obligations on the supplier which are regularly tested.
• Vaisala Inc.
We have recently added a statement to all quotes to customers with regard to COVID19, namely that it is now a 'known' event and given that the environment is ever-changing that status of your order may change, including for example the time from submission of order to delivery/performance. We will use all commercially reasonable efforts to notify you as soon as possible of any change. So perhaps something along those lines? Our sales and executive teams seem pleased that we are addressing it directly.
Hi Erik - personally I don't think that you are the last one to figure it out, and if I might observe, I believe that there are many others around the world trying to work out what it means for them.
There's two things I'd contribute to your thinking, which are caveated in the usual way (i.e. my views and not necessarily those of my employer) :
1. I think that there is a financial cost to the organisation in seeking to embed these. It's a discussion that I've found has meant that it's hard to get real traction - as whilst the requests for these initiatives come in, there has not been the additional funding provided to many Government organisations to get his going. Sure, it's argued that there are other benefits - often more widely outside of the organisation - but many organisations aren't winning the battle with their finance teams that could see this progress.
2. I have been impressed with the approach of the IRD team in New Zealand. From the presentations that I've seen from Karen Whitehouse and the team, they picked one of the UN goals that was most relevant to them, and looked to focus on that. I think this will be more effective than those who try to achieve too much by looking to incorporate too many of these goals into their procurement activities.
We've looked to take that thinking on board into our operations. Given our contracts are split into portfolios, the challenge for my team in 2020 is to get the business agreeing to an area of focus and measurements for each of these portfolios. These might be the same, or they might be different, but we're using that approach to get the business owners, as well as the leadership team to buy into it, so it's not us going it alone.
Like you, I would love to hear how others are approaching it - it's brave of you to start a topic by making yourself vulnerable, but I think that you're in good company.
• NXB AB
Hi Darren, thanks for your contribution. I will add, in terms of motivation, that the Swedish government yesterday announced their long-term strategy towards a sustainable society in general and climate activities in particular. As always, there were many (130) activities, more or less concrete, but a very firm statement by the minister was that they will demand from all public procurement to embed the Agenda and thereby drive the change process.
Obviously, there are a zillion question marks on how to do it (sounds a bit like "how to eat an elephant") and I believe that selecting the goal(-s) that are most relevant would be a decent strategy with a good chance to succeed. I looked at the IRD homepage but could not see a whole lot. Is there a write-up of some kind that I could get access to.
Btw, I am glad to see NZ being active, Tim mentioned it to me and I really believe that us smaller countries are quicker to decide and get going rather than just talking. Denmark is also, as I understand it, acting in the same direction and I honestly believe that we together could put together an IACCM statement of some kind, given that we find more material.
• Ngamuru Advisory
You've hit on a really good topic. As I sit here in Australia in the areas affected by fire and storms the need for broader outcome as part of public spending is not lost on me. So much so I recently wrote an article on my blog (www.performancebasedcontracting.com) on this topic. I also mentioned that this is being used, or trying to be used. I'd be happy to provide more details directly if you need. Key thing is that it is possible, just not typical. And I hope we can all change that!
Dr Andrew Jacopino, IACCM Fellow
• NXB AB
Hi Andrew and thanks for your encouraging article. We seem to have things bubbling here and there in the world and I understand that Tim Cummins is taking a lead from an IACCM perspective, that you are involved and that I will try to contribute to the best of my capability.
Meanwhile, I continue to make myself present in the public domain, an interesting effort after 44 years in the private sector. There is no doubt in my mind that the "public muscle" is a major enabler to introduce a more targeted, ambitious and future-focused trading practice.
In addition, I hear more and more that having a common purpose and an encouraging, visible leadership is more engaging and motivating to coming generations entering the labour market than career paths, personal benefits and generic power and status symbols. Without a clear purpose and professional leadership "the good ones" are gone. Yesterday, the CEO of Scania, producer of heavy trucks, buses and other machinery, said exactly this in a TV interview. My contacts with leaders in the public sector say the same.
Tomorrow, I will meet with a few like-minded people in Copenhagen and look forward to continues communicating with you and others in IACCM on the subject. A "viral approach" will be very important, I believe!! There are big and well funded opponents to a change in the current activities.