This is a difficult question to answer because it rather depends on organisational design and, to some extent, the nature of the project.
Commercial and contract considerations should be in place from inception of the project concept and design. There should be a commercial analysis to understand the business requirements and to determine the nature of the commercial relationships and contracting models that will be needed. If this is a relatively standard and low risk form of project, the decisions may be quick and easy to make.
Too often, projects are initiated without proper thought being given to the commercial risks and opportunities. As a result, assumptions can be made with regard to the form of relationship and the underlying terms. By the time commercial or legal resources get engaged, it is often too late to alter some of these assumptions, or doing so creates major delays.
Another issue arises in the context of post-award contract management. Frequently, the implementation and operational resources are not the same as those who were involved in the original tender and negotiation. Good practice here is to start involving post-award contract management during the negotiation so that they have a good understanding of the final agreement and can move rapidly once it is signed.
You may find several IACCM resources are helpful. I will send you a paper on the Role of a Contract Manager. You might also look at the 2019 Benchmark Report which sets out the typical work areas for CCM staff. We have also undertaken a cross-industry project to define the contracting lifecycle.
I made my initial comment about organisational design because the critical point here is about competence in performing a role, rather than a specific job title. If, for example, you have project managers who have specifically been trained in contract and commercial management, they may have the competence to make front end decisions.
Do get in touch if it would be helpful to discuss this in more detail.
• GMR Energy LImited
I agree with Tim that requirement of commercial & contracts manager is required at each and every stage of the transaction right from beginning i.e go or no go stage . To be a good commercial contracts manager one should be able to understand technical ,legal, finance, business risks, insurance, taxes etc. rather all aspects of a business. They need not be an expert but need to cut thru the clutters of complicated matters involving multiple dimensions and factoring them appropriately in all the documents created for signing with the counterparts,decision making etc.
Typically in any organisation depending on the confidence level of the management one enjoys and ability to contribute in bringing different dimension to the table than other participants , he /she would be kept in the loop as a commercial & contract manager.
Problem with commercial & contract managers is that every project manager for that business manager/engineer feels that they know contracts/commercial matter ( which they might be right in some cases) and go beyond their briefs while they can get away in small value low risk item contracts, it gets complicated when contracts are of high value, long term with multiple risks.
Hi Steve, thank you for your question. Pricing trends for major equipment are not something we specialize in unfortunately and in the current circumstances, the answer would, I believe, vary enormously depending on the nature, type, and location of the acquisition.
• GMR Energy LImited
Believe there is no ready made global data base as of now. Each countries Govt. publishes data on whole sale price index/producer price index/purchasers price index( nomenclature varies) on each and every category of product including machinery, equipment etc. year on year and month on month. These data is generally publicly available and can be accessed and down loaded.
For example - there is Bureau of Labour Statistics in USA which pubishes all such data for the products manufactured in USA. In India its published in a bulletin every month by the central bank i.e Reserve Bank of India
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 firstname.lastname@example.org.
New Zealand Defence Industry Associat...
I worked in several Russian companies as Contracts Manager and in related roles at both domestic and international projects. What I can tell you exactly is that there is no such thing as specific Russian Commercial Management, there are may be some cultural differences between Russian and Western Europe management style, but methodological basis is based on the same principals and sources.
If you have any specific questions, I'll try to share with you my thoughts and observations based on my past experience.
• University of Grenoble
Thanks for your answer, this confirms what I had originally thought!
Is there any reason why there isn't any Russian Commercial Management? Is it linked to hierarchy in the business structure?
Also, would it be worth adapting it to Russia? Or is Russian "Contract Management" more of a legal job better suited to lawyers?
In my team its cross functional; procurement, finance, project management. Whoever the beneficial user is may the best person to advise if the requirement is being delivered to time, quality etc. Suggest you might want to think about creating a cross function contract management team.
Dear Ted, it pretty much depends on your organisational ambition & objectives with the Contract Management function. In my oppinion many organisations don't realize the potential (strategic advantages and benefits) of Commercial Excellence - if the organisational understanding & culture around Contracts & Commercials are at a low maturity level you can see Contract Management placed as a sub-function in eg. Legal or Finance (being a somewhat defensive approach), while the few org. (as I know it) who realize the potentials are placing it higher in the organisation, some even spilt it out to a stand-alone veritical (making sure that the context of being a "support function" is embedded, implemented & maintained) of course balanced with the organisations overall aspiration, purpose and "nature". BR Ole
• BC Hydro
In our organization, Contract management resides within the business; however Supply chain (Finance) own the process. Over the last 5 years we have been fully integrating Category Management and as a result putting in more strategic, long term agreements with an overview to the category rather than the need. Putting in such a strategic shift in business has saved us millions in our new contracts by looking at all the driving forces behind the need. Now that we have a robust Category Management program in place which covers 80% of our spend - we need to ensure that a enterprise wide practice is in place to make sure we are getting what we need, when we need it and are paying the right price otherwise the contract is simply a piece of paper. That is why Supply chain owns the process but the business is responsible for managing the work and providing the required resources to do so.
• PRS for Music
In my company the contracts team sits in Operations as the contracts they manager supports our deliverable pipeline. However, we have close links with our legal team and procurement sits in Finance. Looking at some of the replies it seems there doesn't seem to be any best practice.
• Mitsubishi Hitachi Power Systems
In my organization, our pre-award and post-award contract management for new equipment sales are led by different teams (Commercial Operations and Project Execution respectively), however there are many functions that actively support and contribute to our contracting processes such as Legal, Finance, Sales, and Engineering departments. Legal's input and review into the contract is critical for protecting the organization from unacceptable risks, but we have the overall bidding and contract process managed by the Commercial team since we are focused on the company's strategic/sales goals.
Hi Graham. Thanks for the response to this and sorry so late getting back to you. Is there an "owner" of the CM discipline? I would always expect that there would be participants from various functions but where does this all come together? is there any consolidated reporting view?
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• Australian Red Cross Lifeblood
Here are a couple that I just quickly came up with:
1. Can you recall the last time that you engaged with our team. Was it;
a) In the past 7 days
b) In the past 4 weeks
c) In the past 3-6 months
d) More than 12 months ago
c) Who is this?
2. When you engaged with our team, did you know the name of the person you were contacting?
a) No, I had to look someone up using either the contract, website, intranet, LinkedIn
b) Vaguely, I have spoken to a few different people in the course of business
c) Yes, I have regular communications with a consistent point of contact
Good evening Abdullah - I'll contribute an observation on the first one. Perhaps others who have been doing contract management and procurement for longer than me might have a different view, or say it more eloquently, but here goes....
Purchasing is a subset of procurement. It is the giving effect to a lot of the procurement work that you've done earlier (i.e. establishing what you want, identifying suppliers etc).
That said, I think that you can purchase without doing procurement, and in fact, I'd go so far as to say that you can even get the same outcome.
However, only by procurement can you demonstrate that you've got the right outcome. If you only purchase, and don't understand your needs, identify the market and consider the offerings against your needs, you can't demonstrate that you've got the best outcome for the business.
And this is where I think we as a group can demonstrate our worth to the business. We can show with procurement the outcomes that we've avoided (goods not matching requirements, getting better pricing outcomes, repetitional damage etc) by running a fair and robust process ensures that the business is better off.
On many occasions I've seen my team has moved someone from their initial fixed ideas into better outcomes by taking the time to show them what's possible and what good looks like. Do that enough times, and you have more and more allies in the business to encourage others to use your services.
Check out this article in the IACCM Library, 'Procurement' and 'Purchasing' Are Different:
Having looked at this topic, there is actually already a lot written on the question of the difference between purchasing and procurement. As they observe, for the typical person they are probably the same, but apparently 'the experts' in procurement know the difference! Though once you start reading, there is plenty of contradiction...
When it comes to Supply Management, it is yet another variant and clear as mud whether it is actually different from Procurement. Supply Chain Management is certainly a more holistic activity of which procurement is part, but that's about all you can really deduce.
The net is, these terms are used with a high degree of variability and tend to mean whatever anyone wants them to mean; the only common factor is that they are all associated with the act of buying!
Years ago Procurement and Purchasing were often used interchangeability. These days they have very different meanings. Procurement refers to the end-to-end activities from strategic category management, through to the operational analytics of spend and performance, to the tactical buying and sourcing activities which can happen in-house or in shared services.
As the Procurement function has 'grown up'it has become far more strategic, so although the term Procurement refers to all the activities conducted by the function, it also implies more strategic perspectives. The scope is also overlapping with other related functions like Finance (Accounts Payable as part of the purchase to pay process) and supply chain (Supply Planning, product innovation and supplier performance management). The increasing focus on digital in Procurement is also seeing more collaboration with other functions for example, RPA (Robotic Process Automation) and machine learning, process automation and contract management, and predictive analytics.
Purchasing is clearly the administrative activity of raising a purchase order, managing the goods/service receipt notice and approving to pay. More advanced companies use on-line catalogues to support this along with automated workflow routing and defined delegations of authority. Put simply, Purchasing includes the tactical purchase and approval activities to support buying.
When we speak about supply chain today, we tend to talk about a value chain. Some organizations are now including supply chain and Procurement in one organization given the overlaps, but predominantly they continue to be separate, but related functions.
Supply chain will include demand planning and forecasting, distribution planning, warehousing and logistics, manufacturing (which may also be a separate function), supply planning and often new product development.
Where Procurement gets involved most is in supply planning and supplier performance management, for instance, using contracts to enforce performance, and collaborating with supply chain and marketing for product and service innovation by tracking supply markets and innovations.
Conceptually, the Procurement function has shifted from managing costs to providing value. Using advanced analytics of COGS and SG&A data, digital tools and advanced supplier market research, the function is working far more collaboratively with other functions. As business cadence increases, functions are becoming more linked and lines between which function does what is blurring.