Legal Aspects, Selection, Contracts, Essay Example
This paper is about the project procurement. Procurement is a method that corporations employ to obligate each other to do business (Baily, 2008). This paper will explain and review how procurements can and are legal binding commitments between two parties. It will show the essence of the project manager understanding the legal aspect and responsibilities associated with procurement management. And finally prove how the source selection and contracting processes can be affected and possibly impacted by the legal responsibilities of the parties involved in source selection and contracting
Project procurement and the legal responsibly attached to it.
Project procurement entails a procedural process of identifying and procuring through purchasing or acquiring necessary project services, goods, or results from outside vendors who will do the work (Murray,1996). Procurement is the work of a project manager although some organizations opt to select a person other than the project manager to handle these responsibilities. Project management industry recognizes six processes which are integral to project procurement management.
By Shaw, the first process is planning purchases and acquisitions. Here, needs required for outsourcings are identified. Market analysis is done to differentiate the sources from where the required goods, services, or results are to be obtained. While planning the procurement, the project goals are reviewed to make sure that the acquisition remains within the laid down goals. This step of procurement is crowned up by identifying the resources necessary for acquisition, determination of the contract type needed to protect the acquisition and finally preparing of the procurement management plan/schedule (Shaw, 2010).
The second process is contract planning. Baily claims, in this step it is mandatory to describe in depth the details of the product or services requested for and prepare the requests for proposals and bids to avoid problems (Baily, 2008).
Third is the requesting of seller responses and proposals. When requesting for seller responses and proposals, qualified vendors are identified and put on the qualified seller list. Those vendors selected are considered qualified basing on their ability to provide /supply the goods or services putting into consideration the constraints of the project, their interests in providing the goods or services and the worth of their bid.
Immediately the prospective sellers have been identified, and set apart, their proposals are evaluated in order to determine the best vendor to supply the goods or services. After the best sellers have been chosen the contacts are then negotiated. Administration of the contracts is the critical part of the project procurement (Mann, 1998). Here clear outlining of the obligations, responsibilities, and performance goals is very essential in completing this procurement step. The contract once administered is expected to perform its duties to the satisfaction of the parties involved. In fact the contract must track the excursion of the initial stated goals. In cases where the project manager corrects the processes in order to get the required results, contract changes should be controlled and documented to avoid unnecessary legal claims (Baily, 2008). As soon as the contract is completed the final step follows which is the closure of the contact.
During closure of the contract the whole process is audited to make sure that all the contract terms were fulfilled during the procuring. The performance of the vendor is evaluated and the lessons depicted in the contract excursion recorded.
Procurement process involves making of contracts. Those contracts must have certain legal obligations or must be enforceable before the court of law (Baily, 2008). The legal aspects of procurement may include: contract laws, agency laws, uniform commercial codes and federation acquisition regulations With regard to contract law, a contract is an agreement between two or more parties which is legally enforceable (Mann,1998). It is mutually binding where by one party gives an offer and the other party provides the consideration. The contract constitutes the following basic elements namely; Offer, acceptance, and Consideration and an intention to create legal relationship
Definitions of terms
Offeror is the person who makes the offer.
The contract can either be formal (written) or oral (verbal) as long as the contract terms are affirmed and understood. An oral contract is a contract made by a word of mouth only ( Mann, 1998). It is very hard to deal with it since it is difficult to prove it. Although it is difficult to deal with verbal contracts, if the contract terms can be admitted or proved by the one party then it can be enforceable just like a written one.
Formal contract is a contract which is written and signed. This type of contract is enforceable before the court of law (Baily, 2008). It has its terms well elaborated for each party to understand. With regard to contract essentials, contract must have two parts, an offer by one party and acceptance by the other party without which then contract cannot be established (Baily, 2008).
Commercial law refers to the body that deals with business transactions (Baily, 2008). It covers many areas that affect business and people who indulge in commercial transactions. Commercial law is intended to resolve the disputes between merchants or merchants and their customers. In USA the commercial law has been coded as uniform commercial code (UCC). The commercial laws based on UCC are very advantageous in project procurement because they help make the parties involved in the process of project procurement to seek remedies and resolve disputes which may arise from their business transactions. UCC provides courts with appropriate governing laws, especially the purchase and sale of the goods through contracts is covered by article 2 of UCC (Mann, 1998).
Legal Responsibilities in Procurement Management
Procurement management entails the responsibility for procuring materials, supplies, and services. The employees involved in procurement management are known as buyers who can either be classified as junior or senior, purchasing agents, or supply managers. Procurement management involves the acquisition of products and services from outside the vendors who will carry out the work in order to complete a task or a project (Mann, 1998).
Basically there are two types of project procurement: A project where the company is legally responsible for a particular product under a contract, this carries with itself contract management responsibilities that spell out specific tasks to certain team members. It can also be responsibility of the contracts in which the buyer is hired to perform a certain task on behalf of a given seller, this contract is mostly involved in procuring services and the team involved in the execution of the process till it is fully discharged.
Procuring a project involves establishment of a well thought of planning process involving various decisions to be made such as what to acquire and how to acquire it. Then , the team involved plans the contract that provides necessary legal documents that will facilitate the exchange. Drafting of the legal documents is followed by the seller responding certain enquiries e.g. a bid or a proposal. On receiving feedback, the procuring team evaluates the various offers and determines on whom the project will be awarded. The contract defines clearly the relationship between the buyer and the seller. The project commences once a deal is sealed and all parties are bound by the terms and conditions spelt out on that contract (Shaw, 2010).
The whole process of project procurement is planned and controlled by a procurement manager who plays various roles. These roles includes ensuring policies are complied with, coordinate various procurement activities, and supervise procurement staff. The project manager is expected to be experienced in terms of having a solid understanding of current business processes, proficiency with policies and contract law (Baily, 2008).
The procurement manager ensures policies are complied with to protect his company from legal huddles, and to enable his company enjoy benefits arising from policy compliance such as obtaining goods and services of high quality at a fair price possible. The manager must ensure that the staff of the department involved in procurement of goods and services for the firm adhere to the standard procedures and that they stick to the guidelines governing their trade and those stipulated under the contract (Mann, 1998).
The procurement manager, apart from buying is also responsible for approving the acquisition of goods and services required by the organization, searching for reliable vendors to provide goods of good quality at a reasonable price, gets involved in negotiations and in stipulating the technical specifications of goods, the quantity desired and in setting time when deliveries are to be made (Mann, 1998).
Procuring can be broadly classified as strategic (direct) or transactional (indirect). Strategic procurement is focused in building beneficial long-term relationship between those involved in buying and the suppliers. This involves procuring materials that give the firm a competitive advantage over the competitors. Transactional procurement tends to focus on dealing repeatedly with the same vendor on a blanket procurement order especially for maintenance and repair goods or any other thing that is not included in the bill of materials and is used indirectly in the production of goods by the company (Murray, 1996).
If the organization decides not to buy all the goods and services identified on the project scope, this can ensue into legal battles because from the law of contract most goods and services are bought on the terms and conditions of the vendor and refusal to comply with all the terms by not procuring everything as par the agreement could render the company liable to paying damages for having discharged the contract to the disadvantage of the vendor who can demand payments to recover losses he incurred on his part in making the contract possible (Mann, 1998).
The objective of terms and conditions under the contract is to pass as much risk as possible to the buyer by the seller and therefore the buyer has a legal ground to claim that unwarranted risk would have resulted into harming the company if some of the goods and services stipulated under the contract were not foregone (Murray, 1996).
The procuring manager should do three things to reduce the risks of buying using a sellers terms and conditions; know the risks in each step of the following processes; delivery, passing title, insurance, loss or damage, acceptance/failure, rejection, quality, fitness of purpose, terms of payment, etc. second the manager must be aware on what is acceptable and what is harmful under the contract. Finally take action to deal with unacceptable risks (Mann, 1998).
As Stipulated by the UCC a claim arising from breach of contract may be discharged in whole or in part without consideration by agreement of the seller if the contract had not indicated under the terms and conditions that any action will be taken should the company not buy some of the goods or services.
Procurement has to follow all the relevant procedures so that legal claims are avoided in case a problem occurs during procuring process. Project managers have an obligation to ensure that during any project procuring, proper procuring guidelines are followed so that proper contracts are formulated which will be satisfactory to both parties after the process.
Baily, H., (2008). Procurement principles and management. Harlow, England: Prentice Hall Financial Times.
Mann, R.A., (1998). Business Law & the Regulation of Business. 6th ed. Cincinnati: South- Western Publishing,
Murray, J. E., (1996). “Shakes Alive-Surprise, Surprise.” Purchasing, 5 20-22.
Shaw, F. N., (2010). “The Power to Procure: A Look inside the City of Austin Procurement Program”. Applied Research Projects.
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