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A specification is a statement of requirements to be satisfied in supply of product, or service. Two main types of specifications: 1. Conformance Buyer details out exactly what the required product, part or material must consist of. Supplier task is to simply conform to description provided by the buyer. 2. Performance Buyer describes what it expects a part or material to be able to achieve. Purposes of Specifications Specifications must be clear and unambiguous. Specifications facilitate: Communication between all involved, including purchaser and supplier. Comparison between bids. Functions of specifications: The communication has to be clear and unambiguous. Comparison facilitates a fair and more accurate supplier s bid A specification is the source document for contracting. Specifications can be divided into two categories: Conformance specifications tend to be more technical and rigid. Performance specifications have a range parameter: minimum to maximum performance expectations. 4
When generating KPIs consider: What is to be measured (strategic, operational or tactical). Link to purchasing business plan. Compliance with 6 point plan. Available data source. Valid means of measurement. Write target. Communicate to relevant others. Characteristics of KPIs: Specific easily understood. Measurable what does success look like or how is it quantified? Achievable otherwise de-motivational. Relevant to core business/service. Timed realistic timescale. 5
Implies Terms A contract term that has not been expressly agreed, drafted and included in a contract. It is implied in the contract by law whether or not both parties agree or not. If a contract is too detailed, courts will be reluctant to imply terms, too many gaps may lead to a contract being declared void. Breaching a condition entitles the other party to sue for damages and terminate the contract if they wish. In some cases, the injured party might take the option of affirming the contract and claiming damages. A condition is an important term in a contract, one that goes to the very root of the contract. If breached, the contract would be in jeopardy. Types of implied terms: Sale of goods act Fit for purpose Description on packaging Passing of title Sample/brand Express Terms Provision in a contract that is clearly, directly and unmistakably communicated in written or spoken words and includes: Exclusion clause Penalty clause Liquidated damages Force majeure Guarantee Warranty Payment terms Condition Is a vital term to a contract, breach of which may result in the other party suing and claiming damages. Breach of the term leads to contract termination and suing for damages by the aggrieved party. The leading case: In Poussard vs Spiers and Pond (1876), an actress was employed to play the leading role in an operetta for a season. She was unable to attend until a week after the season began and the producers, who had to engage a substitute, refused her services when she eventually appeared. They purported to terminate the contract and sue for breach of contract. The court heard evidence that as the opening night was regarded as very important, the actress s absence amounted to a breach of condition and so the producers were entitled to terminate the contract. Warranty Is a less important term. Breach does not constitute a substantial failure of performance, the injured party may claim damages but cannot reject the contract. 6
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The battle of the forms occurs where there is a stand - off between the supplier and the buyer on whose terms to use. The general rule is that the last piece of paper will govern which set of terms should apply. The buyer can use the following ways to avoid the Battle of the Forms trap: Create a set of standard terms and conditions in advance, which will cover all future dealings with suppliers. It could be the buyer s or seller s terms or a combination of both sets. These will form a framework agreement. Use of tenders. With the tendering process, it is the buyer who controls the terms and conditions of the contract. Web based purchases (e-contracts), the purchaser automatically accepts the seller s terms and conditions before a contract could be made. Buyer to incorporate the Order Acknowledgement Slip to be signed by the seller and return to buyer. A request for quotation is an invitation to treat. 11
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Effects of misrepresentation Rescission 1. Contract becomes voidable 1. Main remedy for all types of misrepresentation until injured party elects to rescind equitable and so discretionary remedy 2. Innocent misrepresentation takes effect when notified to the other rescission and indemnity under s2(2) MA party court discretion to award damages if releases aggrieved party from obligations equitable to do so sets contract aside as though never 3. Negligent misrepresentation made right to rescind but court has power to 2. Injured party may lose right to rescind refuse and award damages instead accept some benefit under the contract can claim damages under s2(1) MA affirm the contract in some other way onus on the person making false wait too long before taking action statement to show grounds for believing it to be true may not be possible to restore parties to original position damages do not need to be foreseeable goods have passed to a third party 4. Fraudulent misrepresentation main remedy is rescission Final point exclusion or restriction of liability or a can also claim damages under tort of remedy for misrepresentation deceit... not under contract. s3 of MA... any such clause is subject to a test of reasonableness. 13
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Key points on once-off It commits both buyer and supplier to all the terms relevant to supply of the specified requirement, in a specific case. It only commits the buyer and supplier to purchase and supply of the specified requirement, in a specific case. 15
Three options: To issue call-off orders against the framework with a selected supplier To run a further mini-competition (competitive tender) between multiple suppliers included in the framework To go elsewhere (utilising appropriate contract tender and award procedures) Examples of framework arrangements Supplies from a single provider Supplies from several providers Consultancy services Minor works Major works 16
Ideal if you are: a larger organisation (10+ staff, several offices) or Several smaller organisations able to work together Have just secured reasonable funding for a large project (or want to show procurement compliance on a lottery bid) Benefits of mini-competition Benefits of consortium purchasing Multiple suppliers provide choice and competition Exact requirement can be further refined over and above the basic contract terms. Achieving best value for money for your specific requirement Terms and conditions already established, so call-offs can just refer to the agreement. By following these guidelines, and any specifics detailed in the Buyers Guide, you will ensure adherence to EU Procurement legislation 17
Apply the terms of the framework agreement Hold a mini-competition between capable framework participants 18
Examples of service contracts Goods are tangible or material items, which can be consumed. Services are actions individuals or organisations perform which confer a benefit, but do not result in the ownership of anything. Works includes projects such as the construction, alteration, repair, maintenance or demolition of buildings or structures; the installation of fittings; and so on. Service level agreements What services are included? Standards or levels of service The allocation of responsibility for activities, risks and costs. How services and service levels will be monitored and reviewed. How complaints and disputes will be managed. When and how the agreement will be reviewed and revised. 19
Many kinds of business asset are suitable for financing using hire purchase or leasing, including: Plant and machinery Business cars Commercial vehicles Agricultural equipment Hotel equipment Medical and dental equipment Computers, including software packages Office equipment Renting office space and buildings Leasing is a contract between the owner(lesser) and the lessee for the hiring of a specific assets. Leasing can apply to any fixed assets and quite commonly used for plant and machinery, office equipment and motors vehicles. Instead of acquiring these assets for itself, the company enters into an agreement with a leasing company whereby the latter purchase the assets in question and then lease them ( rent or hire them) on a long-term basis to the former. No initial funds are required but there is instead a regular charge for lease payments to be charged in the profit and loss account. 20