Archive for the ‘Contract Management’ Category

Contract Types

Tuesday, August 21st, 2018

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Today?s post is?from our SafeSourcing?Archives.

If you don?t like the pricing model of the contract you?re working within but didn?t know you had other options, here is a high-level overview of a few of the standard contract types being used today:

Cost Plus: An agreement wherein the seller agrees to charge based on cost of goods sold, plus whatever profit margin is required to make the project viable. One example is where a highly commoditized good is subject to price regulation or index pricing, and therefore will have their pricing fluctuate based on the market constraints. The only pricing the vendor has control over in this scenario, is their profit margin, which will be the only pricing variable the vendor can agree to discount during negotiations.

Guaranteed Maximum Price: Similar to a Cost Plus contract, a GMP agreement is where the contractor is reimbursed for their actual cost, but also is paid an agreed upon fee. This fee is not to be exceeded unless the scope of the project changes, for which a formal ?change order? can be enacted.

Incentive Contracts: This agreement begins as a cost reimbursement model, but varies based on whether or not previously determined goals were met. The incentives can be positive or negative, such that a vendor can be rewarded for underrunning the estimated cost of the project, or penalized for being over-budget. Both scenarios still require timely delivery of finished project. One potential drawback though, is that it can be difficult to monitor quality of work/product meets standards, as this model can also incentivize vendors to cut corners.

Time and Material: This contract type is fairly self-explanatory, in that the basis for pricing is on the number of man-hours used, and any necessary materials to complete the work contracted. Profit is either baked into the hourly rate, or invoiced as an add-on. This contract type is most typically used in situations where it is difficult to forecast the number of hours needed to complete, and must be billed as needed.

Unit Price: In this contract type, the activity or good is grouped into a pre-defined unit. The vendor is then paid a fixed amount for each unit completed. Profit and overhead is typically included in the unit rate, and rate is determined in part by estimated total units contracted.

Lump Sum: A Lump Sum contract is typically enacted when a full scope of work is well defined, enabling the vendor to quote the exact amount required to complete the project. This contract type can be financially risky to a vendor who could later discover hidden costs to perform the project, and can be risky to the timeline of the principle, as the contract would not penalize or reward timeliness as would an Incentive Contract.

For more information on how SafeSourcing can assist your team with this process or on our ?Risk Free? trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.

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Are You Still Printing And Filing Documents in Filing Cabinets?

Friday, July 6th, 2018

 

Today?s post is written by Heather Powell,? Manager of Major Accounts and Special Projects?at SafeSourcing Inc

paperstacks

 

 

 

 

 

 

 

 

My co-worker once asked me how many trees I planned on killing one day when I printed a hard copy of a Request for Proposal I had written. I suppose I am ?old school? to have paper in hand and make my edits in red pen, then make my revisions to the electronic document, and save those edits in our document management system. Now I have a hard copy in a filing cabinet that, more than likely, no one will ever see and eventually be shredded.

We are a Green company, and I am becoming more cognizant of that by limiting what I print, and save more trees. By utilizing the document management system, the original drafts, as well as all of the edited copies are saved, anyone from our company, at any point and time, can visit those documents and follow the train of thought from beginning to end. It saves time and paper to have those documents accessible.

From our website: www.safesourcing.com

SafeDocument?

SafeDocument? is a document repository that allows companies to collaborate on documents through an online tool that is a cloud-based SaaS offering available through simple internet access. This tool Provides document sharing and collaboration options where users can organize, edit, protect, and track their documents.

SafeDocument? includes safety features and controls that enable users to safely share large files across their organization, including the ability to save and recall multiple versions of a document and a notification system that alerts users when changes to the document have occurred.

Implementing SafeDocument? provides companies with a cost-effective alternative to enterprise content management solutions that is safe and easy to use.

To learn more about SafeDocument? SafeSourcing can assist you in exploring your document management procedures for your business or on our ?Risk Free? trial program, please contact a SafeSourcing Customer Service Representative.? We have an entire customer services team waiting to assist you today.

We look forward to your comments.

 

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Contract review is tedious work?

Wednesday, May 30th, 2018

 

Todays post is from Ronald D. Southard, CEO at SafeSourcing Inc.

Many large companies have law departments and at least as many don?t. Most small companies don?t either. Which company is in better position to review and evaluate existing contracts?

The answer is neither or maybe both. The first important question for each type of company is who is actually evaluating the contracts, and just because they have a law degree does not mean that contract evaluation is a specific skill set this individual may possess. This author strongly recommends choosing who will provide this function within your company or as a service and then make absolutely sure that they have the skill set required to do the job and stay up to date.

There are any number of contract management certificate programs available from prestigious and well know institutions. To name a few, there is Villanova University, The University of California Irvine and St. Louis University. In addition there are organizations that also offer this type of training. Probably the most well know is, the National Contract Management Association or NCMA that has been around for over 50 years.

Many of these organizations offer on line courses that can be completed within a reasonable period of time. Many of the University and College courses are actually accredited as well as affiliated with NCMA.

Once you have resources that are certified, provide them with the tools they need to do their job. All companies have 100?s if not 1000?s of contracts and most do not have a contract management solution. These solutions today are available via the cloud in Software as a Service model for very little investment. You can buy what you need when you need it. Most of good providers will also assist with evaluating your existing contracts in order to create your Meta data and populate your? contract database.

SafeSourcing offers a cloud based Software as a Service contract management solution called SafeContract? which is supported by these types of services.

Please contact a SafeSourcing? customer services representative in order to learn more.

We look forward to and appreciate your comments.

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Should retailers manage their in place contracts with SaaS based Contract Management Offerings?

Wednesday, May 16th, 2018

 

Todays post is from Ron Southard, CEO at SafeSourcing.

It is not secret that the majority of global retailers both large and small do not have contract management solutions in place. Nor, do they have document management systems in place. In order to mitigate their risk, where should focus be placed when beginning implementation?

SafeContract? which is a Software as a Service cloud based offering is the best way to store and leverage the pertinent language or data within existing contracts. What this means is that there is also a need to create a process with which to identify the Metadata within your contracts.

According to Wikipedia Metadata is loosely defined as data about data. Though this definition is easy to remember, it is not very precise. The strength of this definition is in recognizing that metadata is data. As such, metadata can be stored and managed in a database.

When we think about contract management, we need to be thinking about mitigating risk and not necessarily all of the language embedded in a contract. On many occasions this information is listed on addendums or attachments. For sake of simplicity, and this is certainly not an exhaustive list the following twenty items reflect the metadata you might want to hi-lite and set alert targets against in storage of current contracts.

1.?Supplier or Seller Information
2.?Purchaser or Buyer Information
3.?Detail of Goods to be purchased
4.?Detail of Services to be purchased
5.?Delivery Timeline Details of the Goods and or Services
6.?Agreed upon pricing
7.?When and where should payments are to be made?
8.?Payment Terms
9.?Down Payment Terms
10.?Delivery Dates
11.?Delivery Location or locations
12.?Risk of Loss or Damage and transfer language
13.?Is Assignment of this Agreement Allowed?
14.?Detailed Warranty
15.?Trademark infringement language
16.?Origination Dates
17.?Termination Dates
18.?Termination Notice
19.?Additional Clauses
20.?Signature Details
21.?Auto Renewal Language

The above list should be at a?minimum the type of?data that is considered for your Metadata table for inclusion during the document review process that your SafeSourcing will put in place for you as a supporting service during the early stages of implementation, training and review of your SafeContract? SaaS cloud based offering.

To learn more please contact a SafeSourcing customerr services representative.

We look forward to and appreciate your comments.

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In these days of big data, how should retailers manage their legacy contracts?

Friday, April 6th, 2018

 

We are all aware that the majority of retailers large and small do not have contract management solutions in place. In order to mitigate their risk, where should focus be placed when beginning implementation?

We have conversations all of the time with retailers as to what is the best way to store and leverage the language or data within existing contracts. My answer has always been the same and that is the identification of your critical Metadata.

According to Wikipedia Metadata is loosely defined as data about data. Though this definition is easy to remember, it is not very precise. The strength of this definition is in recognizing that metadata is data. As such, metadata can be stored and managed in a database.

When we think about contract management, we need to be thinking about mitigating risk and not necessarily all of the language embedded in a contract. On many occasions this information is listed on addendums or attachments and not necessarily in the master agreement itself. For sake of simplicity, and this is certainly not an exhaustive list the following twenty items reflect the type of metadata you might want to hi-lite and set alert targets against in your current contracts.

1.? Supplier or Seller Information
2. ?Purchaser or Buyer Information
3.? Detail of Goods to be purchased
4.? Detail of Services to be purchased
5.? Delivery Timeline Details of the Goods and or Services
6.? Agreed Upon Price
7.? When and where should payments are to be made?
8.? Payment Terms
9.? Down Payment Terms
10.? Delivery Dates
11. ?Delivery Location or locations
12.? Risk of Loss or Damage and transfer language
13.? Is Assignment of this Agreement Allowed?
14.? Detailed Warranty
15.? Trademark infringement language
16.? Origination Dates
17.? Termination Dates
18.? Termination Notice
19.? Additional Clauses
20.? Signature Details

The above should be data that is considered for inclusion during the review process that your solution provider puts in place for you during the early stages of implementation, training and review of any contract management offering.

If you?d like to learn more about SafeContract? from Safesourcing and the services provided to assist in defining your Metadata please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

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What is a price or commodity index and how is it used?

Thursday, April 5th, 2018

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

SafeSourcing uses a number of ?indices in our sourcing events every day and the same question always comes up from buyers when we do. While this is an older post from our archives I believe you will still find it useful today.

This author has heard a lot lately about prices indexes or indices. Every time we source something we are asked what index should we use. Although there are times when an index is helpful in sourcing in order to manage contracted pricing once a baseline has been determined versus the rise or fall of an index, that is not always the case for every product.

I was reading our local paper today “The Arizona Republic”. In their MARKET TIP on page 3 of the business section they had a nice synopsis of the Consumer Price Index or CPI relative to measuring inflation. It was brief and holds true in terms of how indices are used to measure the rise or drop in prices over time. In your annual contracts you may wish to review them quarterly and have escalator language that locks in price increases or decreases versus a specific index to protect you from volatile commodity markets like the oil market.

According to the Bureau of Labor Statistics website, the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI is used as an economic indicator, a deflator of other economic series and as a means of adjusting dollar values. The CPI affects nearly all Americans because of the many ways it is used.

To learn more about how the CPI index is used please visit the Bureau of Labor Statistics website.

If you?d like to learn more about the variety of indices and how they impact the many products that you buy for reuse as well as resale or if you are not in the business of prognostication, please contact a SafeSourcing ?customer services account manager.

We look forward to and appreciate your comments.

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How Much Does FREE Cost? Simple Question right?

Tuesday, February 6th, 2018

 

Today?s post is from?the SafeSourcing Archive

The byline to this post would seem simple but the number of large companies that are taken in by it is staggering.

My brother dropped his phone and to no surprise the screen was cracked. He took it into his wireless provider and without insurance he would have to buy a new phone. A new phone? That sounds great! Right? Well he did not have an upgrade available and without insurance he would have to buy the phone at ?full retail price?.

The phone that cost him ZERO dollars when he signed a two-year contract was $349.99! I understand that the contract gets you a better deal, but how do wireless providers make a profit when they are just ?giving away? phones.

Wireless providers subsidize the cost of your phone into your wireless plan. They have to pay the manufacturer for these phones, but take such a large hit initially in the contract. It takes wireless providers an average of at least six months to begin making a profit on your wireless contract. Makes you wonder how low your service contract could be a month if you paid ?full retail? price for your phone.

Many companies have used the word ?FREE? to sell a product or service, but are they really free? If you did not accept the free or significantly low cost coffee maker for the office would the year supply of coffee be cheaper? There is a cost for free and that cost usually falls back on the customer or consumer.

SafeSourcing, Inc. has the knowledge and expertise to eliminate the cost of ?free? from your service related plans.? If you?d like more information on how avoid the free pitfall, please contact a SafeSourcing customer services representative.

Be careful out there or you might just get what you have not asked for.

We look forward to hearing from you.

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More than negotiating contracts!

Thursday, February 1st, 2018

 

Today?s post is? from? our SafeSourcing?archives.

If you are a sports enthusiast there is no doubt that you are probably familiar with the Buffalo Wild Wings chain of restaurants.? The fact that this statement is geared to sports fans and not food or Buffalo wings fans is the biggest reason this company is one of the fastest growing in the world.? By shifting the focus away from what they had traditionally done (food first; atmosphere second) to a primary sports fan destination that happens to offer good food, the chain has been able to explode with growth almost tripling revenue numbers in the last five years.? This effort to give customers more than the traditional offering and some of the ways procurement professionals can begin doing the same for their internal customers is the focus of today?s blog.

Get involved early ? Negotiating contracts and handling vendor negotiations has always been a main focus of procurement teams.? Many times they are engaged well after the decision has been made for services and products.?? The problem with this approach is that there is no longer any leverage for the procurement team to get a better deal for the company and often they are not equipped with the background details and project progress that allow them to execute the most beneficial contracts.? By getting engaged through annual or bi-annual meetings with the department heads, a procurement team can make themselves better prepared to help the department and the company get the most value from a new agreement once the decision has been made.

Provide Extra Information ? With the assumption that they have been engaged early, procurement teams can offer their internal customers more than the traditional approach by helping departments better understand how they are spending money with their current incumbents.? Helping to track down the details of how well a contract has been executed, whether through internal means or directly from the incumbent suppliers, can provide very important details for departments in making decisions of who they do business with in the future.? Another way procurement teams can assist their internal customers is by helping them to understand how the company uses and feels about the products and services they have selected in the form of supplier scorecards.? These can be used as leverage for future contracts even if a supplier change is not made.

Offer New Tools ? In some companies procurement teams are actively using eProcurement tools in conjunction with strategic sourcing partners to accomplish some of their goals on many sourcing projects.? So many times these solutions and partners offer functionality that other parts of the company can use.? Contract management, survey tools, and online RFx tools are just a few of the tools that procurement departments can bring to their internal customers that will provide extra value and support beyond what they have traditionally done.

At SafeSourcing we know that many procurement departments are looking for ways to be more involved with the purchasing projects that go on in the rest of the company. At SafeSourcing we want to work with your team to help provide extra value to your internal customers paving the way for involvement at a new level.?? For more information on how we can help with this process or on our ?Risk Free? trial program, please contact a SafeSourcing Customer Service Representative.? We have an entire customer services team waiting to assist you today.

We look forward to your comments.

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Safety in Contracts

Wednesday, January 31st, 2018

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Today?s post is by Dave Wenig,?Vice President of Sales and Services?at SafeSourcing.

We?ve all heard that there is safety in numbers. It?s generally understood that in a larger group, each individual has a lower chance of something bad happening. Fish do it? humans too.

The point is that safety is a general concern. While we all take precautions to ensure personal safety, often the same level of attention is not paid to the safety of our contracts. Of course, there are contract management solutions available to provide safety relative to your contracts.

As I see it, contract safety is knowing when contracts are set to expire and proactively taking steps to prevent unfavorable auto-renewals. Contract Safety is knowing that the price you negotiated is also the price you pay throughout the contract term. Contract safety is always having your contracts at hand in the event that you need to review them.

Without these elements, you don?t have contract safety. If you don?t know where the contract is or you can?t verify the terms including pricing, or you don?t know when the contract ends, then you do not have contract safety.

Again, there is reasonably sound logic behind the theory that there is safety in numbers. I encourage you to take the same logical approach the safety of your contracts.

Dave Wenig is a Regional Sales Manager at SafeSourcing and is a devoted champion of saving money. Dave or any member of the experienced team at SafeSourcing would be happy to discuss how SafeContract? can provide you with contract safety. For more information, please contact a SafeSourcing representative.

We look forward to your comments.

 

 

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When using e-procurement tools to source complex services make sure you have a well defined change of control process.

Friday, October 6th, 2017

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

Change happens. It can result from poorly designed specifications, terms and conditions, quoting instructions and other data related to a bid.

The normal process for managing these changes is a change of control process which governs how any changes to the services being provided as identified in the actual bid.

The change of control is normally managed as a request that communicates the requested changes to the services deliverables. Normally the change request will describe the following at a minimum.

1.?The change
2.?The reason for the change
3.?The effect the change may have on the existing Statement of Work.
4.?Impact on cost or savings

In most cases a project manager or the associate with responsibility for managing the program deliverables will be required to submit a written change request to the contracted or warded supplier.? The supplier will then develop and return the response to the contracting company.

The contracted supplier and the contracting company will then review the proposed change request and either approve it, modify it or reject it. When approved the contracting company as well as the contracted supplier must sign the change request in order to authorize the work as well as the implementation of the work and its potential impact on the existing project plan or project time line.

If you don?t want erosion inn your savings, make sure you spend the time to cover this process in your bid parameters.

Please contact a SafeSourcing Customer Services Account Manager in order to learn more

We look forward to and appreciate your comments.

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