CIPS Practitioner Corporate Award Assignment
CIPS Negotiation in Procurement and Supply Assignment Example was prepared by a CIPS professional to guide students in preparing assessment submission for their corporate award. This CIPS assessment tests the learning outcomes and module content of the following Modules:
- Driving value through procurement and supply
- Managing expenditures
- Developing contracts
- Sourcing essentials
- Negotiation in procurement and supply
Task
- Select a category of spend from your organisation.
- Develop and discuss a plan using the knowledge gained from this programme which could form the basis of a formal commercial negotiation.
- Your assignment should include an explanation of the key facts,
a. data
b. and approaches that you will use in the negotiation. - Remember, the negotiation does not have to be just about price.
a. Other considerations could include quality, deliver schedules, timing and amendments/variations etc.
CIPS Negotiation in Procurement and Supply Assignment Solution
Executive summary
The objective of this evaluation was to evaluate the relevance of the terms and conditions when developing procurement contracts and the supply process. The research examined the amount of successful risk mitigation of poor quality, extended times, cost growth, and non-ethical activities with a focus on the Unilever firm. This article began with the establishment of the information firm of Unilever and defined its pre-contract, contract, and post-contract phases. How may pre-contractual ethics be prevented? How can I prevent pre-contract time extension? How can you avoid pre-contract charges? Then the formal struggle began over how to win the contract to your terms and conditions. The struggle against forms is defined in a contract as a crucial phenomenon that may be seen from the unwillingness to recognize and refuse to implement specific terms and conditions within specified time limits and procedures. When both parties desire a contract negotiated or agreed upon according to their terms and standards, the idea of the war of form assures their culpability. Almost every business considers itself to be interested in these form wars. Additionally, Lord Denning’s technique may be used to ensure that all parties involved are actively incorporated into a standard agreement based on current regulations & agreements.
1.0 Introduction:
This evaluation assesses the role that an organization plays in managing problems of poor quality, extended time, higher expenses, and non-ethical conduct. This is consistent with the CIPS which noted that the major goal for developing conditions was to ensure that the bid is attractive to your target market and that adequate and unambiguous requirements and expectations have been defined. It was found that the terms & conditions need to be adaptable, transparent and clear, regular, and suited to the anticipated outcomes to achieve properly its intended purpose. The expected results of the terms and circumstances should incorporate the risk of quality mitigation, time extension, raise expenses, and ethical practices in this phenomenon. In addition, the significance of the planning and forecasting performance measures that have been thoroughly analysed in the study. In addition, a comprehensive analysis of the idea of combat forms was conducted to describe the level at which an arrangement might be actively and reliably accepted within the restricted limits of the entities. This is because it recognizes the unusual events that occur when a single company form generates an offer in terms of pre-printed contractual terms. Unilever is the company used in this study.
1.1 Background of Unilever Company:
Unilever is an organization that was founded back in 1929 and it has since emerged as a top industry player since inception. One of the first brands that have remained in the market ever since is the sunlight soap which came at a time where the purchasing power of most people was still low. The brand was meant to ensure that ordinary citizens could have access to cleaning materials at an affordable rate and this can be termed as one of the major principles that Unilever has maintained throughout (Unilever global company website | Unilever Global, 2021). The organisation aims at ensuring it provides quality products for the consumers and at very affordable prices. The main focus of the organisation is service delivery to the consumers and creation of a conducive environment where all can thrive.
The combination in 1930 of soap producer Lever Brothers and margarine manufacturer created Unilever originally. In 1930 the Unilever Company propagated and a new company in Latin America was established. They constantly increase their items so they develop even more intensely and extraordinarily (Unilever global company website | Unilever Global, 2021). Unilever has five laboratories worldwide, which examine innovative ways to further enhance them. Unilever aims to establish the highest standards for corporate conduct (Sheehan, Marti, and Roberts, 2013). Unilever, a major global business, now has a plethora of brands that encompass consumer items on a big scale and are involved in massive production operations in over a hundred countries across the world. It’s a fast-moving leading consumer goods enterprise. Unilever products account for 57 percent of the world’s emerging economies in 190 nations (Unilever – Forbes, 2021). And has its ideals and principles. It has about 400 goods for the brand of which 14 are very significant. Unilever’s items comprise food, drinks, cleaning products, and care products. The two products of Unilever are Rexona and Surf.
The overall supply chain of Unilever has greatly contributed towards the success of Unilever. It can be seen in the graph above that there has been an increase in the revenue for personal care and home care products of Unilever. This increase in revenue came when Unilever looked down on cutting their procurement costs, making the products cheaper in terms of cost, increasing profit margins for the company at the same time allowing them to charge premium prices for their product. The cost of risk in the production process has worked in favour of the organization since, as per the graph, the revenues and demand for products has greatly improved. Through the continuous maintenance of quality products, Unilever has managed to remain competitive within the markets. The competitive advantage has enabled the organization to create brand loyalty which is an essential element for any product and service providers.
1.2 Unilever Terms and Conditions Overview
The business terms & conditions are organized into many stages, including the pre-contract, contract, and post-contract phases. In this situation, it is classified into Product Supply, Compliance with the Law, Products to be disabled, Performance indicators, Intellectual property, and Item Quality.
1.2.1 Supply of Products:
Unilever commits itself to deliver recognized services and goods which give value for money and quality constantly and which are safe to use. Properly labelled, publicized, and conveyed shall be products and services (Sella, 2015).
1.2.2 Compliance with the law:
Unilever firms and workers are expected to comply with the rules and legislation of the countries where it operates, such as those governing financial statements, taxation, and environmental obligations.
1.2.3 Products that are turned down:
In the absence of any product that is unbendingly accepted as a damaged, obsolete or inconsistent Item, the Company has a right to refuse to send products that are harmed, obsolete, or inconsistent with the agreed PO (“Rejected Products”) and to forfeit its rights to make a claim against the Supplier or to reject the products of that Company (Terms and Conditions | Suppliers | Unilever global company …, 2021).
1.2.4 Performance indicators:
Sellers must execute rigorous responsibilities in terms of expertise, attention, diligence, prudence, foresight, and evaluation derived from qualified, skilled, and knowledgeable persons working according to a globally known and leading supplier of products and services.
1.2.5 Items quality:
All resourceful manner must be of the highest quality, new, and comply with all requirements and guidelines.
The circumstances may, summarily, be classified into three phases, including the pre-contracting, contracting, and post-contracting phases (Sheehan, Marti, and Roberts, 2013). Different explanations and suggestions of all procurement procedures are essential at these stages when they govern the connection with external legislation.
1.3 Pre-contract Phase:
An organization must prepare at this stage by gathering business department requirements, then preparing for the most common expenditure categories, and finally acquiring needs from consumers. Once the requirement has been analysed, the company may do market research and pick suppliers that will deliver high-quality service or products. The reputation of the provider is also essential and highlighted (Pre-Contract Phase of Legal Agreements, 2021). Management of pre-contracts is described as the management of the activities involved before the work on a construction site begins.
This initial phase is where two parties want to cooperate. There is indeed a good cause for this, an interest and an intention. To bring together two parties to an agreement is of net advantage to both parties, whether for financial or strategic grounds. Either firms or parties need to comprehend the interaction, opportunity, and intent of a deal as part of the contract management procedure before an agreement is drawn up. At the beginning of the conversation, the legal teams (general advocate, contracting team) will have the opportunity to thoroughly grasp the plan and the aim (Pre-Contract Phase of Legal Agreements, 2021).
1.3.1 How can one prevent unethical pre-contractual practice?
To avoid unethical activity, the procurement staff should be in touch with customers and providers. The procurement contractor should also be ethical and ensure the chance to supply sufficient fear. We must not forget that not all customers or providers are not ethical, but that the actions should be monitoring and monitoring according to organizational rules and procurements. One of the conditions in the firm reads, “Strictly, the provider should follow all industry standards and prevent any non-ethical actions which might cause the two participants to disconnect (Adékambi and Essiomle, 2020). Mutual understanding must always govern, with best practices based on individual development and progress.” Unethical behaviours are reduced in this phenomenon.
1.3.2 How may pre-contract fees be avoided?
The organization has established its contract terms on responsibility and potential losses at the pre-contract process to increase needless expenditures. Unilever should have clear customer expectations and communicate them to suppliers in a transparent manner. If the criteria are clarified, it will assist providers in meeting demands without incurring additional costs; most projects incur additional costs due to missing specifications and poor planning. To assure that the expense will not grow, avoidance of the job in this phase will be useful. This is explicitly stated in the terms and conditions “the seller shall maintain such complete and comprehensive good insurance policies as would normally be needed in conformity with the practice of goods and all Applicable laws, including any transport and storing security.” Avoidance indicates that if certain demands exist under complicated working conditions and do not impact the project, we should remove them to obtain precise costs or less.
1.4 Contract Phase:
The terms and conditions should apply to the vendor during the contract phase and shall be agreed upon by the vendor. It is the legal department’s responsibility the examine contract terms and conditions. Furthermore, the terms of service in the contract phase are linked with the state’s rules in the contracting nation (Sklaroff, 2017). The most important part of the contract is to ensure tight compliance with materials problems and price-fixing. The procedure also includes the integration of the system to clarify the delivery time for all its activities and eventually ensure that their suppliers are aware of the prices.
1.4.1 How can the risks of poor contract quality be minimized?
Conditions and requirements that are extremely crucial in this phase, must guarantee that suppliers supply excellent quality and time with the products. One cannot accept service or product by controlling the delivery time unless a purchase order between both the end consumer and the delivery provider is signed. They can enhance the results for the delivery of products and materials based on the category.
1.4.2 How can contract time extension be avoided?
The terms and conditions for Unilever clearly show that projects are practical and directed such that they are helpful and progressive to the organization. For projects to be finished on time, they are. It stated under one of the terms and conditions that “The implicit term should be required for the effectiveness of the contract’s business. This doesn’t match this requirement, for instance, if the word just makes the contract work better.” All the possible constraints that might hinder successful contracting are reduced in this instance.
1.5 Examine and explain how the terms help to manage the contractual risks in practice
Legal terms can be termed as mitigation and the management of the mitigation of contractual risks by incorporating specific language such as indemnification, insurance, cyber security, limited ability, governing law, termination, and warranty clauses. There are some other significant or threatening risk factors that contribute to the contractual risks such as the unauthorised access of contracts, lack of contract compliance, and governance, broken contractual obligations,and missed renewal and expiration dates (Ruparathna, 2015).
For instance, the equal opportunity clause works in ensuring that there is discrimination against qualified protected veterans in the United States and Puerto Rico. The clause prohibits discrimination against people based on disabilities and also encourages the people living with disabilities to apply for procurement services. This works in creating equal opportunities for all and ensures that services are awarded based on merit. There is also the country specific clauses that ensures Unilever operates based on the laws within the country they are operating. The essence of this clause is to avoid incidences where the company may engage in activities that are not considered as legal in the host nation. The clause protects the company and its employees and reduces the high legal costs that may be incurred in case the clause is not implemented.
Risk management is important in contracts in minimisation ofthe potential for loss through effective and efficient management and control of contract risks. The contractual risks can be defined as the representation of the major risk management and internal audit blind spot for many companies. The organisation today such as Unilever has this corresponding demand for the management demonstration for providing adequate control over functions in a firm which would have an impact on certain areas such as financial reporting, contractual relationships. The briefing and instructions or the guidelines offered in the terms and conditions are liable for mitigating risks and help in managing the contractual risks in practice (Sequeira, and Lopes, 2015).
Terms and conditionsin a contract can be referred to as the dictation of the contractual rights, and obligation of the party to any contract which if breached, giving the party the legal access to take legal actions against the other party. Terms and conditions are liable to provide the clarity of the action to be taken in certain situations. The terms and conditions are for providing the suitable contractual framework, allocation of risk, or the appropriate remedies to best resolve issues that arise. The terms and conditions check whether any terms render the policy invalid and under what circumstances while ensuring the contractual rights areunder the terms of the policy(Aven, 2016).
2.0 The legal concept in the procurement contract
The legal concept in procurement contract is essentially a legal binding of contract establishing the framework of the goods and services purchased by a seller or buyer. The legal issues in the procurement can be termed as the authority limits, awareness of contract law, quality and safety, monitoring the supply contract, tenders etc. The law for procurement narrates the purchasing by the public or organisations and certain utility sector body of contract for goods, work and productand services (Mendoza Jimenez, 2019). The legal framework works in the protection of both the Unilever group and the suppliers. As per the specific provision for the supply of product clause, products that are sold to a third party are considered as a contract that is entered between the third party and the supplier. The supplier has the sole responsibility of ensuring that the third party gets quality products and Unilever does not intervene in cases where a dispute may arise.
2.1 Post contract phase
Post contract stage can be termed as when the last stage has been achieved in contract management. It demonstrates that the contract has ended but still there is left the margin to ensure that all the things are winded properly. The contract termination stage is ensured to have been met. Such as the issuing of final invoices, and keeping a safe contract for further use. To improve future contracts, a contract post mortem can be performed to analyse the valuable information (Igwe, 2020).
2.2 Risk in the contract lifecycle
2.2.1 Contract creation risk
This is the risk involved when initiating the contract between the companies or the other parties. Poor contracts are said to be the poor results in contracting processes. The cause lies when there is a lack of communication, manual processes, and automation that could create communication gaps between the negotiators. Moreover, the signing process could be inappropriate if the wrong person signs or approves the contract. This leads to inefficient processes which could hinder the post-contract phase of the lifecycle, unfavourable outcomes including the contract slippage resulting in loss of profit (Melese, 2017).
2.2.2 Contract terms risk
The terms in the contract are oxygen for the agreement between two parties. There could be a risk involved when in some cases the old and outdated terms are created and signed. This unauthenticity might lead to excessive negotiations among the vendors or stakeholders (Tippett, 2016).
2.2.3 Contract execution risk
While executing the contract, it must be sure that all the payments and milestones are due on time. Contracts can be dangerous if they are in the wrong hands. More risk includes when payment is made for invalid claims without proper justification and validation. The missing deadlines and obligations can result in penalties. Poor communication might lead to misunderstandings among the negotiators and could result in a separation between the different corporate strategies and terms (Zhibo, 2019).
2.3 Financial risk: Impacts to an organization
Contracts have the potential to make more profits for the organisation. But they could be hefty enough if the contract is managed properly. The slow process in the contract lifecycles devoid the company to identify the potential revenue. Contracts that are not executed properly would cost a lot for an organisation such as overpayment or late payments (Bartram, 2015).
2.3.1 How to minimize the risks of poor quality in post contract?
Risk cannot be eliminated but minimise or managed to improve the quality of the specific arrangement, design, or thing such as a contract. During the negotiation of the contract, the stakeholder and vendors must be clear about what they want and how they want a certain work to happen. All the terms and agreements must share openly and every desire as to how they want the things to go must be kept as an open book. There should be a proper mode and mean of communication to carry out the contract agreement. The authenticities of the contract must be validated by the authorities. So that no cheating can happen. The overall process of the contract should be supervised closely such that all the criteria’s are met according to the need of the parties and payment are done of time. Contracts have to be managed properly. The process must be carried gradually and authentically according to the timeline (Sklaroff, 2017).
2.3.2 How to avoid extension of time in post contract?
In many scenarios, there might be a delay in the agreement of contract and there can be many reasons. Described as an EOT extension of time, it cannot be foreseen at the time of creation or signing of contract since many events or occurrences happen as the stage progresses with the cycle of the project. When it is realised that some certain process would require some time, or there is likely a delay, the stakeholder involves issues the written notice in which he mentions the issues that are causing the delay. While Unilever believes that it’s all process and agreement must be accurate as possible by allowing the proper negotiation and risk planning among the signed stakeholders. Being a multinational consumer good company, Unilever aims to create and execute contracts in a suitable way allowing the extension of times in a few cases but in most, it tries to manage so far (Bari, 2020).
Procurement has become a unique role and comprises many opportunities, Unilever is adamant to partner together with passionate people, who share the same values and purpose as them. They believe their responsible sourcing policy RSP encapsulates the commitment to carry out their business with integrity, openness, and respect for everyone including universal human rights while standardising the expectations from all of their partners. There had been 12 fundamental principles as to how one can conduct business with Unilever. It is essential to agree with their RSP terms to start or collaborate the business with Unilever. There had been introduced the practical approaches that are recommended to be applied by the stakeholders so that they are easily able to prove the delays and form a well-validated and supported claim for EOT. In voidance with of EOT, the contractors or stakeholders must ensure the following steps such as preparing the baseline program known as the planning stage, proper programming updates, accurate programming revisions, defining and introducing the delays to the program updates, identifying the concurrent delays and splitting between the stakeholders. If all these are defined before, a timeline could be invented where the EOT can be reduced (Benaroch, 2016).
2.4 How to avoid unethical practice in post contract?
There can be many ways in which unethical practices can be avoided post-contract. Such as payment on time, delivery, and supplying of things on time. Understanding the difference to protect the confidentialities. Respecting people’s autonomy, and knowing the responsibilities of each entity involved in procurement and supply. Staying honest to terms and conditions (Manu, 2019)
3.0 Battle of Forms;
3.1 Concept of Battle of Form
The concept of the battle of form ensures the liability of both the parties when they want an agreement or negotiation of the contract according to their terms and standards. Almost every company deems to follow these battles of forms. The practice of these battles of forms can be understood as when the seller agrees to deliver the goods to the buyer by sending an acknowledgment form after the buyer’s form according to the references in the purchase order. But in the backhand, there are terms and conditions in the seller’s form reprinted and standardize at the back of the form which is different from the buyer (ShiraviKhozani, and Khodabakhshi, 2016).
3.2 Current contract formation processes
The current contract formation processes and their respective obligations involve the four steps such as the offer, acceptance, considerations, and intention to create legal operations. A contracting process more properly can be termed as the process where the tasks and activities which is defined differently by each of the organisation such as Unilever. The approach involves the determination of the solution based on where contractual documents are prepared. Including the specifications, terms, and conditions, or requirements.The contract formation process of Unilever include the following code of business principles and code policies such as the code and standard of conduct, countering interruption, respecting people, safeguarding information, engaging externally, and useful information, etc. (Bienhausand Haddud, 2018).
According to Dennings (1971), out of 1000 customers, there is none that would go through the terms and conditions since they would apparently miss the train. The reason why Denning came up with this concept was to protect the consumers from organizations that may opt to have conditions that were unfavourable to the consumer (Kapnoullas& Clarke, 2006). Unilever ensures that they practice the reasonable notice of terms and this has gone a long way in the protection of the consumers and maintenance of quality products.
3.3 Suggested Approaches of Mitigating Battle of Forms
The suggested approach for mitigating the battler of forms is to record the signed document. This would allow both the parties to be aware of agrees and disagreements among them. Unilever follows the procedure in this context with regards to the responsibility assignment matrix and lord denning’s approach(MacMillan, 2016).
3.4 Relevant practical approaches for ensuring that any agreement is on Unilever terms
The scenarios for the battle of forms happen or occur if the negotiation between the commercial supplier or buyer of goods who each want to have or conclude the contract on their standard of terms and agreement. For instance, the purchase order in Unilever would have its standard terms and condition of purchase printed on the reverse or the backside and the supplier would have their frequent conditions of sale printed on their acknowledgment or their reverse of the form. For deciding which organisation would have its application of terms and conditions, the court would analyse the contract duration or the date of contract conclusion and the terms of an organisation such as Unilever were incorporated at that stage(Magagan, 2021).
As per Dennings red hand rule in 1956, he suggested that consumers that failed to go through the terms and conditions should be liable for any damages that may be incurred in the process. Where a party has breached any of the terms, they are supposed to take full responsibility as they would expect the organization to do in the case where they (consumer) were the victims (Kapnoullas& Clarke, 2006).
The assurance of agreement is on Unilever’s side is done in four steps such as negotiating the contract, firing the last shot, beware of the expectation, and training the staff.Examples of the scenario could perfectly demonstrate approaches for ensuring that any agreement is on Unilever’s terms. Such as, any seller would send the quotation to Unilever for delivering their services on their terms. In response, Unilever would send the purchase order acknowledging and confirming the order by concluding on its term of business.
As soon as the order was placed, the seller delivers the goods. Therefore, Unilever wins the battle or hasconcluded the terms on its side since it has acted as the counteroffer rather than accepting the terms and offer of the seller, the seller also accepts the Unilever terms. Unilever is said to have fired the last shot because it was the last entity to refer to its terms and conditions (Mustchin, 2017).
4.0 Conclusion
It can be concluded that developing contracts in Procurement and Supply is an important job because it determines the revenues and profits for the company. Thereby they have to tend properly by assessing all the risks involve and how to manage them. During the initiator, careful supervision must be involved. All the terms and conditions must be read carefully and assess toughly. Unilever has been cautious about the party with whom it is collaborating Risk allocation and management are necessary to mitigate the cost and factors for the time constraints such as EOT. The poor quality of contracts can harm the company in many ways but most importantly the financial way. It is very vital to manage the quality of contracts so that no future problems can arise and no costing. The battle of forms must be properly followed where companies and stakeholders have a right to decide their thing in their way.
5.0 Recommendation:
Risk must be looked after before the process of procurement and supply. All the honesty and integrity must be in one paper and on one term. Parties must adhere to the cause, consequences, terms, and conditions when initiating or executing the deliveries and supplies. Lord denning approach and responsibility assignment matrix must be implemented to analyse the roles and the entities involved. Not only would these many other approaches increase the efficiency and effectiveness in developing the contracts. The RACI chart allows the allocation of every task and is assigned to the entities involved beforehand and accurately and allows the complete deliverables for a project or business process
Lord denning approach seems rather royal than slavish since he believed he was more concerned to do the fairness according to the parties in a case than following the rules blindly. Being a judge, he contributed much in the field of the law of contracts where he stated that the standard form contract would include the contracts that are written and printed because a human cannot trust their memory very well. And secondly, he stressed upon considering the contract in the eye of law. The values considered in the contract involve rights, interest, profit, and benefit related to one party. Including some amount of forbearances, losses, given responsibility, suffering, and the undertaking by the other party.
References
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