Understanding and Drafting Specifications and Scopes of Supply Training Course

Introduction

Components of a contract and benefits of express terms

• Implied terms (statute)
• Express terms (negotiated terms agreed verbally, in writing or by conduct)
• Benefits of express terms:
  • Clarity
  • Governance / Supply Chain Management (SCM)
  • Proactive risk management
• Exercise – Silence exercise on Sale of Goods Act

Drafting a specification: for clarity of obligation and liability

• To comprehensively capture and clarify ALL contractual promises and ownership of them.
  • Use of exclusions, disclaimers, assumptions and caveats.
• To clarify extent of promise:
  • ‘Best endeavours v reasonable endeavours’.
  • Ownership of ‘fitness for purpose’ obligation, the difference between a Conformance and Performance specification
• To define the measurement criteria ‘satisfactory quality’ (Sale of Goods Act).
  • Quantitative not qualitative measurement mechanisms, SMART measures.
  • Using Key Performance Indicators (KPIs) 
  • How to use KPIs to reflect the type of specification: input (conformance specification) v output (performance specification)
• To appreciate the significance of terminology used: ‘shall/will’ v ‘could/may/ recommend’ and the associated risk
• To understand intent behind buyer’s involvement: visibility or liability. Understanding when and why an indemnity may be requested
• Exercise – review of a real life scope of supply using ‘word search’ methodology to identify ambiguity
• Exercise – Completing proforma table identifying what promises have been made, whether they are ambiguous, and ownership of them, plus consequences / liability if a promise is broken and ownership of that liability (reflecting the disclaimer, exclusion, assumptions, caveats and indemnity express term clauses)
• Exercise – drafting clear output KPIs for a performance specification

 

Drafting a specification: for good governance and supply chain management

• Proactive inclusion of express terms for transparency and control:
  • Change control, waiver / concessions, notices, authorised representative
  • Subcontracting
  • Progress reports, meetings, reviews etc.
    • Rights of transparency and associated cost.
    • Use of this information to incentivise or to merely recoup losses, carrot vstick.
    • Relationship objectives
    • Realising opportunities / value engineering
• Exercise – drafting KPIs – carrots v sticks

Drafting a specification: for proactive risk management

• Solutions not money. Monetary compensation v practical solutions / remedies / Plan Bs / contingency plans to move the project forward. Avoiding litigation
• Benefits of incorporating proactive risk management solutions into the legally binding contract at the outset, at time of signing, to promote a harmonious relationship and avoid unnecessary delays
• Exercise – identifying practical solutions

Drafting a specification: cross checking

• Cross checking the specification with all other documents which make up the complete agreement for consistency
• Order of precedence express term clause

Drafting a specification: to achieve best value for money

• Exercise – Price v Scope or Risk

Final questions