Procurement Method Report: Factors and Contract Management

This report examines procurement methods, focusing on factors for negotiating agreements and effective contract management. It explores strategic decision-making, objectives, data, concession, and strategy in negotiations. The report delves into contract management, emphasizing cost design, planning, control, and benefit analysis, with an illustrative cost-benefit analysis. The implementation of these factors in the MFB company is discussed, highlighting the importance of contract plans, defined roles, scope statements, and risk analysis. The report uses the case of a natural gas contract renewal to illustrate these concepts, addressing challenges like fluctuating taxation norms and emphasizing the need for stakeholder involvement and transparent communication. The report provides valuable insights into best practices for procurement and contract management in a business context.

Running head: PROCUREMENT METHOD
Procurement Method
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Factors for negotiating an agreement and evaluating competitive proposals..................................3
Contract Management......................................................................................................................4
Factors of effective contract management.......................................................................................5
Implementation of these factors in MFB.........................................................................................7
The role of commercial terms and conditions.................................................................................9
Uniform Commercial Code...........................................................................................................11
References......................................................................................................................................14

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Factors for negotiating an agreement and evaluating competitive proposals
Strategic decision-making process on an agreement helps in negotiating processes. There
are various factors and steps involved during negotiation process including inter-state negotiation
be inclusive and exclusive. Agreements involve mechanism of monitoring in the company and
aimed at motivating compliance. There are full commitments required during agreements.
However, sometimes it causes failures. Some factors that include during negotiating an
agreement are as follows:
Objectives
The objectives of the company and the party needs to be clear and concise before
entering into any negotiations. The objectives of the company must be properly circulated
between the second party members (Girth, 2014). The clear objectives of the agreement helps in
understanding various terms, condition of the agreement, and contract. In the case of F&B
Company, the use of clear narration of the objectives might help in negotiating with the client.
Information
Data and information related to the agreements during negotiation helps in maintaining a
clear objective pf the session. A clear analysis of the data and information related to the contract
and agreement maintains a healthy atmosphere during negotiation (Cullen et al., 2017). A both
way communication channel is created between the parties that maximizes the chances of
positive negotiation. On the other hand, lack in the information may lead to arguments and
quarrelling. An organized discussion can turn into aggressive behavior of participants of
negotiations (Wibowo, Tjahjono & Tomiyama, 2016).
Concession

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Negotiation is a process to bargain during an agreement has reached to two or more
parties. It is rarely possible in negotiation for an agreement to reach immediately for each side to
have identical objectives (Khan & Khan, 2013). Therefore, agreements are one where there is an
availability of concessions and profitability for outcome. During an agreement, a party can
explain their objectives and ideas and other parties are fixed to their goals. The concession
provided during the negotiation needs to be properly managed and according to the profit of the
company in the market.
Strategy
The strategy planning is a vital factor for the negotiation in an agreement. A proper
planning is required before entering into a negotiation. Planning helps in managing the
negotiation in any worst case (Rendon, 2016). The strategy is based upon the requirement of the
negotiation topic during an agreement between two or more parties. In the case of F&B
Company, the company is indulged with the clients into an agreement. The planning is done for
understanding the limits of the company during a negotiation in an agreement (Kogut-O'Connell
et al., 2017). This helps in maintaining an ethical atmosphere among the participators of the
negotiations.
Contract Management
The basic aim of the cost management is to create a link between the price and value and
affordability in relation. The cost managers understands that they require to work for the benefits
if the clients for the inception of the project and ensure best results out of it. However, it does not
mean that cost manager acts as cost cutter of the company (Van Weele, 2014). The cost manager
have to understand about the type of investment in the project. The cash-flow analysis helps the

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cost managers to go beyond the service for activating the concept of concept management.
Organizations in both people in general and private divisions are expanding strain to costs and
move forward money related and operational execution. In the case pf the MFB Company, the
overall contract for renewal pf the natural gas supply has around 5% in profit (Oluka & Basheka,
2014). This amount can be maintain by a proper contract management policy established by the
company. The developing acknowledgment of need to robotize and enhance authoritative forms
and fulfill expanding consistence and diagnostic needs has moreover prompted an expansion in
appropriation of more formal and organized contract administration strategies and an expansion
in accessibility of programming applications intended to address these needs.
Factors of effective contract management
There are various factors involving in the effectiveness of the contract management.
These factors are discussed below:
Cost Design
This step is based on the design of parameters including cost of acquisition and
management. It is also explained as cost design that help in designing a project in financial terms
by taking in account related to cost and benefit of element.
Cost Planning
The cost planning helps in allowing the developer to know about the outcomes of the project in
earlier stages of the project. The cost planning include the anticipation of all the cost included in
the project including cost of land, legal issues, buildings, professionals, tax and management. In
the case of the F&B Company, the net price of the natural gas has been increasing ( Zhang,
2015). This has caused alarming situation for the company in the market. The frequent change in

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the taxation policy have created undefined strategies for mitigating issues in the context. The
increase in the price of the products have caused decrement in the interest of the customers in the
market. The planning of all the cost of the company helps in maintaining the cash inflow and
outflow form the company. The investment in the market becomes saturated (Cullen et al.,
2017). This helps in maintaining the profit and loss of the company in the market. The use of the
cost planning have maintained the estimating process of the company in the market that includes
all benefits and its associated costs.
Cost control
The cost control refers to the auditing process in the company. The cost control is an activity that
focuses on the reactive reporting of decision results. The cost control happens by deployment
process by briefing completion stage (Zou, Wang & Orgun, 2016). The benefits of the cost
control is deprived in all stages by briefing, approved sketch plan, receipt of tenders and
construction stages.
Cost Checking
The cost checking is process for ensuring the client is informed with actual performance of
company in the market. In this case, the F&B Company has able to inform their clients about the
increase in the price of the products. Therefore, there has been successful implementation of the
cost checking process in the company (Vyas, Hayllar & Wu, 2017). The actual cost of the natural
gas has been increased that are detailed in the balance sheet of the company against the target
cost and cost plan.
Cost-benefit analysis

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The cost-benefit analysis focuses on establishment of real benefit of expenditure and savings of
the company. The benefit id discussed in terms of use of resources including energy, natural gas
and human resources. However, this technique is not accepted by many organizations including
F&B Company (Rendon, 2016). It is able to provide support for evaluating aspects having
monetary value and intangibles including social benefits are separately decided on various
objective terms.
Cost-Benefit - INPUT VALUES
Hardware $ 20,000.00
Software $ 950.00
Development team salaries $ 8,160.00
Training $ 1,500.00
Total Development Cost $ 30,610.00
Hardware $ 10,000.00
Software $ 209.00
Operational Labor $ 15,000.00
Total Operational Cost $ 25,209.00
Approximate salary savings $ 100,000.00
Reduced operating cost $ 40,000.00
Total Benefit $ 140,000.00
Discount Rate Used 3.00%
Figure 1: Cost benefit Analysis
(Source: Created by author)
Implementation of these factors in MFB
The implementation of the project management factors in the MFB has helped in
maintaining a proper contract with the clients. In this case, the contract of the natural gas has to
be renewed with a company, the fluctuation in the taxation norms have created various
challenges for the company in the market (Kogut-O'Connell et al., 2017). The company have to
implement all the contract management factors for successful agreement of the contract. The cost

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design analysis of the company is necessary for amending the total cost of the production sector.
The cost planning is required to implement various strategies in the planning cost of the
company. GEP's global energy experts identified the cost structure in NG manufacturing in
Australia. Production and processing accounts for roughly 30 to 35 percent of the total cost,
transmission and distribution accounts for about 40 to 45 percent, while gas retailing accounts
for 15 to 20 percent of the total cost. The team also identified that the increasing use of shale gas
and the increase in LNG exports have significantly affected natural gas prices in Australia. The
planning is done to maintain the cash inflow and cost outflow of the company due to the
contract. The renewal of the contract in the natural gas has been maintained to reorganize the
profit of the company (Kravari, Bassiliades & Governatori, 2016). However, due to the change
in the taxation norms in Australia, the issues are reviling in the context. There are various steps
involved in a successful contract management.
Step One: Explaining the contract plan to stakeholders
The contract plan is one of the important point in contract management for a company. It
provides a roadmap to the contract for completing within time. The use of various factors used in
the project planning are acknowledged to the other party in the agreement. This helps in
maintaining a proper communication with the key stakeholders of the company. The
stakeholders of the company contacts with the project manager for details about the contract. The
contract plan comprises with all the components used in the contract. The amendment in the
contract plan can be done by stakeholders based on profit of the company (Greenhalgh, 2016).
However, in most of the case, the stakeholders are not affected with the requirements of the
contract. The complex part of the contract is for getting into commitment for the agreement.

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Therefore, the involvement of the stakeholders in the commitment of the contract is necessary
for its successful completion.
Step 2: Defining the roles and responsibilities
The roles and responsibilities of different employees in the contract has to be maintained
properly. The stakeholders of the company have to be aware of these roles and responsibilities in
the company. The natural gas contract in Australia is a major concern for the company. The
contract has to be successful by defining the roles and responsibilities of the resources of the
contract. A proper specification and requirement of the contract have to be maintained by the
stakeholders of the company (Park & Kim, 2017). The preparation process of the specification
has been drafting in the evaluation model of the contract that helps in maintaining information
security and potential suppliers. Therefore, it is necessary that the communication process among
the team is transparent. Thus helps in maintaining a transparency in the contract strategies.
Step 3: Defining Scope Statement
The scope statement of the contract helps in maintaining the foundation of the contract.
The processes, terms and conditions of contract are written in scope statement of the contract.
The scope statement describes about the outcomes of the contract. It also helps in creating the
milestones and deliverables of the project. The F&B industry has been renewing its contract with
the natural gas company (Dong, 2017). The use of the scope statement company maintains
various aspects of contract.
Step 4: Analyzing risks and threats in contract
The risks involved in the contract are properly analyzed by the manager. There are
various types of risks involved in the project. In this case, the natural gas contract has various

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risks including the natural risks. The storage of the natural gas is major risk for the company.
The transport of the natural gas is also a risk (Hidayatullah, Ismail & Jaya, 2017). Therefore,
these risks have to be mentioned and analyzed in the contract that helps in initiating the risk
assessment process in the company. The probability of risks in the natural gas renewal project is
high due to the inflammable product. The international demand and supply of the key drivers of
commodity prices around the globe has been continuously fluctuating in the market.
The role of commercial terms and conditions
The commercial terms and conditions of the contract is an important element for the
company. The MFB Company have to maintain the terms and condition of the contract for the
signing in agreement. The applicability of the terms and condition is valid on the contract of the
natural gas for this company. The renewal contract of the company has been reformed due to
risks factors (Waugh, 2017). The purchasing order of the natural gas has been a critical role in
maintaining the terms and conditions by the company in the market. There might be conflict
between the terms of written agreement signed by both parties. This is maintained and monitored
under the legal systems of the country.
The Place Order is an offer by Buyer to buy Goods and additionally Services from
Supplier as per and subject to terms thus and in that. The Place Order is not official on Buyer
until the point that it is acknowledged by Supplier (Pate & Scullion, 2017). Provider will be
esteemed to have acknowledged Place Order when it (I) sends Buyer notice of acknowledgment
in composing, (ii) begins to play out Services as per the terms of Place Order, as well as (iii)
conveys any or the greater part of Goods secured by Place Order, whichever happens first. Placer
may pull back Place Order whenever before it is acknowledged by Supplier. No agreement will
exist aside from in this gave.

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Supplier’s acknowledgment is explicitly restricted to Terms. Any proposition, statement
of work, cite, receipt, affirmation or other correspondence issued by Supplier regarding, or
generally consolidated by reference into, Place Order will be for motivations behind depicting in
more noteworthy detail Goods as well as Services to be given (Ismail, 2017). Additionally for
record and bookkeeping purposes just, and any terms or conditions put forward in such
correspondence would not have any significant bearing to Place Order and would not be thought
to be Supplier's special cases to these Terms. Any extra or distinctive terms proposed by Supplier
are questioned and dismissed and will be considered a material change in this regard, unless
explicitly consented to in composing by Buyer (Clarke & Scurry, 2017). Moreover, Buyer would
not be bound by, any "disclaimers" or "click to endorse" terms or conditions now or in the future
contained in any site utilized by Buyer regarding the Goods and additionally Services or the
Place Order.
Confidential Information incorporates is not restricted to any data or material that is
exclusive or monetarily important to Buyer, including, without confinement, know-how,
specialized data, information, exchange privileged insights, creations (Hidayatullah, Ismail &
Jaya, 2017). Regardless of whether protected or unpatented, advances, tests and materials,
research or strategies for success, items, administrations, client and provider records, operations,
fabricating forms, programming, equipment, hardware, databases, disclosures, recipes, outlines,
illustrations, diagrams, plans, particulars, lab books, records, plans, examinations, test materials,
mixes.
PC programs in human or machine-lucid code (counting notes, spread-sheets and stream
graphs), promoting, monetary, producing and different business information and projections
(counting, without impediment, operation costs, net revenues, crude materials, deals data,

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generation and innovation costs), unpublished reports, and the substance and presence of the
Place Order. Secret Information will incorporate the classified data of any outsider who has
given Buyer the privilege to utilize such private data subject to a non-divulgence assertion
amongst Buyer and such outsider (Pate & Scullion, 2017). Private Information require not be
marked accordingly to appreciate the assurances managed the same yet require just be of the
kind largely comprehended to be classified, restrictive or monetarily significant.
Standard merchandise fabricated by Supplier and sold to Buyer without having been
composed, altered or adjusted for Buyer do not constitute Work Product and, as between the
gatherings, all rights with deference thereto will remain the sole and select property of Supplier
(Dong, 2017). The prior in any case, Supplier therefore gives to Buyer a non-selective, eminence
free overall permit to utilize such of Supplier's protected innovation, assuming any, as is required
to give Buyer full advantage of any Goods that fuse such Supplier licensed innovation.
Uniform Commercial Code
The uniform Commercial Code mainly functions in the U.S., which is used for
harmonizing law of sales and various commercial transactions all over the nations through its
adoption in various states. The Uniform Commercial code is not applicable in Australia.
However, Article 3 and 9 has been modified for the implementation in Australia. The code has
able to provide secure transaction in trade (Greenhalgh, 2016). The MFB Company has able to
maintain a secure transaction of natural gas in Australia. The GEP global energy experts have
helped in maintaining a roadmap to the contract for suitable supply of natural gas. This approach
have helped in conducting in-depth targeted research on the contract.

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According to Corporation Act 2001 Sec 5E(1), the legislature indeed in the corporate
sector is not intended for excluding the limit of the concurrency operation of any law of a state.
Therefore, the MFB Company have to follow the act in Australia for the trade of natural gas. The
contract have to be signed under this act and violation of this act might led to legal consequences
as mentioned in the contract (Clarke & Scurry, 2017). The main concern of the Article 9 is to
prioritized disputes between the security holders of the company. The legislation is not in the
form for applying jurisdiction to another trade in the country. Therefore, it helps in providing
stability to the trade of the natural gas.
As recommended by GEP, the client agreed to have a short-term contract with natural gas
retailers. The retailer have able to match the requirement of the client for the trade and signing on
a short-term contract. The contract has been extended for one-year validity. The government
norms has been applied on this contract for smooth purpose of the contract (Dong, 2017). Where
an agreement has lapsed without an affirmed variety to expand however the supply of
merchandise as well as administrations under the lapsed contract is required to proceed for a
brief timeframe after the lapse, another break contract should be executed. In such
circumstances, where the provider will proceed with supply under similar terms and conditions,
acquisition endorsement for the expanded courses of action might be acquired by means of a
similar procedure utilized for varieties (Greenhalgh, 2016). In spite of the fact that a procurement
design is not required, the general population expert still needs to consider hazard and incentive
for cash by surveying any negative effect of the broadened courses of action on the agreement
expectations, value, time periods and objects of the Act.

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