Procurement Contract not the single solution to all ill of supply chain

One remark put to me recently as following, "I am getting fed up with the project engineers handling the package as there were too many issues and I need a proper contract to enforce it!"

First of all, the purpose of a contract, especially in managing supply chain operation or project is to put into writing the following parameter:-

a) Quantity of supply in purchase or to build for a project b) Value of the contract
c) Quality specification
d) Duration of the contract
e) Term of payment
f) Claim clause, including penalty for non performance
g) Lead time to supply or date to complete the job
h) Delivery method for supply of material
i) Safety and Health matter in project
j) Under which legislation or law this contract is covered under, especially if this is an international procurement contract
k) Copyright issue
l) Variation job which was not included in the job scope for project
m) Various processes which need to be adhere to for any abnormalities or decision to be made

So back to the comment put to me, my next question to him was, " Actually what the problem?"

The reply given to me was that, there is always claim made by the supplier or contractor which was not specify in the contract and this create too many following up, questions to be answered and decision to be made if those claim can be pay or otherwise.

My reply to him was as following:-

a) As long as everyone follow to the content in the contract, there will be very minimum issue to be managed on ad hoc basis

b) Supplier, contractor and the managers managing the contract must follow all information stated in the contract and issue like the above complaint occurred because there are too many issue not followed to the script, for example;

• operation processes were not follow the the procedure and allow thing to bypass the system 
• self decision made without looking into the contract proper
• variation order for project or excess material supply was accepted before referring to the method of deciding as stated in the contract
• specification was waived but not communicated to the necessary level
• deadline expire and no action taken on penalty
• conflict of management as in some cases, decision was made by someone which are not supposedly make such decision and these decision not recognized

Such issue need to be resolve by having regular update or meeting and having ad hoc discussion as and when issue are created for immediate disposal of such matter.

The life cycle of the contract management is important to make sure all issue are recorded, performance updated and communication with all parties are file in system to reduce any conflict. Non recording of the issue will create unwanted conflict during the course of the contract or at the end of the job scope.