Legal Aspects of Project Procurement

Background

Effective procurement within the public sector represents a balance between the principles of just, open, and transparent procurement, responsibilities imposed by law, as well as business considerations. A full procurement cycle may take the shape of either a service contract, or a performance contract. Contract law applies to any contract, irrespective of whether it is written or oral. A contract emanates from instances where there is an offer and acceptance of the offer. Vendor relationship management represents a critical part of all phases engaged in any procurement process. Hence, fair treatment of vendors is a critical consideration for the company right from the planning stage to post-contract evaluation. Fair and consistent disclosure of company information connected to the procurement process guarantees a leveled play field for all suppliers.

Procurement and Contract Management

The procurement and contract management comprise of interconnected components that affect the acquisition of goods, as well as services within the company. The planning stage encompasses highlight needs, options and establishing the business case. The pre-award and solicitation stage entails establishing what is available to satisfy the highlighted needs, pointing the vendors to avail the goods, as well as suitable solicitation process and strategies. Contract award details negotiating remaining contract elements with the highest-ranking component. The administration and monitoring phase relates to guaranteeing receipt of deliverables as per the contract, and any emergent issues to be dealt with accordingly. Post-contract evaluation encompasses evaluating deliverables/outcomes, appraising contractor performance, as well as appraising the internal process.

Main Task

A procurement strategy refers to structured or planned approach (cost-effective approach) to buying a company’s required supplies as informed by a number of elements and factors such as the timeline for procurement, the funding, and budget to settle the procurement bill, as well as the anticipated risks and opportunities. Planning to attain the most effective procurement systems necessitates a review of the vendors on the basis of which would award the most dependable and of the best quality office equipment, and within a reasonable price range. It is essential to establish a strong, lasting relationship with the vendor so as to derive better between the company and the vendor.

Based on the contract type, vendor history, purchased items or services, or uncertainties regarding the project’s schedule, scope, or budget, possible risks may necessitate an enhanced detailed planning and mitigation strategies. Transparency, flexibility, and accountability are at the heart of good company-vendor relationship and form keys to a successful procurement system. Effective procurement is at the centre of management of risks associated with vendor-company disagreement. It is frequently best to engage with possible suppliers early and carry out pre-procurement conversations as it enhances the joint understanding of intended outcomes, as well as the risks and cost drivers linked with delivery. Early engagement fosters joint understanding and clarity of purpose.

Dealing with Procurement Legal Battle between the Company and Vendor

This aspect of the review should comprise of: (a) a quick confirmation to guarantee that the company has satisfied all the applicable procurement laws and regulation; and (b) an appraisal of the quality of internal procurement practices and their alignment with procurement practice that are acceptable to the company. Communication is critical when handling any form of breach of contract, and the company must make all the possible efforts to contact the vendor given that the vendor may be unaware of the breach. Indeed, misunderstandings form one of the most dominant causes of contract breaches. In the event when communication has failed, this is indicative that the vendor has intentionally breached the contract. Contract law represents one of the most fluid areas of law and comprise of three core conditions: offer and acceptance, consideration and an intention to generate a legal relationship. Various procurement items necessitate diverse contract types. The purchase of office supplies can be procured under firm-fixed contracts, which necessitates the project team to liaise with purchasing define in defining the item types, services, quantities, and required delivery dates.

Legal Aspects of Procurement- Uniform Commercial Code (UCC)

Uniform Commercial Code (UCC) applies to the contracts regarding the purchase or sale of goods with the term “goods” embodying anything moveable. The Uniform Commercial Code adopts a flexible, reasonable and common sense approach to contracts regarding the sale of goods. The UCC represents a uniform set of principles that a majority of states have incorporated as statutes, and are generally consistent across the U.S. (except LA). The UCC is referred to as contract “gap filler” given that it supplies critical terms to a contract, when the parties fail to do so. According to the statute of frauds, a contract for the sale of goods for ≥500 is not enforceable unless there is adequate writing indicative of establishment of a contract for sale between the parties and signed by the parties on whom the enforcement is sought. As such, the writing may not be considered inadequate when it fails to include or incorrectly states a term approved by parties; nevertheless, the contract cannot be enforceable beyond the quantity of goods indicated in writing.

The exceptions to the writing requirement comprise contracts that fail to meet the requirement of Statute of Frauds, but which may be valid and executable, if: (a) the said goods are to be specially manufactured and unsuitable for sale to others within the ordinary course of the vendor’s business; (b) the contractual agreement is sought by the part who can be affected by  enforcement, but only to the level of quantity of goods sought and admitted; (c) or instances in which payment or goods have been received and/or accepted. FAR system oversees the activities of government personnel in directing the acquisition process, but does not regulate the acquisition process within the private sector firms, unless there is involvement of some parts in government solicitations and contracts by reference. This process comprises of three stages; needs analysis and acquisition planning, contract formation, and contract execution.

The Company’s Position in Relation to Breach of Contract

Since the contract, in this case, involves the sale of office equipment by the vendor, it ought to be in writing. Key indications to look for in the case include: whether the company has a valid contract that necessitates an offer and acceptance. It is reasonable to believe that the company has a valid contract with the vendor (supplier of the office copiers). The law of contract covers the validity and content of an agreement entered between the company and the vendor. The contract elements entail offers and acceptance, mutual consideration, good faith, and no contravention of public policy. The company has a right to sue for breach of contract in case the vendor has failed to live up to the provisions in the contract. The breach of contract may be occasioned by the vendor: failing to perform as promised; rendering it impractical for the company to perform as promise; and, rendering it known f the intention not to perform.

The core remedies for breach of contract encompasses: damages; certain performance; or cancellation and restitution.  As such, the perceived damages can be categorized as incidental and consequential damages, whereby if the vendor breaches the contract, the company incidental damages may encompass  expenses for receipt, inspection, transportation, and warehousing of rejected goods, expenses linked to replacement of goods and services, as well as other expenses linked to delay in delivery or non-delivery. Consequential damages refer to damages that do not directly emanate from the breach of contract, but results of the breach and are highly indirect in nature. In the event that the vendor breaches the contract, then the buyer’s consequential damages may encompass losses that the company incurs and which the vendor had reason to be alert to at the time of contracting and which the company could not reasonably have safeguarded.

Significance of Contract Management

Contract management function refers to the administration of contracts between a company and its vendors. Seven core criteria can be delineated as constituting contracting management: creation; negotiation; adherence; service level agreements; managing changes; documenting; and, analyzing.  The benefit of methodical contract management details guaranteeing that the financial and operational risks that the company faces remain minimal, and the maximization of vendor performance. Contract management comprises of three distinct facets: contract administration, which represents management of the physical contract, and the observance to the sections and aims of the contract; service delivery that entails guaranteeing that the vendor satisfies service performance and expected quality and relationship management, which guarantees that the relationship between the company and the vendor is mutually beneficial and problem free.

In conclusion, project management officer can greatly benefit from a contracting management function.  Contracting management function can provide advice on the issue of legal powers that are essential in entering project contracts; aid in the appraisal of the legal viability of the project; advice on the suitable procurement route; advice on the original contract notice, as well as procurement documentation such as pre-qualification, invitation to tender, and appraisal criteria. Moreover, it can establish a contract; guarantee that bids satisfy the legal and contractual requirements for submission; appraise and advice on all processes and contractual solutions in the procurement phase, inclusive of contract negotiation; therefore, avail support within the clarification and fine-tuning of legal issues that emanate.

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