CPSM Flash Cards 2

Term 1

Social responsibility issues in preparing obligation documents

Definition 1

Consider adding clauses about child labor, worker safety,

nondiscrimination, ethicl business practices, and environmentally

sustainable practices.

Term 2

State of domain/jurisdiction in preparing obligation documents

Definition 2

Especially important when procuring goods from internat'l suppliers. Legal counsel can determine if the laws of supplier's country recognise laws of

buyer's country.

Term 3

Liquidated damages issues in preparing obligation documents

Definition 3

Clause that can be invoked in situations such as inadequate service

response times and downtime on equipment, late deliveries, and failure

to deliver critical material. Damage awards are for restitution not penalty. Can be activated by partial breech as well as breech of entire agreement.

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Term 4

Contractor downflows in preparing obligation documents

Definition 4

Regulations regarding child labor, use of small businesses, equal

opportunity, and restrictions on certain international purchases are

added to subcontractor agreements. Needed for U.S. Federal gov't contracts due to FAR-Federal

Acquisition Regulation.

Term 5

Warrenties in preparing obligation documents

Definition 5

SM professionals are free to bargain for broad, strong warranties or to

accept a supplier's total and complete disclaimer of warrenties.

Term 6

Define: express warranties

Definition 6

Can be expressed either orally or in writing by the supplier. Can include

almost any statement or representation a supplier makes about

its product. Should be included in writing in the contract to make sure it

exists.



Term 7

Define: Implied warranties

Definition 7

Provided by the Uniform Commercial Code (UCC). Buyer does not have to

list them specifically in the contract to have them apply. Include title &

authority to sell (supplier has the right to sell product), implied warranty of

merchantability (must be of fair, average quality), fitness for intended

purpose (supplier warrants that goods are suitable for buyer's purpose), and

latent conditions (not identifiable under normal inspection, but when

discovered deprive buyer of product's value).

Term 8

Remedies in preparing obligation documents

Definition 8

Purpose is to provide buyer with goods that conform to the contract

within a reasonable time after a defect is discovered and the supplier

notified. Legal concepts involved in remedies include cure, cover, incidental damages, liquidated

damages, adn consequential & actual damages.

Term 9

Define: Cure (remedies)

Definition 9

To make the situation right, such as by fulfilling a contract as originally

agreed.



Term 10

Define: Cover (remedies)

Definition 10

To provide protection against breach or compensation for breach of

contract.

Term 11

Define: Incidental damages (remedies)

Definition 11

Expenses reasonably incurred in the inspection, receipt, transportation, and care of goods rightfully rejected. Can

also include expenses or commissions in connection with the purchases required from alternative

suppliers as a result of the breach and other reasonable expenses incidental

to the delay or breach.

Term 12

Define: General damages (remedies)

Definition 12

Foreseeable damages that "flow naturally from the breach." Suppliers

should assume buyer organization will suffer general damages in the event of a breach; differ from special damages

which are not foreseeable, and the buyer must prove the supplier knew the buyer would suffer damages if

there was a breach.



Term 13

Define: Consequential & actual damages (remedies)

Definition 13

Consequential damages include lost profits and other damages occurring

as a consequence of a suppliers inability to perform.

Term 14

Statements of Work (SOW)

Definition 14

Document used in the procurement of services to define exactly what work is

being contracted. All services must have a clear definition outlining what exactly is to be done, when it should

be done, and what constitutes an acceptable result.

Term 15

Elements of a Statement of Work (SOW): Work breakdown structure

Definition 15

For lengthy or complex projects, the SOW may divide the description of the

work into segments. Each segment can then be managed as a separate

subproject, or the overall project can be quoted and managed by using the

work breakdown with a form of project management chart (ie PERT) to

sequence activities



Term 16

Elements of a Statement of Work (SOW): Hold points/milestones

Definition 16

When the SOW is divided into segments, may be advisable to make

continuation of project conditional upon the successful completion of

each segment. Quality assessments can take place at those points.

Safeguard against the project going too far awry before a deviation is

discovered.

Term 17

Elements of a Statement of Work (SOW): Performance evaluation

factors

Definition 17

Every SOW should state all performance and quality criteria along with the methods by which they will be

measured. Results of performance evaluation should be known to each

party.

Term 18

Define: Contract administration

Definition 18

Management of various facets of a contract to ensure that the

contractor's total performance is in accordance with the contractual

commitments and that obligations tot he purchaser are fulfilled.



Term 19

Objectives of contract administration

Definition 19

*Ensures supply management organization fulfills its part of the

agreement*Ensures supplier's performance

complies with the contract*Protects buyer's interests by prompt and fair resolution of problems that

arise during performance*Determines whether any increased

costs of contract performance should be borne by supplier and negotiates equitable adjustmens of the contract

terms when necessary*Takes all administrative action

necessary to document contractual transactions

Term 20

In order to assist in cost & schedule control, many cost-reimbursement contracts require the establishment

and maintenance of what 3 documents?

Definition 20

Annual work plans, work authorizations, and notices to proceed

(NTP).

Term 21

Define: annual work plan (AWP)

Definition 21

details the initial definition of tasks to be performed in the budget year and a schedule for completion. During the AWP review, the supplier's resource projections are approved and tasks are scheduled. Includes goals and

assumptions, work auth review results, a schedule, a staffing plan,

and a cost estimate. Should be updated mid fiscal year. *Used in cost-

reimbursement contracts



Term 22

Define: work authorization

Definition 22

Generally includes work breakdown structure designations for the work,

info regarding the duration of the work auth, the baseline cost estimate for the

work, and references to the annual work plan and notices to proceed.

*used in cost-reimbursement contracts

Term 23

Define: Notices to proceed (NTP)

Definition 23

Upon receipt of the NTP, supplier begins work and begins cost and

scheduling reporting for the task. NTP typically includes a statement of work,

key schedule milestones for task accomplishments, and the total amt of

funds alloted for tasks.*used in cost-reimbursement

contracts

Term 24

Compliance (Contract Administration)

Definition 24

A primary responsibility of sourcing; day-to-day monitoring may be

assigned to other departments or third-party entities. Complex, specialized, or very technical

contracts may require assistance from an internal customer actually using the product to ensure compliance.



Term 25

End-user and third-party individuals in charge of contract compliance require instruction by supply management in

what areas:

Definition 25

*Reading and understanding the basic requirements of the contract

*Developing mutually beneficial, arms'-length relationships with

suppliers*Recognizing potential problems

*What actions they can and cannot take and when to contact contract

administrator*Areas of authority and responsibility

Term 26

How do contracts such as indefinite deliver contracts, time and material or

labor-hour contracts, and cost-reimbursement contracts differ from other contracts in terms of ordering and work authorization processes?

Definition 26

In indefinite deliver contracts, time and material or labor-hour contracts, and cost-reimbursement contracts,

ordering and work authorization processes are defered until after the

contract is awarded. Ordering becomes a contract administration

matter.

Term 27

Effective contract compliance programs include a plan of actions to

take if what two things occur?

Definition 27

1. The supplier fails to perform2. The purchasing activity has a

change of requirements



Term 28

Areas to be reviewed in compliance monitoring

Definition 28

*Is performance on schedule?*Is the cost within the estimate?*Are resources being applied at

expected levels?*Is quality for the end-product on

target?*Are progress payments warranted?*Will new components be needed in

major equipment?*Will the supplier's own progress monitoring system be adequate?

*Are all contractual provisions being followed?

*Is the organization receiving all goods/services at the price, time, place and quality contracted for?*Are requested changes properly documented and fairly resolved?

Term 29

Financial responsibility (in Contract Administration)

Definition 29

Supplier's primary concern is to be paid in a timely manner for work done. The relationship between the supplier

and the supply management professional differs depending on the

contract. In a fixed-price contract, supplier has incentive to perform in the most economical way. In labor-hour, time and materials, and cost-

reimbursement contracts, they do not. The supply managment professional

must monitor and guide the supplier's efforst to prevent waste of funds and

stay on budget.

Term 30

Approving systems (in Contract Administration)

Definition 30

Important to determine who has the authority to approve transactions and

make sure it is known throught the organization



Term 31

Administrative responsibilities (in Contract Administration)

Definition 31

Contract administrators cannot be experts in everything, but it is

important for them to understand price adjustment clauses and administration

of change orders.

Term 32

3 types of price adjustment clauses

Definition 32

1. established price clauses dependant upon fluctuations in the supplier's applicable established

prices and in accordance iwth applicable labor and material price

indeces.2. Adjustment clauses that permit changes to labor or material costs

when one or more identifiable labor or material cost factor is subject to

change. The types of labor or material subject to cost adjustment are

described in the contract schedule.3. Adjustment clauses based upon published cost indecies rather than

actual cost. Used when extended period of significant cost will be

incurred and it begins more than one year after the commencement of the

contract, the contract amount subject to adjustment is substantial, and the

economic variables for labor and material are too unstable to reflect a reasonable division or risk between

the parties without adjustment provisions

Term 33

Administration of change orders

Definition 33

Allow the contract to be altered after the award. Should require both parties to equitably alter the delivery schedule or the price to be paid in accordance with other changes to the contract's terms. Should also give both parties



"relief" if the other party takes an action not contremplated or fails to take an action contemplated by the

original agreement.



Term 34

Contract terms and conditions (in Contract Administration)

Definition 34

Must be known by the contract administrator to make sure both

parties are in compliance of contract. Includes price, quantity, deliver, shipping requirements, payment

terms, quality specifications, engineering drawings and other docs,

sampling plans, conditions of acceptance, and other important factors. Also includes standard

"boilerplate" terms intended to give legal protection to the buying

organization, such as patent rights, trademarks, contract termination info,

etc.

Term 35

Documentation requirements (in Contract Administration)

Definition 35

Every contract has its own requirements; could include work orders, invoicing, work plans, and

performance measurements among other documents. The point is to

document all actions and verify all requirements.

Term 36

Contract closeout (in Contract Administration)

Definition 36

Actions taken by both parties to a contract after they have completed their respective obligations. May

include verification that all work has been duly performed, accepted,

invoiced, and paid in full.



Term 37

Termination options for the U.S. Federal government include...

Definition 37

The government may terminate a contract for its own convenience at

any time, with or without cause. Furthermore, in government contracts, suppliers cannot realize profits on that portion of the contract not performed.

Term 38

Define: Termination

Definition 38

When a party exercising a power created by agreement or law ends a

contract for reasons other than a breach.

Term 39

How do cancellation and termination differ?

Definition 39

Cancellation implies "cause" and does not excuse the "causing" party from damages resulting from its failure to

perform.



Term 40

Upon termination, what happens to rights and obligations?

Definition 40

Executory obligations are discharged, but rights or obligations based on

prior performance or breach survive.



CPSM Flash Cards 2

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