Report on Legal and contractual arrangements in purchasing

Contract management is a process to manage contract, analysis, and execution of financial performance and maximization of operations. In an organization, the services and purchasing goods should be on behalf of enough knowledge about the laws of contract and pitfalls. The legal issues in the procurement must be considered to recognized and seek appropriate expert advice is especially required by the lawyers promptly. The legal issues in the procurement are an essential subject that must be considered while training the employees (Ziaconsulting. com, 2019). The contracts should exist based on legally binding and the steps of offers, acceptance, considerations, and intentions of legal relations. The offer is mainly an expression that shows the willingness of contract under specific sets of terms and conditions. The offers are then accepted under the unconditional and absolute agreement. The acceptance should be related to mirror of original offers and the extinguishes the original offers (Wafula & Makokha, 2017). The contract is required to be considered as promise and agreement between two parties. In the legal contract, both parties are bound in legal relations and intention to create legal relations is highly required for the legal sequences (King, et al., 2017).

 The present work aims to consider different cases related to legal consideration about the contract and dispute resolution, ethical considerations, critical analysis of legislation, contractual relationship, and negotiation strategies. The intention to create a legal relation through contract is to keep both parties bound in a relation. The expressed and implied terms are considered as a main principle of legislation. The present report will deal with legal and contractual arrangements in purchasing.

1.      Importance of effect contract management  

There is the number of reasons to terminate the contract such as by frustration, breaching in the contract, and by agreement. In case of frustration, the contract is terminated by a party and they excuse from the obligation due to unexpected events (Maniruzzaman, 2018).

a.      Avoid fines of Legal and contractual arrangements in purchasing

 The frustration should not exist in several jurisdictions. In the case of agreement, both parties take a decision after discussion and in parties are voluntarily agree with the release of obligations for each other.

b.      Sustain competitive advantage of Legal and contractual arrangements in purchasing

The breaching of the contract takes place when the party fails to provide all the contractual promises. If the dispute arises between suppliers, then there are several options to resolve the issues (McVicker, 2011).

c.       Brand reputation and confidence of Legal and contractual arrangements in purchasing

In most cases, the suppliers and the buyers should find an acceptable solution to resolve the critical issues immediately. The solution of dispute should be based on ethical considerations and flexibility is required to proceed with legal processes.

d.      Legal compliance to statues and regulations of Legal and contractual arrangements in purchasing

The legal proceedings are highly time-consuming as well as expensive. The alternative dispute resolution is highly required for mediation, arbitration, and conciliation to resolve the dispute.

e.       Increases profitability of Legal and contractual arrangements in purchasing

The proper contract management increases market trust of the company and result in higher demand of product. The increase in product demand increases the profitability.

2.      Case studies of poor contract management

In the present report, a case studies are considered to elaborate on the importance of legal procurement in business and how failure could lead to issues in the organization. Several procuring entities are often considered to execute contract management effectively. The failure to meet the expected objectives from the contract was the main issue of the case. The general objective of the present analysis is to identify the factors affecting poor contract management and public procurement. The specific objective includes analysis of factors affecting the management of contract and value of money for the legal, political, social and economic development in the effective contract management and public procurements. The failure of the contract was due to the low monitoring process, contradicting functions, and lack of effective tools used in the monitoring process. Poor contract management could lead to issues related to services

Case study of British gas and national grid

In the 1980s, the vertically unified company, British Gas implemented a gas act 1986. In the process, British gas began to process the open access and privatization process for the establishment of regulators of natural gas and to have access for the competitors. In the contract, third party access agreement was also considered for the privatized British Gas and the forces were used to abandon a large portion of the content and the existing contract was between the natural gas supply and a second party (Baudry & Chassagnon, 2012). The contract represented 60% of undertaking for the contract management and then the procurement process that can be measured by different values. Due to poor contract management, the contract was not properly signed therefore contracts lacked important documents such as specifications, drawings, conditions of contracts, and documents related to invitation of bids, applied delays in the contracts, and liquidated damages. The justifiable analysis is required to consider the quantitates and exaggerating conditions of quantities. The lack of enough communication resulted in corruption practices and different conditions for the implementation. The lack of practical and legal technicalities in the contract resulted in poor contract management

Major contractual failure

 The British gas homecare 200 central heating contract failed due to certain circumstances. The major issue was annual renewal and annual charge that was increased from $258 to $283 and the sudden increase in service rates was 9.8%. The longstanding customers of homecare services faced excessive increase in the cost of services. The new boiler fitted, and the central heating system used in the British gas was upgraded. The source of services was higher, but the features of heating and good plumbing were highly appreciated by the customers. The discount offers were provided to loyal customers and charge dropped to $255. The loyalty of customer was changed due to disappointed customers due to adaptation of dubious practices of British gas technicians (Brignall, 2016).

Consequences of contractual failing

 The contract was dealing with the unbundling of company business and independent subsidiaries were used to provide space for the entry in the market by competition. The gas act of 1995 was then introduced as a network code for the implementation of the fine-tuning process. The third-party access rules were used to develop a new system of management and for the settlement of national balancing point. After that in 2002, the newly established mechanism was used at the final stage. The British gas sold in the transmission business was used to achieve ownership rights in the contract (Sanderson, et al., 2015). The independent British transmission operation was used to establish a transmission network for the national gas. The market liberalization was used because of excessive exploration of natural gas fields and domestic production of gas at larger volumes in the Britain decline. The long-term contracts were between customers and suppliers and they used sufficient market volume for the available entrants (King, et al., 2017). The contract creates a barrier for limited capacity and the restricting access for the midstream infrastructure. The regulators were incumbent for the contracts and reduced market shares open new market entrants in the specified fields. The breaking up of the existing contracts was a key step that forces the dominant market to release capacity according to the contracts and to improve the market competition (King, et al., 2017).  

The empirical evidence is considered in this section to analyze the impact of different techniques and practices that are related to the different stages of the procurement process and different settings of organizational context. The evidence is considered to support the contract and considers details of techniques and practices (King, et al., 2017). Based on critical analysis of implications related to the legislation and business, there are different conclusions drawn to provide the strength for the evidence, techniques, and practices. There are six aspects for the contract management including internal resource allocation, collaborative buying, the structure of procurement, e-procurement systems, specification development, and internal behaviors. The fundamental issue is the procurement function that dictates reporting lines, location of organization and the actual procurement (Baudry & Chassagnon, 2012). The potential benefits of the centralized structure are highly reported for the maximization of purchasing power, the capacity of commodities, and high-quality procurement staff. In the business contract, the central structure of the contract is effective procurement and management actions. The practice for the structured procurement and the purchasing category is based on contract management. Despite the challenges, the proper investment and contract management are especially required for the promotion of public reporting and performance initiatives (King, et al., 2017). The internal step segmentation is required to be considered in the different matrix to recognize objectives of the contract, factor affecting the contract, and competitiveness of the supply market. The techniques and practices used in the contract are associated with demand management and stronger areas of evaluation. The alternative structures are developed for the evaluation of contracts and procurement functions. E-Procurement systems and collaborative buying initiatives are essentially required to implement contracts (McVicker, 2011). Such type of practices appears as lesser prominent and highly complex procurements. The studies find progressive approaches for the specifications that do not have any kind of restrictions for the context either. The performance-based specifications are used in complex areas, particularly for third-party expenditure. For the improved contractual agreements, the high-level strategies and the internal resource allocation is highly required. The matrix should be wider for the implication and decision-making process (Sanderson, et al., 2015). 

The international energy contracts such as British gas and national grid contracts are similar to the long-term international investment contracts between the investors and the host state. The risk associated with the British gas and national grid contracts is a political and economic risk especially for the developing countries (King, et al., 2017). The governmental interferences are related to international energy operations in different types of contract operations. The nationalization for the energy operation shows increasing prices of energy. The main objective of the contract is to protect foreign investment, mechanisms, and various stabilization techniques (Sanderson, et al., 2015). The legal instruments are used in the international investment and national legislation is often considered for the special stability regimes. The development of countries is to attract foreign investment. There are different emerging trends for the stabilization of current state and international law. The approach is based on three broad perspectives including classic stabilization techniques, international energy contracts, and emerging innovation for the stability from cross border pipeline industry (Baudry & Chassagnon, 2012). The nature of the contract is related to the approach of matter and different emphasis conditions for the exchange relationship. The theoretical movement for the relational contract theory is required to be considered for different circumstances of contracts. The role of the organizational economist is to identify contract vertical integration. Some of the contracts are in the form of deal between customers and the suppliers and such kind of contracts are incomplete without third party enforceable elements (Sanderson, et al., 2015). Some elements described by economists are rational elements of contracts that shares circumnavigate difficulties in the formal contracting between the third party. In the previously done researches, the research scholars worked to identify contract offered for valuable exchange relationship among the individuals. The critical streams are considered for relational a contract theory. The normed based approaches such as relational contract theory developed to identify the challenges faced during the contract and transactions (Maniruzzaman, 2018). The norm base contracts are strongly related to operations in practices.  Search type of contracts defines relations among the parties and project transactions. The common contract norms include implementation of planning, reciprocity, role integrity, flexibility, the propriety of means, remobilization of motion matrix, the link between expectation, norms, lines, and every situation. In the case of exchange relations, the preservation of relations, harmonization of relations, and Supra contractual norms are essentially required for the harmonization of the social matrix. Formal models are only used to define efficiency issues and assumptions used in the contracts (Mouzas & Blois, 2018).

Brand reputational damage  

The process to reach an agreement between two parties is based upon bilateral negotiation at a large extent. The agreement depends upon tactics used to propose an offer and perception of the offer developed by the party. The improved negotiation is highly required to engage both parties in a contract to be established. It is important to gain a better understanding of the tactic and to identify potential factors affecting the shaping of the process (Zhang, et al., 2016). The negotiation is often typically judged by the efficiency and outcomes after the negotiation and if the negotiation ends up with a positive outcome. The process of reaching highly benefited contract between two parties receive higher tension and formal tools are used to reach the outcomes. There are different dynamics of negotiation that are based upon types of exchanging offers and different toolbox is being used to study the performance and human negotiations system. Besides negotiation, the fairness of perception and emotions are also used to determine the outcomes of the contract. To have a better understanding of negotiation dynamics, different factors influencing the negotiation process are also used to analyses and these factors are related to the evaluation of efficiency and negotiation (Zhang, et al., 2016). Influencing negotiation process required highly perform process of social scientist and a psychologist. The interest of formal analysis and negotiation dynamics is classified based on a better understanding of the negotiation and its outcomes. There are different steps before having a stepwise contract and these steps can be classified as a fortunate step, selfish step, nice step, silent step, construction step, and concession step. The sensitivity and adaptability of preferences in the contract are related to the demand of the third party in the contract (Zhang, et al., 2016).

Loss of competitive advantages of international electricity and gas company

The national grid is a well-known international electricity and gas company that faced a lot of challenges in delivering energy to the customers. The business is carrying a lot of business contracts that are related to essential economic and social responsibilities. The national grid reserves the right of controlling procedure for detection of fraud and craft business practices. The potential conflict of interest considered in the contract. Important to consider ethical consideration in the business contract (Wafula & Makokha, 2017). This ethical consideration is related to Prompt payment code, health and safety considerations of the users, implementation of environmental strategies that protect the environment, free license and business community, respecting human rights, community and skill development process for diversity in supply, monitoring and reporting of the supply chain, and finding solution for conflict minerals (Marco, 2013; Mouzas & Blois, 2018). The subcontract of national grid work to provide services for the third parties. The process is considered as a remedy for problems identified in the services. The national grid introduced a document for relevant procedures and policies that implemented relevant procedures and policies. The ethical issues evaluated in the activity is are related to the code of conduct and define the expected ability to demonstrate compliance of principles on behalf of the national grid. The supplier code of contact is also considered for investigation of concerns and issues. The key personnel working conditions for the element procedure and policies are also considered as a suitable training process carried out by national grid and British gas company (Wafula & Makokha, 2017).

Consequences of contractual failing

The process of sustainable procurement is related to needs of services, goods, utilities and work that generate benefits for the organization. The sustainable procurement policies consider environmental, social, and economical impact on the organization. On the other hand, the ethical procurement is based on the standards and rules for right contract or practices carried out in the organization. The professional procurement process conducts different types of business practices in ethical manners.  The potential benefits of ethical consideration and procurement include effective use of natural resources, long term efficiency saving of energy, and reduction of harmful impact of waste and pollution in the services. British gas and National grid of UK consider sustainable and ethical conditions of the procurement.

Recommendations on Legal and contractual arrangements in purchasing

On the basis of different reasons of contract failure in British gas and energy UK, some possible recommendations are required to be considered. These recommendations can be considered to reduce the consequences of contract failure in any organization.

1.      Well haggled and well spotted policies are required to be considered that play significant role in a system. The Consumer Rights Act provides new ways to recourse the services up to next six years after the failure. Therefore, it is important to consider the fair price issues related to the services.

2.      The increase in reflected cases such as insurance premium tax was from 6% to 9.5% in the last November. It shows that particular policies with some conditions of sticking with money are required to be considered in the company (Brignall, 2016).

3.      The consequences of contractual failures in British gas and national grid are associated with the diverse issues such as engineering problems, supply chain, management issues for the services provided to the customers and catastrophic failure of the contract without getting success. The proper management of contract is required to be carried out by professional managers that can mitigate or reduce the risk issues up to least levels.

4.      The national grid and British gas company are recommended to develop a comfortable speaking platform that delivers the different options of contacting the compliance team. The company sector function and general counsel are working independently but some unethical behaviors and issues are affecting the national grid (King, et al., 2017).

5.      To improve the services enough information of Investigation is required to consider ethics and team involvement in the contract (Sadiq & Governatori, 2015). It is highly important to maintain media relation team that recommends appropriate matter expert.

6.      The corporate donations are required to encourage the customers and to recommend them for the favorable treatment of productive public framework (Wafula & Makokha, 2017).

7.      The comprehensive volunteering programs are required to provide Employees with an opportunity to work in different processes and diverse activity (Mouzas & Blois, 2018). They contribute to community projects is highly recommended.

8.       The price-sensitive information has a significant influence on sharing the deal with the third party, therefore, the company is recommended to induce such type of deals that are legal and does not include price sensitive information (Baudry & Chassagnon, 2012).

Conclusion on Legal and contractual arrangements in purchasing

The aim of the present work was to analyses the legal and contractual arrangements in purchasing the products and services provided by an organization. It is important to identify the legal considerations of a contract between two companies for the services. The contract should exist for different acceptance conditions and offers that are related to different terms and conditions of services. Different types of factors are considered for contract and procurement management. The dispute and contract resolution are highly expected in any event before having contractual promise about the services. In the present work, two case studies including Tanzania national roads agency and British gas and the national grid is considered to identify the role of the third party in the contract. The contract deals with independent subsidiaries and services provided to the customers under different market competitions. Besides the analysis of two case studies, the critical analysis of different strategies implementation of legislation, critical analysis of contractual relationships, critical analysis of ethical issues, and critical analysis of negotiation strategies are also considered in the present report. At the end of the report, some recommendations to improve the contract between customers and some organizations are provided. The recommendations are related to the national grid and British gas case studies.

References of Legal and contractual arrangements in purchasing

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King, W., Haigh, M., Lee, T. & Nie, S., 2017. An Overview of International Regulatory Experience. China’s Gas Development Strategies, 01(01), pp. 379-424.

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McVicker, E., 2011. Turning Risks into Opportunities in Contract Management: A Case Study in the Health Care Industry. American Journal of Economics and Business Administration, 03(02), pp. 224-233.

Mouzas, S. & Blois, K., 2018. Relational Contract Theory: Confirmations and Contradictions. Relational Contract Theory, 03(42), pp. 01-12.

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