Contract Management

CHAPTER 8

CONTRACT MANAGEMENT

CONTRACT
‡ A contract exist when an offer is made and accepted ‡ It may take different forms such as:
Ł Ł Ł Ł A written document A digital document A fax A verbal agreement

CONTRACT..Cont
‡ The basis for all event management documentation ‡ It is the goals and objectives of the event frozen in time ‡ Each contract specify who will do what, when it will be done and for whom it will be done ‡ It can be detailed or as simple as letter of agreement or purchase order (PO)

EVENT SPECIFIC CONTRACTS
‡ A contract with suppliers ‡ Hotel contract ‡ Key concepts:
Ł Ensure all contract conform to local, state and federal regulations Ł Determine the time frame for final execution Ł Prepare original for each signer and use the signed original as the official documents not facsimiles Ł Create a separate checklist to track approval records for all written agreements Ł Identify arbitration and dispute resolution methods

TYPES OF CONTRACTS
‡ ‡ ‡ ‡ COST-PLUS CONTRACTS FIXED-PRICE CONTRACTS INCENTIVE CONTRACTS MIXED CONTRACTS

COST PLUS CONTRACTS
‡ Cost plus percentage or cost plus fixed fee contract. ‡ The contractor passes on any costs directly to the client. ‡ It is common contract made between the event company and its client/ sponsor ‡ The event company charges the client a percentage of the gross amount (total cost of the event or a mark up)

COST PLUS CONTRACTS «Cont
‡ The event company overhead could be absorbed by the fixed fee or could be a separate cost to the client ‡ It can also structure it so that it can be paid on an hourly basis ‡ It means that many of the risk are borne by the client ‡ The client assume that the contractor will get the best price for the goods and services ‡ Examples???

FIXED-PRICE CONTRACT
‡ Also known as lump-sum contract ‡ One price is determined for the whole resource ‡ It allows the supplier and contractor the freedom to use its own subcontractors to produce deliverable ‡ It transfer the risk of variation in cost to the supplier ‡ The good and services have to be carefully described and the manager need to know the market price of the goods and services ‡ Examples ????

INCENTIVE CONTRACT
‡ A percentage share of profit is common for entrepreneurial events or corporate-sponsors events that have an admission price ‡ The entertainment supplier might get percentage of the door ‡ Incentives can be included in the cost-plus or the fixed price contract ‡ If certain cost or schedule targets are met, then the contractor or supplier gains an extra fee ‡ Examples???

MIXED CONTRACT
‡ It is a mixture of all three type described ‡ A venue could be a contracted for a fixed fee plus cost with a percentage of profits ‡ It is advisable to secure the services in the case of unique contracts. ‡ Examples ????

THE CONTRACT MANAGEMENT PROCESS
1 2 3 4

‡ Negotiation ‡ Specification ‡ Contract ‡ Administration

NEGOTIATION
BACKGROUND PRECEDENT
‡ Preparation ‡ Background info on supplier and their styles business ‡ Powerful argument ‡ Reducing or increasing fees is far more difficult once a precedent has been set ‡ Attitude of the parties ‡ Seen a win/win situation or a mutual benefits to all parties

PARTNERING

SPECIFICATION AND EVALUATION
Function Technical description Performance
‡ Resources to enable the event to occur successfully ‡ Of the product or services ‡ Of the good or services of the event

ADMINISTRATION

Setting the procedures for contract review with task and responsibilities Briefing all the contractors

Establishing trigger event or milestones that indicate the success

Maintaining a general firm but fair attitude about fulfilling the contract terms

Forming a contract administration team

THE DEGREE OF ADMINSITRATION
‡ Will vary depending on such factors :
Ł The uniqueness of the event Ł The experience and skills of the contractors Ł The confidence of the client or sponsor on the event management abilities Ł The magnitude and the visibility of the event

CONTRACT VARIATIONS

EXTERNAL AND UNKNOWN (e.g.: natural disasters, exchange rates, new legislation)

EXTERNAL AND KNOWN (e.g.: inflation, building work)

INTERNAL AND UNKNOWN (e.g.: sickness, staff conflict)

INTERNAL AND KNOWN (e.g.: new suppliers coming on board, increase in staff)

COMMON PROBLEMS
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Too much time spent on negotiation Lack of sufficient knowledge regarding the event element Lack of contract knowledge Not realizing the implication of a variation in the contract Settling for a cost plus contract Not requiring the suppliers to make timely progress reports Not realizing that both bidding and administration are cost to the event Not settling disputes Not obtaining a signed release form at the time of any dispute settlement Not asking questions Not getting any changes

END OF CHAPTER 8
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