Procurement and Contract Law Challenges

Introduction

Obtaining commodities or services for commercial reasons is known as procurement. Procurement is most often connected with businesses due to the large-scale nature of the services and products that corporations need to procure. However, procurement has quickly become more than merely a need during the last few years. When a company’s procurement and supply chain management system is compromised, it could cost the business millions of dollars. To ensure that procurement is done fairly and transparently, there has been an increase in regulatory frameworks that control corporations. A company’s competitive advantage can be preserved by effective supply management, which involves monitoring and controlling all aspects of the supply chain. The supply management chain can be efficiently handled with the help of software that helps manage the process. Modern procurement and supply management requires extensive data mining techniques. One of the critical issues facing the sector is the inability of firms such as JDPi to handle its data, leading to low staff morale. Due to the company’s existing inability to effectively manage its data. The paper focuses on the procurement of the company, challenges of supply chain management, and approaches to minimize them.

Competitive Tendering and E-auction

The procurement department of a corporation invites suppliers of the goods and services needed to submit their bids in a competitive tendering procedure; therefore, through the company’s invitation, the providers draft tender feedback. A competitive market can be created by allowing competition and allowing the corporation to select the best (Nemec et al., 2020, p. 201). Using such a method, JDPi might quickly access a wide range of market vendors and select the one that offers the most value for money. A transparent procurement procedure is preferred by major enterprises, which is why they use the tendering process (Kohler and Dimancesco, 2020, p. 45). Interested providers must submit their tenders within a specific date stipulated by the company. To analyze bids, the corporation uses a set of criteria based on facts such as price and quality, among other things (Pavithra et al., 2018, p. 55). Because of this, the tender can be publicized via media, online platforms, and different approaches as appropriate.

Benefits and Setbacks of Using a Competitive Tendering Approach

As a result of employing a competitive tendering procedure, JDPi will have the opportunity to select the best product at the best price, eliminating the probability of procurement personnel favoring any supplier. The system allows for a competitive market to discourage complacency and stimulate innovation (Vitasek and Kuchler, 2020, pp 260). Due to the current market price, it may be impossible for a single supplier to provide the organization with a competitive deal. Organizations should first try to outsource from various providers before deciding on a single vendor to receive the best rate possible. Direct procurement is subjective, but the use of competitive tenders is objective. Through specialized purchasing tactics, competitive procurement also provides a clear snapshot of the product to be purchased (Kovalchuk et al., 2019). Competitive tendering would allow management to study new factors and make an objective final judgment if the procurement manager decides to employ it.

Suppliers compete against each other via online platforms for agreements against published stipulations in an “e-auction,” also recognized as a reverse auction, which uses electronic auction. Using e-auctions, the procurement department would be able to choose from a variety of providers who would compete with each other to offer the best price for the service the company needs (Kelly et al., 2021). An e-auction also speeds up procurement and reduces the time it takes for suppliers to submit their final proposals, saving time and money. There are many advantages to using e-auctions over traditional competitive bidding because providers may compete with one another in real-time, no matter the distance (Fanzeres et al., 2019 p. 1160). Because of this, JDPi prefers to use e-auction because it provides a wide range of products and services.

Common Challenges

Risk management is one of the biggest challenges when it comes to procurement. Risk management is essential to a company’s success because it helps keep its management team focused on the most important, the business itself. There are many ways a procurement risk might affect a company’s overall performance (Pavithra et al., 2018, p. 55). It is essential to identify and address procurement risks in the shortest time possible to avoid critical consequences for the whole supply chain. Significant issues include a wide range of hazards from business threats to prospective frauds and regulatory risks such as anti-corruption and regulation enforcement.

Another problem with procurement is the lack of precise data. Increasing the scope of a project brings a slew of new dangers and obstacles. One such issue affecting procurement is the availability of unreliable data (Lindblad, 2019, p. 30). A breakdown in the market cycle can occur due to inadequate data leading to bad decisions. Product shortages and excess inventory might come from purchases based on incorrect information (Vitasek and Kuchler, 2020, p. 260). Reliable evidence is essential in large enterprises because it helps management make a clear verdict. A data-driven decision significantly has a low chance of going wrong based on unsteady facts (Kovalchuk et al., 2019). Some procurement and supply chain managers confront common issues, such as the inability to track and control inventories due to the abundance of retailers and warehouses. A product’s failure to be followed is another potential issue while handling procurement data. An adequate supply management method relies on a reliable and able system to track the movement of a product or service (Nemec et al., 2020, p. 201). Therefore, the organization does not have a secure software system to monitor its actions, resulting in frequent system failures.

One solution to the challenges would be to ensure that the organization has a current system in place. Employee morale may suffer due to a lack of accountability if inventory levels are challenging to track, thus hurting supply chain management. For the organization to operate at its peak, the person in charge of procurement must ensure that items and services move freely across the supply management chain (Fanzeres et al., 2019, p. 1160). Customers may file product liability claims against the company if there is no real-time information on the product’s progress from the point of manufacturing to the end of the supply management system. This is a risky condition for the company, and product traceability is essential to avoid any resulting legal concerns. Heckman (2020, p. 370) claims that corporations face difficulties when it comes to anticipating production and making purchases. A paper can be written if data are accessible. However, estimates are used when there is no available data (Lindblad, 2019, p. 30). A business must have historical data to create accurate projections and keep track of product movement along the supply management chain.

Since risk management is one of the most challenging issues procurement managers confront, Proper risk management can be performed with a thorough grasp of suppliers and their impending operations. Pre-screening is essential to ensure a successful partnership with a supplier (Vitasek and Kuchler, 2020, p. 260). Keeping an eye on the procurement process can also help minimize any potential dangers. There are a variety of supply chain risks, from reducing supplier risk to ensuring compliance. Understanding the supply chain process of every supplier and having a plan in place if something goes wrong can assist defend the procurement process.

Another way to deal with procurement issues is to think sustainably. Planning for the future using only the most essential instruments is a critical component of sustainability. This method helps firms migrate to a circular economy centered on recyclable prospects rather than a linear economy, which is entirely built on resource extraction and use (Fanzeres et al., 2019, p. 1160). Economic cycles and sustainable growth will contribute to general financial prosperity and more significant revenue throughout the present and future. Thinking sustainable also involves an essential aspect of the business world strategizing on financial matters. The CPO and CFO will collaborate to create a comprehensive acquisition and procurement plan (Kovalchuk et al., 2019). Finance and procurement departments should cooperate to build a more powerful corporate position without unpleasant competition. Developing a big data strategy tailored to the procurement process will help one solve the challenges. There will be a need to invest in software tools while engaging and processing data.

Regarding sourcing, investing in procurement tools may be a good idea, as those systems can handle all aspects of the task, including selecting suppliers and negotiations with them. Vendors, purchases, and accounts payable will benefit from acquisition tools (Nemec et al., 2020, p. 201). Analytic technology also results in cheaper costs and more savings. Procurement can be well-planned and well-researched as a whole process. The acquisition process can be better understood if broken down into its parts.

Main Contracting Issues

Recruitment is among the phases demanding enormous amounts of data, as do big data and artificial intelligence. Procurement officers and the company care more about data quality than quantity, even if the latter is more impressive. Only 2% of organizations claim to have streamlined their acquisition process entirely, while 54% claim to be in the process of making it happen (Kelly et al., 2021). When many procurements are done manually, human errors and misunderstandings are unavoidable. And the move from manual to automated operations should not be overlooked. A company’s ability to make sensible procurement decisions will be aided by the proper use of monitoring, research tools, and reporting technology. (Heckman, 2020, p. 370). The underlying procurement’s successes and failures can be discovered through business analytics.

As a highly specialized institution, procurement has come to the public’s attention, fueling an increase in demand. All big companies are looking for persons with experience in this field to fill their workforces. Businesses must pay attention to the professional development of their employees to streamline operations and get the most value out of them (Fanzeres et al., 2019, p. 1160). Keeping staff abreast of new technologies is essential for companies that want to invest in expanding their workforce, attracting top talent, and improving the hiring process. Because of their differing priorities and differing views on the project’s outcome, stakeholders can be challenging to manage. While some stakeholders have direct control over the initiative, others may have influence only indirectly; therefore, the priorities of various stakeholders will shift.

As a result of the wide range of stakeholders, negotiating and working together to achieve a positive and successful outcome is difficult (Kohler and Dimancesco, 2020, p. 45). There are times when goods and resources are purchased in haste to complete a project and meet an established deadline so that the acquisition phase may be perceived as an extended one. Failure to follow proper procedures results in more significant risks and difficulties (Heckman, 2020, p. 370). A lack of time for contract negotiations and delays in starting the evaluation process can lead to overpriced and late-delivered products because of incomplete technical specifications, missed procurement deadlines, extended bid and proposal deadlines, and an inability to begin the evaluation process.

Critiquing the Main Issues

Procurement managers are responsible for various tasks, from identifying vendor needs to handling payments. As a result, they serve as a vital link in the supply chain. Managing procurement policies and ensuring that the company adheres to them is a significant task for its leaders (Kohler and Dimancesco, 2020, p. 45). There are several ways to address the issues that have arisen. The management uses risk mitigation to deal with concerns before they become a problem to protect the organization. As a second consideration, a company’s data must be accurate and readily accessible to make vital business decisions (Kelly et al., 2021). Many firms realize the need to have plans to deal with any potential issues that may develop throughout the procurement process. JDPi’s problems can be alleviated with the help of the software. When it comes to procuring goods and services, it is essential to adhere to the times and adapt to new technological developments.

Terms and Conditions governing the Contract

It is essential to the procurement business since it governs the conduct of parties involved in supply and procurement. In this agreement, the parties are free to set the parameters of their Contract, and they enjoy contractual independence. Therefore, any party who violates their contractual commitments will be held liable for breach of Contract (Fanzeres et al., 2019, p. 1160). In this scenario, Capgemini’s terms and conditions have been modified to reflect the supplier’s ability to enter the Contract. For a contract to be legally binding, two or more parties must agree to enter into it. The Uniform Commercial Code defines an agreement as a legally necessary contract between two or more parties. An offer and acceptance are required, as is the exchange of consideration between the parties. According to the rules and guidelines, contracts and agreements are legally deemed the entity’s obligation that procures them.

What It Means to the Legal Rights of JDPI

Except for the elements that the supplying firm altered and notified them of the same modifications, JDPI’s legal rights and obligations will remain. Accordingly, the parties will be governed by the terms of the master contract issued by Capgemini UK PLC, which has been modified to reflect the new conditions to incorporate anything without explicitly mentioning it is up to the people involved. Based on what a reasonable person in the same circumstances would expect, JDPi’s rights and obligations will be applied objectively to the Contract (Kelly et al., 2021). If Capgemini UK PLC changes the terms of the Contract in writing, then the Contract will incorporate those terms.

Capgemini’s changes to JDPi’s standard Contract indicate that the law of Contract determines whether a promise made by a party to a contract is enforceable. When choosing whether a pledge is legally enforceable, the court will look to see if the promiser intended to make it happen (Sönnichsen and Clement, 2020, p. 118). Contractual considerations include promises of payment, and Capgemini has the legal right to enforce the promise they made that they would be paid an additional £100,000 under the Contract terms. After the corporation agreed to work under the new changes, consideration was given to the additional costs incurred. A promise’s enforceability can be determined by looking at what the other party has done in exchange for it (Gidigah et al., 2021). Although JDPi made a few adjustments midway through the Contract, Capgemini went above and beyond to fulfill the Contract on schedule. The company’s guarantee was for its advantage after the work was done.

Different Sourcing Approaches

By putting up a strategic procurement team, the organization ensures that all functional departments are included in the buying process. Similarly, the procurement process must be aligned with the organization that develops the most effective strategy. The company could use acquisition as a sourcing strategy, in which case it would buy directly from the desired supplier (Fanzeres et al., 2019 p. 1160). Alternatively, the organization could engage with a chosen supplier as part of a strategic alliance. The market conditions and the organization’s outsourcing strategy will influence the company’s method. A corporation may buy solely on price alone, in which case the supplier would be responsible for forecasting, delivery, technology, pricing, and everything else. The corporation can take advantage of economies of scale by using fewer suppliers. There will be a greater willingness on the suppliers to contribute their technological know-how and design input (Merkert et al., 2018, p. 88). Changing suppliers can be expensive; thus, the company in the case study may be considering keeping its current supplier.

Alternatively, a company could set up a virtual company that relies on various service providers. The relationships with these providers can be short-term or long-term at their discretion. JDPi can use multiple sourcing strategies to find the best supplier for its needs (Kelly et al., 2021). As a strategy, the company may want to focus on utilizing the Keiretsu Network. The company creates a vertical integration under the networks, in which the supplies are considered to be part of the company’s coalition. Suppliers who participate in such a system can expect to build long-term partnerships and deliver high-quality services. Procurement online may become a problem if a corporation uses a virtual business (Nemec et al., 2020, p. 201). The EU directive Number 2000/E mandates that the seller’s information be made available to the buyer. The vagueness of contractual provisions may also be a source of legal difficulties. If unforeseen events arise, a commercial contract clause must give relief to one or both parties.

The organization must have a plan to deal with any potential legal issues. To ensure that corporations are aware of what is legally required of them, procurement employees must have a thorough understanding of the legal nature of contracts. It is also essential to consider how procurement regulations such as the Uniform Commercial Code apply to the Contract and how its terms will affect other parties, such as suppliers (Gidigah et al., 2021). When doing business online, it is critical to know precisely when a contract comes into effect and each party’s responsibilities and rights. The procurement process can be harmed by regulations governing competition. Therefore, each company involved in the case study must examine how a new law impacts the competition in its supply chains. Because the company’s reputation is so important, any violations of regulations could severely affect its performance. The parties to the Contract must ensure that the Contract’s subject matter is correct and legal for the Contract to be legitimate. Mutual consideration and acceptance of the offer are also required (Fanzeres et al., 2019, p. 1160). Because of this, the purchasing department must be aware of all contractual obligations and rights and therefore endeavor to safeguard the company from being sued by the supplier (Merkert et al., 2018, p. 88). Consequently, a firm must guarantee that the relevant laws on electronic transactions are followed when it contracts overseas.

List of Cases

Good ethics are essential in the business world, as they can make the difference between a company’s success and failure. It is the purchasing agent’s responsibility to ensure that all transactions on behalf of the company are legal and ethical. Companies have a reputation to uphold, and by implementing ethical practices, they can build trusting relationships with the companies that supply them. Ethical sourcing is the practice of avoiding any activity that could harm others, whether it is a direct or indirect effect. As a result, the company’s purchasing agents must take steps only to purchase ethically produced goods (Vitasek and Kuchler, 2020, p. 260). It is not just the supply chain management team’s responsibility to act ethically; it is a responsibility that everyone should share in the company.

Conclusion

Organizations cannot overlook the relevance of procurement and supply management processes. Using the new software, the corporation can boost morale among its employees, who have become disheartened due to its system’s regular breakdowns. Competitive procurement rather than direct procurement can help the organization reach a broader range of potential vendors. Businesses must implement the most current best practices to minimize the difficulties that procurement and supply chain managers confront.

Reference list

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