You are on page 1of 15

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.
Page 1 of 15 Printable Flash Cards
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
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
Page 2 of 15 Printable Flash Cards
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
Term 8
Remedies in preparing obligation
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
Term 9
Define: Cure (remedies)
Definition 9
To make the situation right, such as by
fulfilling a contract as originally
Page 3 of 15 Printable Flash Cards
Term 10
Define: Cover (remedies)
Definition 10
To provide protection against breach
or compensation for breach of
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.
Page 4 of 15 Printable Flash Cards
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
Page 5 of 15 Printable Flash Cards
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
Term 17
Elements of a Statement of Work
(SOW): Performance evaluation
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
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.
Page 6 of 15 Printable Flash Cards
Term 19
Objectives of contract administration
Definition 19
*Ensures supply management
organization fulfills its part of the
*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
Term 20
In order to assist in cost & schedule
control, many cost-reimbursement
contracts require the establishment
and maintenance of what 3
Definition 20
Annual work plans, work
authorizations, and notices to proceed
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
Page 7 of 15 Printable Flash Cards
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
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
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.
Page 8 of 15 Printable Flash Cards
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
*Recognizing potential problems
*What actions they can and cannot
take and when to contact contract
*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
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 perform
2. The purchasing activity has a
change of requirements
Page 9 of 15 Printable Flash Cards
Term 28
Areas to be reviewed in compliance
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
*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
*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
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
Definition 30
Important to determine who has the
authority to approve transactions and
make sure it is known throught the
Page 10 of 15 Printable Flash Cards
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
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
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
Page 11 of 15 Printable Flash Cards
"relief" if the other party takes an
action not contremplated or fails to
take an action contemplated by the
original agreement.
Page 12 of 15 Printable Flash Cards
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,
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
Term 36
Contract closeout (in Contract
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.
Page 13 of 15 Printable Flash Cards
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
Term 39
How do cancellation and termination
Definition 39
Cancellation implies "cause" and does
not excuse the "causing" party from
damages resulting from its failure to
Page 14 of 15 Printable Flash Cards
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.
Page 15 of 15 Printable Flash Cards