answer the 4 question attach

Project Procurement Management Chapter 04: Project Procurements with:

Corporate Teaming Agreements / Alliances / Arrangements

Contract Negotiations Chapter 04: Planning Contract Negotiations:

People, Tools and Best Practices

Week 4

Question: Why is a corporate teaming agreement like an arranged marriage? How are they used to avoid the challenges of Mergers and Acquisitions?

Answer: “The parents (mostly the fathers) get together and decide that my son will marry your daughter . . . period . . . end of discussion. The parents then meet (mostly the fathers) and introduce the two young participants who have no say in the matter. It is ad one-deal.

Likewise with many corporate teaming arrangements , one executive will met with another executive and they will decide that my firm will join with your firm on a new project . . . period . . . End of all discussion. The executives then meet to introduce the project participants who have no say in the matter. It is also a done-deal.” (PPM, p. 35)

Procurement Teaming

Question: Why do corporations form teaming relationships with others? Is it just another form of “outsourcing?”

The Questions to Ask Before Teaming:  Do we have a candidate for the function(s)?  How do we select candidates?  How do we assess ourselves?  Who are the potential providers?  How do we assess them?  What sort of relationship will we form?  How will we manage the relationship?  How do we ensure efficiency?

Procurement Teaming – The Why?

Beyer et al., Procurement, Principles and Management, 11th Edition

The Better Question(s):  Can others do it better?  Is it cost-effective?

 Does it let us focus on our core competencies?

The Most Important Question(s):  Is the procurement more than we can handle alone?

And the BIG ONE:  Does this eliminate (reduce) competition and position our team better for

selection?

If it doesn’t, don’t form a strategic relationship (team)!!!

Procurement Teaming – The Why?

The Why(s):  External supplier has better capability  External supplier has greater or more appropriate capacity

 Frees resources for other purposes

 Lack of internal resource  Reduction in operating costs

 Economies of scale

 Reducing or spreading risk  Desire to focus more tightly on core business

 Infusion of cash by selling asset to provider

Procurement Teaming – The Why?

Beyer et al., Procurement, Principles and Management, 11th Edition

Types of Teaming Arrangements:  Just plain ‘Teaming Agreements’  Specific Relationships: Partnerships / Strategic Alliances

 Lack of a Formal Agreement

Teaming Defined “An agreement of two or more firms to form a partnership or joint venture to act as a potential prime contractor; or an agreement by a potential prime contractor to act as a subcontractor under a specified acquisition program; or an agreement for a joint proposal resulting from a normal prime contractor- subcontractor, licensee-licensor, or leader-company relationship.” (PPM, p.37)

Confusing?

Procurement Teaming – The How?

Simplified Definition “An arrangement between two or more companies, either as a partnership or joint venture, to perform [or pursue] a specific contract … (PPM, p.37)

Partnership Defined “…[O]ccurs when two or more entities (persons) combine capital and/or services to carry on a business for profit. From a legal standpoint, it is a group of separate persons.” (PPM, p.38)

Procurement Partnership Defined “A ‘partner’ is defined as a firm with whom your company has an ongoing buyer-seller relationship, involving a commitment over an extended time- period, a mutual sharing of information and a sharing of risks and rewards resulting from the relationship.” (PPM, p.38)

Procurement Teaming – The How?

Joint Venture Defined “An enterprise owned or operated by two or more businesses or individuals as a separate entity (not a subsidiary) for the mutual benefit of the group. Joint ventures possess the characteristics of joint control: e.g., joint property, joint liability for losses and expenses, and joint participation in profits. Joint ventures can be either incorporated or unincorporated.” (PPM, p.38)

Strategic Alliance Defined A strategic alliance (also see strategic partnership) is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. A strategic alliance will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship. Typically, two companies form a strategic alliance when each possesses one or more business assets or have expertise that will help the other by enhancing their businesses. Strategic alliances can develop in outsourcing relationships where the parties desire to achieve long-term win-win benefits and innovation based on mutually desired outcomes. Simandan 2018, Time & Society. and, Gulati, Wohlgezogen, and Zhelyazkov 2012, The Academy of Management Annals, 6(1), pp.531-583.

Procurement Teaming – The How?

Unequal Teaming Relationships  The Superior-Subordinate Relationship

Defines who is in charge, and who is not! Unique to each agreement.

Procurement Teaming – The Types?

Project Procurement Management Figure 4.1: Teaming with a Superior-Subordinate Relationship Figure 4.2: Superior-Subordinate: Sometimes Firms Trade Places

Equal Teaming Relationships  The Partnership Relationship

Ambiguous as to who is in charge. Though apparently 50-50, one entity still needs to be responsible. Typically dysfunctional!!!!

Procurement Teaming – The Types?

Project Procurement Management Figure 4.3: Teaming Arrangement with Equal Partners

No Formal Teaming Relationship (Agreement)  The “side-by-side” relationship

No definition as to who is in charge, and who is not! Often “client” driven by indecision, necessity, scale, or competitive restriction, Difficult to manage or lead!!!!!

Procurement Teaming – The Types?

Project Procurement Management Figure 4.4: An Umbrella Contract for One Project Without Teaming

No Formal Teaming Relationship (Agreement) Success, failure, or yet-to-be-determined?

“The contracts were drawn up in a way that did not encourage cooperation between vendors.

It was difficult to get vendors to work in alliance . . . We decided to go for the one-vendor option. While senior managers at BP and the three suppliers clearly understood the vision of seamless service captured in the framework agreements, their respective operations did not.” (PPM, pp. 47-49)

“The roots of IBM’s decline began when it failed to demand the source code for DOS from Gates. Thus, each new upgrade had to be purchased from Microsoft , which maintained control of the most critical piece of software in the PC industry.” (PPM, p. 56)

Procurement Teaming – Success?

Contributors to Teaming Success:  Activities well defined  Roles and responsibilities of all parties clear

 Good relationship(s) with teaming partner(s)

 High quality of partner(s)  Effective contract management/monitoring

Which Relationship Works Best (Best to Worst): 1. Superior-Subordinate Relationships

2. Equal Partnerships

3. Lack of a Formal Relationship

Procurement Teaming – Success?

PMBOK Chapter 12 Section 12.2: Conduct Procurements

Procurement Planning – ‘Make or Buy?’

Project Procurement Management Chapter 04: Project Procurements with:

Corporate Teaming Agreements / Alliances / Arrangements

PPM Week 4 Discussion Question

Question 04a: Explain the difference between a partnership, strategic alliance, joint venture, and when and how a teaming agreement may be used and why.

Question(s): Shall we negotiate as an individual or as a team?

Strengths and Weaknesses – Individual vs. Team

Planning Contract Negotiations

Strengths Individual  More rapid decisions

 Quicker negotiations

 No dissention

 Greater accountability

Team  Greater experience

 Strength in numbers

 More options / win-win

 Ability to plan tactics

 Backup

Weaknesses Individual  No help

 Potential to be influenced (unchecked)

 Lack of experience / understanding

 Individual weaknesses

Team  Slower negotiations

 Increased cost

 Multiple personalities

 Potential to be divided

 Lack of coordinated planning

The Five (5) Negotiation Planning Essential Elements: 1. Selected Negotiation Strategies

Have the preferred and alternate strategies defined and refined 2. Selected Tactics and Countertactics

Brainstorm the potential responses from the opponent and define the tactics and countertactics to address / overcome

3. Desired Terms and Conditions (T & C’s)

Know / define the acceptable T & C’s – use as strategy / tactic 4. Identified the “Must Haves”

Define the absolutes and ‘deal-breakers’ 5. Defined Price Range

Set the Best-case, Most-likely, Worst-case (BATNA / walk-away)

Negotiation Planning Essentials

What are Terms and Conditions:  The collection of language that makes up a written contract  A “Term” addresses a specific subject – e.g., price, payment, disputes

Written in / as “Contractual Clauses”  A “Condition” either activates or suspends a term

Condition Precedent activates a term Condition Subsequent suspends a term

 Standard Terms and Conditions – typical “boilerplate” that remains the same for all organizational contracts

 Exculpatory Clauses – limiting language typically removing or shifting responsibility to others: “Limitations of Liability” “Force Majeure”

 Force Majeure – French for “Major or irresistible force” Eliminates responsibility and enforceability of the contract due to “Acts of God,” wars, strikes, or other causes beyond the control of the parties to the contract

Terms and Conditions (T & C’s)

What does it take to form a Contract?  The Triumvirate – Offer, Acceptance, Consideration

 An Offer must be unequivocal, intentionally communicated, and for a reasonable period of time

 Acceptance means that the Terms and Conditions have been accepted by all parties. Requires a “Meeting of the Minds”

 Consideration is the exchange of something of value, or the promise to do so It is a MUST for a contract to be enforceable (valid) under Common Law

 Competent Parties – Parties to a contract must possess legal capacity

Of proper age (18+), authorized by company

 Legality of Purpose – Reason for the “deal” must be legal  Contract Privity – Legal relationship created ONLY between parties to contract

 Parol Evidence Rule “Best evidence of a contract is the contract itself” Prior oral and or written statements made during negotiation are not admissible / enforceable. Only what makes it into the written contract, or by written amendment remains valid.

Contract Formation

Team-Based Negotiation Best Practices:  Select the right people – with the right attitude and experience  Identify a lead negotiator…and empower them

 Develop a definitive negotiation strategy...to deliver success

 Define a negotiation plan – including T & C’s, tactics, must-haves  Assign roles and responsibilities

 Practice together – role play / mock negotiations

 Select a scribe  Document, document, document!

Best Practices

Contract Negotiations Checklist Form 4-1, p. 88

Contract Negotiations Chapter 04: Planning Contract Negotiations:

People, Tools and Best Practices

CN Week 4 Discussion Question

Question 04b: Why is it important for an organization to have a negotiation plan and upon what should it focus?

Project Procurement Management Chapter 04: Project Procurements with:

Corporate Teaming Agreements / Alliances / Arrangements

Contract Negotiations Chapter 04: Planning Contract Negotiations:

People, Tools and Best Practices

Week 4