PROJ6004: Contracts and Procurement All

6/3/2020 Laureate International Universities

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MODULE 5MODULE 5

Performance-based Contracting and Vendor Management

Introduction

Projects with a substantial procurement component require signi�cant e�ort by the project

manager to ensure that contracts meet the requirements and constraints of the project plan.

Throughout the project phases, project managers must monitor performance to ensure that work is

progressing according to the contract’s terms and conditions.

The performance based contracting approach was pioneered in the US defence industry and now is

being adopted worldwide, across many industries and the private sector. The approach focuses on

outcomes rather than activities and tasks and uses measurable performance standards that are

tied to required outcomes. It includes a pricing model that comprises or includes reward and risks.

Examples of such metrics include; improved reliability or availability, improved certainty of delivery

and reduced cost of ownership. A successful way of doing this is through incentivized term

contracts with speci�c and measurable levels of performance agreed by contracting parties. A

balance needs to be struck between de�ning the outcomes required in su�cient detail to ensure

the customer’s requirements are understood and capable of being measured, and not unduly

constraining the contactor or service provider.

Vendor management allows companies to build a resilient relationship with service providers and

contractors that will ultimately bene�t all parties.

Module 5 learning activities will include a review of the learning resources (essential, highly

recommended and other learning resources), viewing of essential videos, engaging with students to

discuss key sub-topics (noted below) and ultimately record key aspects through re�ection in the

student’s re�ection journal.

This module will cover:

Performance-based contracting and key terms and conditions that drive performance;

6/3/2020 Laureate International Universities

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Contract management and contract administration including enforcement of contracts to deliver project outcomes;

Project constraints and contractor’s role in ensuring contractor delivers within those parameters and the requirements of the project plan.

This module will help you:

1. Learn about performance-based contracting model and to explore its relevance particularly during the procurement execution and closeout phases;

2. Understand the importance of establishing performance criteria, how performance can be measured and the key contractual terms and conditions that drive performance outcomes;

3. Understand the strategic aspects of contract administration and examine contractor’s role in facilitating e�ective contract management within the project constraints;

4. Critique and benchmark the Case Study project against similar projects and capture lessons learnt;

5. Exchange ideas with other students through the discussion form on the above topics and also record key aspect in the Re�ection Journal.