answer the 4 question attach

Project Procurement Management Chapter 13: Close Project Procurements

Week 14

So, Just When Does Procurement End?  When everything has been delivered by the seller to the buyer?

But, we know different because . . .  Things tend to change during performance of the work . . .

AND, one party may have a claim against the other

“After all, everyone wants to get paid for EVERYTHING they did during performance!”

It ain’t over ‘till it’s over!

BUT . . . What happens when one party desires to end the relationship early . . . Before the work is complete????

Termination of the Contract – Three types  Termination for Cause / Default

 Anticipatory Repudiation

 Termination for Convenience

Which is good, which is not; which is avoidable which, is unavoidable; is it ever desirable?

Ending the Work/Relationship Early

Termination for Cause (a/k/a: . . . for Default)  Generally preceded by a “breach” of the contract

“Failure, without legal excuse, to perform any promise which forms the whole or part of any contract.”

Simply put, a Breach occurs when the Seller fails to complete that which it has been contracted. The Buyer can terminate the contract with the Seller.

AND, has the ability to recover costs incurred to remedy the breach – e.g., the Buyer can recover the cost of completing the work from the Seller when it exceeds that which was agreed to with the Seller.

Damages can include any and all costs “to make the Buyer whole” with respect to their original “deal” defined in the contract.

Terminating a Contract

Other types of Contractual Breaches  Material Breach: The failure to perform the contract that strikes so deeply

at the heart of the contract that it renders the agreement “irreparably broken” and defeats the purpose of making the contract in the first place. The breach must go to the very root of the agreement between the parties.

 Anticipatory Repudiation (a/k/a: Anticipatory Breach of Contract):

“The unjustifiable denial by a party to a contract of any intention to perform contractual duties, which occurs prior to the time performance is due.”

Typically occurs when a Seller states that they cannot or will not or no longer has the intention to complete the contract [significantly] BEFORE they are required to finish the work.

Terminating a Contract

Other Types of Contractual Breaches  Constructive Breach: Occurs when the party bound to perform (i.e., the

Seller) disables himself from performance by some act, or declares, before the time comes (see Anticipatory Repudiation above), that they will not perform. (PPM, p.229)

Again, come with the ability for the Buyer to recover damages from the seller.

Be Careful about Nested Subs and Suppliers  What about the second tier subs to a termination for Cause?

Have the right to be made whole for their performance under the contract – when they did not contribute to the breach.

Be careful to obtain acknowledgment of payment to subs and/or lien waivers.

Costs can be recovered from the defaulting Seller.

Terminating a Contract

Termination for Convenience  Typically a provision reserved for the Buyer:

“Allows one party to the contract to terminate the agreement, even in the absence of the other party's fault or breach, and WITHOUT suffering the usual financial consequences of a breach of contract.” Simply put, a Termination for Convenience occurs when the Buyer UNILATERALLY decides, for any reason, to end (or not to begin) performance by the Seller of the contract. The Seller is generally entitled to a negotiated settlement for an equitable recovery of costs and losses incurred. INCLUDING reasonable profit! Originated with the Government during (after) the Civil War, HOWEVER, Termination for Convenience is seldom allowed merely to obtain a better price . . . This is considered contrary to Public Policy and inconsistent with the “Duty of Good and Fair Dealing.” BUT case law is ambiguous!

Terminating a Contract

Absolute Right to Terminate  Typically a SPECIFIC within the contract defining the justification for and

process for either party (Buyer or Seller) to terminate the contract :

Generally triggered by some action or inaction – e.g., lack or payment, work stoppage, etc.

Will require a formal Notice Period

Allows for the right to Perform

Theory is that Termination by Agreement should allow for a “cooling off” period – i.e., the required formal “Notice” process, as it’s in all parties best interest to find a way to continue performance under the contract.

Terminating a Contract

What is a Claim?  Formal Definition: “A written demand or written assertion by one of the

contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.” Simply put, the formal (defined Term & Condition of the contract) assertion by either the Buyer or Seller that they are owed something (money, time, etc.) by the other arising out of the performance of the work.

A opportunity for NEGOTIATION!

The Buyer has a DUTY to timely address claims, AND to provide justifiable time extensions

Contract Claims

Contract Claim Resolution Process

The Claim Progression

Project Procurement Management, Figure 13.1: Resolution of Seller Claims

Mediation  Formal Definition: “Intervention between conflicting parties to promote

reconciliation, settlement, or compromise.” (Miriam Webster) Simply put, the use of an intermediary between parties (Buyer and Seller) to guide negotiations and arrive an a mutually-acceptable compromise.

Typically seeks the middle round.

Paid for by the parties, performed by an expert – SME, attorney, judge, negotiator, etc.

Arbitration  Formal Definition: “The action of arbitrating; the hearing and

determination of a disputed case by an arbiter (a person, persons or agency whose judgment or opinion is considered authoritative). (Miriam Webster)

May be considered a “Private Trial” by INFORMED experts – typically three (3): One picked by each side and the third by the two selected.

Contract Claim resolution Process

Preserve the Following Documentation  The Project Office and Team Organization  Instructions and Procedures  Financial  Project Definition  Plans, Budgets, and Schedules  Work Authorization and Control  Project Evaluation and Control  Management and Customer Reporting  Marketing and Contract Administration  Extensions – New Business  Project Records Control  Purchasing and Subcontracting Liaison and Policies  Engineering Documentation  Site Operations

Project Closeout

A Lesson Learned is: “A lesson learned is knowledge or understanding gained by experience. The experience may be positive, as in a successful test or mission, or negative, as in a mishap or failure . . . A lesson must be significant in that it has a real or assumed impact on operations;

[A lesson must be] valid in that is factually and technically correct; and [A lesson must be] applicable in that it identifies a specific design, process, or decision that reduces or eliminates the potential for failures and mishaps, or reinforces a positive result.” (NASA)

AND, make them available!!!

Lessons Learned

Lessons Learned

Project Procurement Management Chapter 13: Close Project Procurements

PPM Week 14 Discussion Question

Question 13: Identify and define the three situations in which a contractual relationship may be ended early and what are the ramifications of each for either party to the contract?

Project Procurement Management Chapter 13: Close Project Procurements

Week 14