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Procurement and Contract Management

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Procurement and Contract Management

The risks involved in the contract making include mechanical risks in terms of equipment failure and transportation letdown. The risk of business disruption attributable to lack of legal conformity; is commercial risks. Operational risks involve employee errors or under achievement. Financial management and lack of appropriate strategies like marketing strategies before signing a contract might fall short. Deloach adds that, as a source of uncertainty, “decision-driven or information risk arises when information used to support business decisions is incomplete and irrelevant to the decision making process” (as cited in Brindley, 2004 p.19).

Lack of professionalism hurts contract making processes, this is contradictory to what Garret (2005) says, “Establishing and maintaining contract documentation like progress reports, invoices and accounting ledgers” (p. 32). Which clearly displays high levels of professionalism by the contractor and builds trust between them and their clients

In today’s business world, the most common source of risk is the lack of professionalism. This has affected numerous businesses. In addition, strategic planning is another source that affects businesses. Most businesses do not have a plan on the kind of contract they want to make. They do not hire professionals to act as a mediator with the contractor. This raises major concerns.

Financial management is a big problem when it comes to contracting. Many companies get into contracts without considering whether they have enough money for the job. This could be because the financial department is incompetent and/ or corrupt. When your business is disrupted due to lack of legal conformity, you are bound to suffer big losses. Which is what we see happening in companies that do not involve the law when contracting. This includes having legal representation during the signing of the contracts.

Machinery always fails. This takes place today in many organizations; work is slowed down by breakdown issues or infrastructural inconsistencies. This mostly happens when contractors use worn out and fake equipment. Employee inaccuracy and under performance is a source of risk and uncertainty in contracting, but it is not very common today. This is because, companies are relentlessly striving to offer the best services they can to their clients and this means having competent and self-driven employees.

Reference

Brindley, Clare. Supply Chain Risk. Aldershot, Hampshire, England: Ashgate, 2004. Print.

Garrett, Gregory A. Contract Negotiations: Skills, Tools, and Best Practices. Chicago, Ill: CCH, 2005. Print.

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