CETM10 Commercial and Contractual Issues in Projects Assignment Sample
Module code and Title: CETM10 Commercial and Contractual Issues in Projects Assignment Sample
Introduction
Project management is an efficient process of acknowledging specific tools, skills, and techniques for maximising effective delivery of outcomes. There are several stages for completing a given project. Significant issues might evolve with the gradual progress in each stage. The commercial manager is appointed to appropriate maximum control over various elements of risk within that project. Human resource, raw materials, time, assets, and capital are critically dealt with for managing various issues during project execution. Efficient scope of innovation and strategic alternatives are effectively planned to maximise efficiency of everyone.
Procurement and execution are relatively explained with efficient strategies for describing the scope of improvement in alternative cases. Commercial Contracts are susceptible to a wider range of problems that obstruct flexible flow of business ideas across organisational departments. This study aims at evaluating diverse commercial and contract issues arising across project management stages. Based on identified commercial and contract issues, scope of resolving each contractual issue are presented accordingly.
Contract Management
Contract management has been described as an individual wing of project management that caters to business relationships between different individuals and entities. Evaluation of contractual issues further presents an appropriate use of tools, techniques and methods that are consulted for framing new commercial and contractual plans. Purpose of this study lies in understanding how commercial and contractual issues arising in business projects can be effectively handled for providing flexible execution of innovative ideas.
It reflects an efficient scope of management totalling better delivering of objectives during any period. Contracts usually differ by size and tasks thus require to be dealt differently. This phenomenon is cited forth to minimise financial risks of the organisation by totalling effective benefits for the company. Operational ability of the contract tends to enhance with effective application of contract management.
This process is initiated with management of agreements, creation, and execution of relevant objectives, followed by terminating the entire task. Effective management of contractual relations could accelerate successful completion of the project. Commercial Contract Management involves legal negotiation with suppliers, labour unions and stakeholders for executing proposed plans for business projects. As observed by McNamara and Sepasgozar (2020), contract managers appointed at business projects are responsible for initiating legal contracts across diverse commercial segments.
Separate legal contracts associated with basic operational stages such as procurement and supplier management, labour supervision and project deliveries are initially handled by contract manager. Supporting this observation, Larsson and Larsson (2020) had stated that contract management forms the primary stage in project management, based on which legality of projects are defined. On the other hand, Shamim (2022) had argued that excessive presence of legal formalities in contract management leads towards rigidity within project operations.
On the other hand, Giusti et al. (2019) had explained that commercial contract management activities are essential for strengthening public relations with government authorities and enhancing business responsibilities through private partnerships. The idea of commercial contract management in business projects are hence considered to be necessary aspects in deadlines with public and private relations across functioning industries. Williams et al. (2019) noted that, necessity of commercial contract management in business projects lies in safeguarding interests of stakeholders.
Abiding project deliverables through legal regulations or formal written adjustments are likely to reduce risks of financial fraudulency (Haseeb et al. 2019). Effective management of stakeholder relations in commercial projects can be achieved through stable contractual relations across internal and external business environments.
Commercial and Contract Issues
Offer and acceptance: Offer and acceptance of contracts are eventually optimised as an important scope of the entire process. There are various matters of legality within the framework. It is very obvious that contractual terms differ from one place to another (Hart et al., 2019). There is an increased scope of error due to continuous improvement in legality. Entire scope of legality could majorly create the basis for accepting the offer.
Minor issues like misleading consideration or unrealistic deadlines could create significant disparity for the accepting entity. It can be explained that commercial contract management performed in projects help managerial personnels to negotiate regarding profit sharing and financial segregation during and after project completion. Despite formal relationship benefits contributed by commercial contract managements, acts of insolence are common leading towards fraudulency (Nicholas and Steyn, 2020).
Lack of authenticity in handling financial, legal, and social contracts, thereby causes commercial and contractual issues in reaction to execution of projects. As per Chang et al. (2018), environmental pressures cannot be mitigated by project managers or other workers at the site. Uncontrollable and uncertain events: There are several instances of geographical barriers or environmental displeasures that might develop major disparities for completing a project.
Efficient measures are required to be planned for achieving suitable scope of correction. Significant control over different natural calamities are not possible thus affecting broad assumptions made during the planning stage. There is a minimum scope for recovery due to uncertain evolutions. Negotiation of the contract: Negotiation holds significant importance within the framework of project management.
Effective policies could be planned in advance to negotiate the best value for the project. As per Fahy et al. (2019), both offeror and offeree are at their own discretion to maximise their benefits against relevant consideration. Thus, differences between both parties might evolve during this scenario. It could lead to rejection of an offer with that party and might end such a contract. Thus, there is a risk of cancellation without adequate flexibility between both parties. Contents of a contract:
A contract is considered comprehensive when every minute detail has been efficiently prescribed under the terms of negotiation. Definition of each term with adequate scope of completion. Further, cost of the project and location of contract are also confirmed. In case of any disparity, unnecessary confusions arise between the parties (Schmitt et al., 2019).
Changing the terms of such contract: Certain contracts require to address new negotiations between both parties to suit the challenges offered by the external environment. As opined by De Haas et al. (2020), this could require the consent from both parties to ensure their agreement to the contract. In case of undesirable assent from either parties, there could be substantial disparity in coming to a conclusion. Both parties could be subject to new risks without solitary agreement on the resolution. This might disrupt the past tasks by keeping them awaited completion.
There is a major delay in operations for delivering the required objectives of the project. This could create substantial confusion for meeting the relevant deadlines thereby causing wastage of major resources. Limited Visibility in scope of Contract: Contract Management issues involving limited scope of proposed project objectives leads towards challenges of visibility absence or limited visibility.
For instance, construction projects using Building Information Modelling (BIM) technology are subjected to commercial and contract issues due to technical complexities (Papadonikolakiet al. 2019). Lack of adequate knowledge related to BIM technology or its benefits prevents sub-contractors or contractors from visualising scope of construction project contracts.
Supporting this observation, Greenwald (2020) noted that lack of scope visibility in commercial contracts may result due to improper development of business goals. Absence of appropriate project vision, mission and values, visibility of contract scope similarly lags behind, leading towards contractual and commercial disagreements with stakeholders. Lack of knowledge in extracting data from contracts: Knowledge deficiency in a significant challenge for business projects that involve complex technological or scientific proposals.
As observed by Mesa et al. (2019), traditional project management teams often function with lean operational ideas, which constructs in delivering agility in proposed business concepts. However, lack of adequate knowledge regarding hybrid project management involving both lean and agile terminologies can act as major challenges for swift project flow (Dasovićet al. 2020). It can be stated that, in case project managers fail to recognise emerging industrial trends, necessary progress for relevant commercial contracts can simultaneously cease.
As per the views of Rozenberg (2019), excessive Government intervention in regulating commercial relationships of private-sector organisations may result in rigidity in contractual relations. Challenges of Regulatory Compliance: Certain industries such as healthcare, construction, food and farming projects require stringent legal regulations governed by international and national authorities.
Lack of free flow of stakeholder management ideas without approval from Government bodies, are considered as challenges of regulatory compliance. Furthermore, Pargaret al. (2019) had opined that consistent failure to comply with legal terms and requirements in project proposals across sectors like healthcare, food production and construction may result in permanent business termination. As a result, risks or issues related to loss of organisational reputation may occur across stakeholders after termination of business or project licence.
Scope of dealing with identified Issues
Commercial managers have an important role to convey during the project execution. Significant scope of negotiation could have to be dealt with by them for managing various aspects of the contract. In case of any disparity, this person is entitled to mitigate the mutual differences. As per Hajiaghaet al. (2022), risks of the project could be assessed on the first hand to optimise different ups and downs during execution.
Different types of external challenges along with internal disparities could be met with effective communication between parties. This could be initiated from the planning stage to appropriate suitable alternatives within the contract. Various resources could be evaluated on the basis of their performance. Communication of detailed information with the stakeholders could describe the scope of completion (Lehtinen and Aaltonen, 2020).
Similarly, adopting efficient technology to outline the tasks and guide them on deadline management. This could aid sufficient compliance with consumer’s requirements during any execution. It is significantly essential for each business to ensure that outsiders refrain from having access to sensitive information that can render competitors a substantial market edge.
The following information can be subject to business dealings or intellectual properties among others. In this respect, confidentiality clauses have a major role in making certain that the associated parties with a commercial contract engage in taking necessary steps for maintaining the security of the information.
Coralloet al. (2020) argued that an increasing count of cybersecurity breaches tends to adversely impact business performance through vulnerabilities concerning networked contracting. Referring to this, having potential knowledge and advanced evaluation towards the critical assets that require protection from cyberattacks serves as a major advantage for securing commercial contracts. It is also supported by the findings of Saxena et al. (2021) that lacking intrinsic security technologies regarding current IoT systems caters to numerous privacy risks and security vulnerabilities.
As a matter of addressing the same, a decentralized and distributed technological application like blockchain appears as a potentially viable solution for commercial contracts. Following the breaching of a contract by a party in the case of a commercial contract, other parties are required to maintain a certain form of restitutions. This requires setting the same out in contracts in addition to helping to prevent a drawn-out court battle that can be effective in saving necessary money, time, and business relationships.
Connolly (2020) asserted that contract drafters can account for controlling the potential operation of law concerning rested vision to the significant dealings with the help of initial contract design. This is relevant to the understanding that although restitution concerning unjust enrichment tends to occur by operation of law, commercial contracts hold the potential scope of influencing the same.
Equivalent to the defining damages of the front, maintaining agreement on alternatives for litigation can help in smoothing things out later following the arousal of dispute resolution. Kull (2020) further opined that the modern approach of restitution for breaches accounts for an explanation of the non-enforcement remedies concerning the instances of enrichment-based restitutions. This includes a common approach for parties to involve advanced agreement for serving as mediators or arbitrators instead of going to court.
As part of fulfilling relevant obligations, a party associated with the contract can be subject to causing harm to third parties that refrain from being involved in the agreement. This holds the involvement of indemnification clauses that account for specifying when and how a contracting party can step in towards protecting the other party from potential liabilities towards third parties. According to a case example by Carney (2022), Part 3 of the Note by the United States accounts for analysing shortcomings of its regulations and specific lack of indemnification procedures.
The following also requires emphasising the aspect of termination as part of whether or not both parties are subject to fulfilling their obligations. Liu (2019) put forward that A term involves being referred to as a condition only when the parties predicate during the time of contracting a certain breach while a fundamental breach relevant to an immediate term is subject to the test being satisfied. On this note, completing payments and sales can serve as termination triggers while other possible triggers can account for involving pre-defined term limits and contract breaches.
Risk Management
Risk identification is one of the most important tasks in project management. Various sources and items of risk could be identified in advance to prepare appropriate strategies (de Araújo Lima et al., 2020). Efficient basis of alternatives for treating such risks could be kept ready. It is evident that risks are likely to fluctuate with the size and place of the contract. Adequate capital, alternative machinery, supply of raw materials, and a group of substitute employees could be prepared in advance to accelerate project completion within deadline.
Project Risk Management approaches are established across diverse industries on common grounds of “presenting suitable mitigation for resolving negative impact of any crisis”. For instance, an international project management survey conducted in 2020 had identified a growth of risk management by 84% to tackle economic recession during pandemic (STATISTA, 2022).
In terms of identifying potential economic risks that can arise due to prolonged lockdown and travel restrictions in a pandemic has resulted in growth of project risk management ideas. On the other hand, Kerzner (2022) had confirmed that necessity of risk management lies in presenting “back-up” or “alternative plans” apart from primary or original project objectives. Ultimate need for completing project deadlines influences the introduction of diverse risk management concepts.
Conducting Risk Management through SaaS Agreement Liability Model
Figure 1: SaaS Agreement Liability Model (Source: Inspired by Lynn, 2021)
Contractual Issues related to termination of business contracts can be mitigated by effective utilisation of “SaaS Agreement Liability Model”. As opined by Lynn (2021), modular frameworks such as SaaS Agreement Liability Concept interlinks three major contractual issues such as, “breach of confidentiality”, “wilful misconduct” and “infringement indemnity”. Identification of direct project damages initiated by contractual misconducts, would likely enable project management authorities to ascertain the necessity of specific risk management guidelines.
In support of this observation, Lundqvist (2019) has explained that, SaaS Agreement Liability Model observes presence of legal, financial or social liability that can arise due to contractual failures. Analysing presence or absence of risk liabilities beyond pre-identified direct damages cap, simultaneously signifies potential opportunities that can be attained through stable project management (Lynn, 2021).
Purpose of SaaS Agreement Model lies in establishing direct and indirect relations between contractual risks and damages that can be inflicted upon business performance. Parry and Bisson (2020) noted that application of SaaS Agreement Liability Model would allow contract managers to pre-determine feasible alternative plans to tackle contractual breaches. Implementing stringent measures for contractual breaches by imposition of financial or social compensation would likely reduce chances of contractual disagreements.
Strategies to produce new commercial and contractual plans.
Scope for resolving commercial and contractual issues lies in formation of a robust security system that would concentrate on quick identification of contractual breaches or disputes. As observed by Pierroet al. (2020), introduction of a secured contract repository system enables organisations to store contracts and acquire stable “Return on Investment (ROI)”.
Secured contract repository system when utilised in project management increases productivity, improves revenue earning capacity and ensures agility in handling existing or potential risks. For drafting new contractual or commercial plans. Secured contract repository systems would allow project and contract managers in framing reliable “Key Performance Indicators” (KPI) (Liu et al. 2019).
Centralised control of contractual and commercial plans would allow projects to optimise operational flexibility and simplify contract management. Manual Documentation of project contracts poses risks involving loss of valuable information in case of catastrophic events. For instance, business digitalisation trends had increased by 78.5% globally since 2016, followed by approximately 64% of international businesses having decided to build their own websites since 2016 (STATISTA, 2023).
Primary reason for business digitalization as identified from global survey was “increasing customer acquisition” across physical and online purchasing platforms. Streamlining of project contracts by introducing digital storage systems would help in attaining greater customer engagement and reduce manual burden of data handling. Permanent storage facilities availed by digital storage systems such as “OneDrive”, “Dropbox” and “Google Drive” would enable projects to reduce risks of document loss, burn or spoilage (Ko et al. 2021).
Importance of document digitisation lies in improving long-term storage systems for reducing redundancy in manual or physical data management. On the other hand, excessive legal stringencies in project contracts or increasing Government intervention for drafting public-private contracts had increased project rigidity. Therefore, it can be concluded that contractual and commercial issues in business projects can be effectively resolved through sound understanding of business or legal frameworks and immediate actions taken through intelligent risk management.
Conclusion
Significant discussions about commercial project management are installed in this study. Efficient basis of contract management has been explained for establishing a suitable framework for discussion. Offer and acceptance, negotiation aspects, uncontrollable events are optimised as primary areas of disparity during project execution. Similarly, contents and changing of contracts are also aided with relevant instances to optimise the scope of disparity.
Such items have elaborated the scope of resolving identified issues. Communication with stakeholders and establishing the entirety of details are opined under this discussion. It also includes an effective basis of risk management to be concluded for meeting required factors.
This study had observed the idea of commercial contract management with focus on maintaining legal authenticity between project planners, executors, and stakeholders. It was identified that risks of knowledge deficiency in extracting actual data from business contracts were identified as a significant challenge for acquiring maximum capacity in handling complex project issues.
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