ARC 7067 Procurement Contract Administration And Law Question and Answers

Introduction of ARC 7067 Procurement Contract Administration And Law Question and Answers

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Question 1: Methods of procurements

A) Difference between target cost and Guaranteed Maximum Price

In order to be successful in establishing any new business, procurement methods play an important role. As a project management consultant, it is very important to present different kinds of procurement methods. The issue can be mentioned as follows. Beckham, being instructed to utilize GMP (Guaranteed Maximum Price) needs to understand the uniqueness of each procurement method. As opined by Bosio et al. (2022), another method is mentioned as Target Cost which is also an important method that can be followed to acquire potential benefits from the service. There is a key difference between these two methods of procurement. In the UK construction industry, both of these methods are considered relevant and significant.

GMP (Guaranteed Maximum Price)

(Source: Wang et al. 2019)

The GMP method is often found to be important as it presents chances to the contractors to improve their performance. In terms of achieving a better value of work and performance, this method is impactful and necessary (Grega et al. 2019). Individual financial objectives can be mentioned as to be met by considering this procurement method. As Beckham is aiming to finish the project within time, the GMP procurement method can be helpful. On the other hand, Target Cost is considered to be the base on which the overall development and performance of GMP arrangement depend. In order to gain popularity among different departments of public housing and property developers, this particular procurement method is important.

An important difference between these two types of procurement methods lies in the agreement between the contractor and the client. Estimation of cost is associated with the Target Cost procurement method (Sönnichsen and Clement, 2020). On the other hand, the GMP is not based on an estimation of costs. An initial cost can be adjusted in this type of procurement method that is not available for the other mentioned method.

In contrast to the target cost method, an important difference can be highlighted as a lack of support and management. In the GMP procurement method, the contractor is found to absorb the maximum amount of risks. As per the opinion of Wang et al. (2019), this can often be found to be beneficial for a new project as the overall amount of risks can be reduced by this. On the other hand, the Target Cost is found not to be an important consideration of the contractors.

Target Cost

(Source: Sarvari et al. 2019)

The main and most important difference between these two types of procurement methods is their formation and core concept. As per the GMP procurement method, the contract sum is not expected to exceed what is specified at the very beginning of the contract (Decarolis and Giorgiantonio, 2022). This is to be maintained throughout the whole construction project. On the other hand, no such restriction of cost is found to be incorporated in Target Cost. The total expenditure is set at the first that is to be maintained only by the contractor and this is the reason most of the risk factors are absorbed by the contractors so that they do not have to pay any extra charges.

Beckham can consider these differences to understand the relevance of each of these procurement methods.

B) Risks involved in procurement method of construction management

Beckham can consider utilizing the Construction management procurement method in order to construct the sports training academy. As per the rule of the Housing Grants, Construction, and Regeneration Act 1996, construction management needs to be integrally connected and utilized to be successful in completing a construction project (Johnson and Babu, 2020). There are some risks that can be faced by Beckham at the time of considering the method, construction management procurement.

An example of the Scottish Holyrood parliament can be helpful in this regard to identify the risks of using this particular procurement method. As an example, the high-profile court case of this parliament can be taken into a note. According to Sarvari et al. (2019), this method is found to help in designing coordination risks that affected the overall performance of the contractors and project. The application of the rule is associated with this process. The administration role is also found to be increased that affecting the comparability and effectiveness of the CM route. Another important risk factor is associated with a higher degree of the associated client. The uncoordinated and incomplete designs are found to impact on designs of the construction. Beckham can also face difficulties in maintaining workflow in a constant manner that is necessary for a successful project within time.

 Risks in construction management

(Source: Governatori et al. 2018)

In terms of aligning procurement regarding strategies with the construction method, the construction management regarding procurement method is not so much applicable. As proposed by Darko et al. (2019), there is an uncertainty in the scope of work which is not expected in developing a new project. In terms of maintaining the quality of work and project, this method is also found not reliable and appropriate. In the early stages of the project, the construction management team is found to perform effectively in addressing every kind of issue. In conclusion, it can be said that as the time passes, active participation, and engagement of the associated persons are found to be reduced and as a result, the quality of the project deteriorated (Grega et al. 2019). The examples of the Scottish Holyrood parliament can be considered important for Beckham to understand the risks, within the implementation process of the construction management method of procurement.

On the basis of this discussion, Beckham can be advised not to rely on this method and to consider some other methods for procurement of project construction of the sports training academy.

Question 2: Analysis of general contract law

A) The formation of a contract between two parties

Issue

The formation procedure of a contract depends on several attributes and components. Lack of proper maintenance of contract-related attributes can present issues and challenges for both parties.

Rule

The contract law of the UK is based on the Sale and Supply of Goods Act (HMSO) 1994. The formation procures of a contract can be analyzed based on this act.

Application

There are the most important considerations that are needed to be taken care of in terms of setting a base of a contract. As opined by Governatori et al. (2018), the first one is the perfect consideration in which the values of both parties are included. Considering offers and accepting the offers to step forward is the second stage of forming a contract. Both the parties need to posse the characteristic in which provide offers and accepting nature is present. The third most important consideration of a contract-making process can be mentioned as to consider mutual assent. A mutual agreement regarding the developments of the project is necessary as the basic component of a contract (Allam, 2018). In other terms, besides offering and acceptance, some other key elements of forming a contract include effective money-related consideration, the certainty of different terms, and the intention and motive to create new legal relations.

Conclusion

The formation of a contract needs to be appropriate to use the contract for its proper purposes. Two of the associated parties need to be responsible and able to maintain the objective of a contract.

B) Governing rules associated with a pre-contractual statement

Issue

A pre-contractual statement is considered to be an important part of the contract that helps the associated people to understand the main objective of the contract.

Rule

As per the HMSO act of 1994, the pre-contractual statement is also the representation of the whole contract. This is also considered to be the preliminary stage of a commercial agreement.

Application

A pre-contractual statement is considered to be an important express term, associated with the main contract. Some rules need to be followed to incorporate the pre-contractual statement with a contract (Pak, 2020). The main rule is to ensure a successful interpretation of the contract. The terms and conditions of a particular contract are to be mentioned and presented in this part. The issues associated with the contract are to be highlighted in the pre-contractual statement that can be addressed to the main intention and objective of the contract. Another important consideration regarding the rule of this part is connected to the incorporation of each standard term. The referential incorporation needs to be integrated also in this part to specify the core intention and thought of the main agreement (Mu et al. 2021). The overall consideration and success of a contract vary. The next rule is to distinguish each different implied contractual term.

Conclusion

In terms of specifying appropriately the express term of the contract, the pre-contractual statement needs to be made following the above-mentioned attributes. The success of the contract very much depends on these components.

C) Actionable misrepresentation: Definition and summary of every element

Issue

Actionable misrepresentation is considered to be an important part of a pre-contractual statement. This is a type of false statement, stated by a part at the time of pre-contractual negations.

Rule

An actionable misrepresentation is found to be associated with the contractual base that is important for fulfilling the main objective of a contract. According to HMSO 1994, actionable misrepresentation is important.

Application

In terms of ensuring an active engagement of a party, another party is found to include some false statement that induces the other party to engage in a contract. In terms of identifying a particular lapse within a contract, the representees need to consider providing proper justification of a previously made actionable misrepresentation (Klement et al. 2018). The definition of the presented actionable misrepresentation consists of some important components such as pre-contractual statement, false statement, and representee. Each of these elements possesses important significance. Before finalizing a contract, the false statement, made by a party is found to be done several times, which may attract the other party to be engaged in a contract? As per the opinion of Ajax and Strauss (2018), the representee is associated with the contract by being an evitable part of the contract. Stating the objective of the contract, this part presents itself as an important part.

Conclusion

In terms of acquiring the most expected result from the misrepresentation, the associated representee needs to rely on the concept of misrepresentation. Individual investigation and judgment play an important role in incorporating misrepresentation within a contract.

Question 3: Explanation of valid consideration

Issue

Valid consideration is associated with the main concept of contract law which is an important part of the UK contract law. One of the most important and key ingredients of a contract can be mentioned as a valid consideration (Bonica, 2019). The associated two parties are found to be equally responsible for fulfilling provided promises and better as well as worse performances.

Rule

As per (Thomas v Thomas) (1842) 2 QB 851, the validity of consideration is helpful in determining the benefits of the representatives. Action and with it inaction are considered to be the important components of valid consideration.

Application

The law bodies of the UK are often found to be incorporated with values that allow individual parties to decide appropriate considerations. Such kinds of considerations are often found to be based on reality and value (Governator et al. 2018). In the eyes of law, the considerations need to be adequate. An important part of a valid consideration consists of promises that can be kept. Besides that, each consideration needs to have a particular value that provides a proper meaning to the consideration. The most important requirement of a valid consideration can be mentioned as ‘Something to value’ (Sun et al. 2020). As per a valid consideration, the promissee is bound to bear the responsibility as long as the contract exists.

Conclusion

An important part of the enforceable contract can be mentioned as the valid consideration process. In exchange for promises, forbearance and abstinence are considered to be essential also.

Question 4: Difference between innominate, condition, and warranty term of the contract

Issue

There is a key difference between different terms of a contract which are associated with the condition of the contract, warranty, and innominate terms. Key differences need to be identified for understanding the value of each component.

Rule

According to UK’s common and statutory law, the restatements of the contracts can be analyzed. In this regard, the contract law of the UK, the Housing Grants, Construction, and Regeneration Act 1996 is very important.

Application

An important term, associated with contractual factors can be mentioned as conditions, innominate, and warranties. As opined by Napier and Stadler (2020), the performance of a project is based on the specific condition of a contract. The condition of a particular contract is often considered the heart of the contract. In terms of breaching the conditions and breaking the laws by a party, the other party has the right to consider the contract dead. This is an important consideration of the condition of a contract. This is very different from the other components. As per the specified conditions of a contract, the continuation can be carried on (Ozdel, 2019). The type of damages that are associated with the condition of a contract is fallen under repudiatory breach. The warranties are very much different from the condition as it is mainly the guarantee and the promise, made by the parties. Condition is considered to be more powerful than warranties.

In terms of breaching promises and guarantee-related considerations, another party has the full right to sue for created damages. The main difference between these two parts is that the warranty of a contract can be used and regarded as the condition of another contract. As per the opinion of Pak (2021), different kinds of factual matters are often found to be included within the common warranty statements. The consideration of the parties about the importance of the term warranty plays an important role in valuing the term in contracts.

The term ‘innominate term’ of the contract is integrally connected and associated with both condition and warranty. This term is very much different from the previously mentioned two terms. A term that cannot be presented by either warranty or condition is regarded as the innominate term (So and Sooksripaisarnkit, 2021). The importance of the innominate term of a contract depends on the considerations of the parties. In case of less importance, a party may not feel responsible for branching the terms and conditions of the contract. In a case in which one of the parties provides importance to the breaching regarding offenses, the other party is bound to face the difficult consequences. The authority of terminating the contract is found to be handed in the responsibility of both parties. Entire benefits of the contract are found to be associated with these three terms which are very much different from each other.

Conclusion

Different case laws need to be considered for understanding the relevance of each term, associated with a contract. Proper consideration and understanding of these three terms can be helpful for both the parties, involved in a contract to follow and maintain proper adjustment.

References

Journals

Ajax, C.M. and Strauss, D., 2018. Corporate sustainability disclosures in American Case Law: Purposeful or mere puffery. Ecology LQ, 45, p.703.

Allam, Z., 2018. On smart contracts and organisational performance: A review of smart contracts through the blockchain technology. Review of Economic and Business Studies, 11(2), pp.137-156.

Bonica, A., 2019. Are donation-based measures of ideology valid predictors of individual-level policy preferences?. The Journal of Politics, 81(1), pp.327-333.

Bosio, E., Djankov, S., Glaeser, E. and Shleifer, A., 2022. Public procurement in law and practice. American Economic Review, 112(4), pp.1091-1117.

Darko, A., Chan, A.P.C., Ameyaw, E.E., Owusu, E.K., Pärn, E. and Edwards, D.J., 2019. Review of application of analytic hierarchy process (AHP) in construction. International journal of construction management, 19(5), pp.436-452.

Decarolis, F. and Giorgiantonio, C., 2022. Corruption red flags in public procurement: new evidence from Italian calls for tenders. EPJ Data Science, 11(1), p.16.

Governatori, G., Idelberger, F., Milosevic, Z., Riveret, R., Sartor, G. and Xu, X., 2018. On legal contracts, imperative and declarative smart contracts, and blockchain systems. Artificial Intelligence and Law, 26(4), pp.377-409.

Governatori, G., Idelberger, F., Milosevic, Z., Riveret, R., Sartor, G. and Xu, X., 2018. On legal contracts, imperative and declarative smart contracts, and blockchain systems. Artificial Intelligence and Law, 26(4), pp.377-409.

Grega, M., Orviska, M., Nemec, J. and Lawson, C., 2019. Factors determining the efficiency of Slovak public procurement. Network of Institutes and Schools of Public Administration in Central and Eastern Europe. The NISPAcee Journal of Public Administration and Policy, 12(1), pp.43-68.

Johnson, R.M. and Babu, R.I.I., 2020. Time and cost overruns in the UAE construction industry: a critical analysis. International Journal of Construction Management, 20(5), pp.402-411.

Klement, A., Neeman, Z. and Procaccia, Y., 2018. Consumer Fraud, Misrepresentation and Reliance. International Review of Law and Economics, 54, pp.95-105.

Mu, R., Wu, P. and Haershan, M., 2021. Pre-contractual relational governance for public–private partnerships: how can ex-ante relational governance help formal contracting in smart city outsourcing projects?. International Review of Administrative Sciences, p.00208523211059643.

Napier, C.J. and Stadler, C., 2020. The real effects of a new accounting standard: the case of IFRS 15 Revenue from Contracts with Customers. Accounting and Business Research, 50(5), pp.474-503.

Ozdel, M., 2019. International Recent Developments: United Kingdom. Tul. Mar. LJ, 44, p.649.

Pak, J.M., 2020. Application of the Terms and Conditions of English Law Related to the Duty of Utmost Good Faith under Marine Insurance Contract: Korean Supreme Court Decision 2018.10. 25, Docket No. 2017Da272103. Journal of Korea Trade, 24(6), pp.19-36.

Pak, J.M., 2021. A Comparative Study on Marine Transport Contract and Marine Insurance Contract with Reference to Unseaworthiness. Journal of Korea Trade, 25(2), pp.152-177.

Sarvari, H., Valipour, A., Yahya, N., Noor, N., Beer, M. and Banaitiene, N., 2019. Approaches to risk identification in public–private partnership projects: Malaysian private partners’ overview. Administrative Sciences, 9(1), p.17.

So, L.K. and Sooksripaisarnkit, P., 2021. Seaworthiness and Autonomous Ships: Legal Implications in the 21st Century. Austl. & NZ Mar. LJ, 35, p.21.

Sönnichsen, S.D. and Clement, J., 2020. Review of green and sustainable public procurement: Towards circular public procurement. Journal of Cleaner Production, 245, p.118901.

Sun, S., Zhou, M., Lu, W. and Davarpanah, A., 2020. Application of symmetry law in numerical modeling of hydraulic fracturing by finite element method. Symmetry, 12(7), p.1122.

Wang, B., Li, J., Sun, A., Wang, Y. and Wu, D., 2019. Residents’ green purchasing intentions in a developing-country context: integrating PLS-SEM and MGA methods. Sustainability, 12(1), p.30.