Contract Risk Management Process Structured process to develop

Contract & Risk Management Process

Structured process to develop bespoke contracts from standard models initially for strategic direct materials, later for all strategic spend. Non pareto spend covered by purchase order T&Cs… Contract Management Procedure, Guidelines & Standard Forms (available on intranet) Generic Contract Frameworks • Direct Goods Purchasing to become a key interface between budget holders, to facilitate the evaluation of risk and specify requirements including target service levels and Legal (Sheila) (e. g. Raw Materials & Packaging) • Indirect Goods • Services (e. g. Development Services) (Legal & Purchasing) • Capital Equipment • etc. (available on intranet) (Legal) Risk Evaluation • • • Risk Scale of Likely Impact Probability of Occurrence Prevention Mitigating Action etc • • (Purchasing & Internal Customer) Examples of good practise become future standards Bespoked Schedule/s Bespoke Contract Commercial Specification Service Level Agreement Prices & Incentivisation etc. To be used for invitation to tender (ITT) & contract negotiation. (Purchasing & Legal) Guidelines for Drafting Purchasing Specifications --including Service Level -Agreements (SLAs) - -(available on intranet) (Purchasing) On-line Contract Repository Signed contracts to scanned & be held in. pdf form on a central Server i. e. accessible to Legal, Purchasing, etc. with change control procedure.

Contract Management Procedure, Guidelines & Standard Forms (available on intranet) Generic Contract Frameworks • Direct Goods Purchasing to become a key interface between budget holders, to facilitate the evaluation of risk and specify requirements including target service levels and Legal (Sheila) (e. g. Raw Materials & Packaging) • Indirect Goods • Services (e. g. Development Services) (Legal & Purchasing) • Capital Equipment • etc. (available on intranet) (Legal) Risk Evaluation • Risk • Scale of Likely Impact • Probability of Occurrence • Prevention • Mitigating Action • etc (Purchasing, Internal Customer & Legal) • • Examples of good practise become future standards Bespoked Schedule/s Bespoke Contract Commercial Specification Service Level Agreement Prices & Incentivisation etc. To be used for invitation to tender (ITT) & contract negotiation. (Purchasing & Legal) Guidelines for Drafting Purchasing Specifications --including Service Level -Agreements (SLAs) - -(available on intranet) (Purchasing) On-line Contract Repository Signed contracts to scanned & be held in. pdf form on a central Server i. e. accessible to Legal, Purchasing, etc. with change control procedure.

Workshop to Analyse Key Risks/Results/Preventive Actions… … and to identify how the contract model should be bespoked to specific risks of a unique supplier relationship. Attendees: § Purchasing Manager involved § Budget Holder/s § Legal Outputs: § Risk analysis e. g. Key Risks Potential Results 1. 2. Line Stop (£ xxx per hour lost contribution) Product Recall supplier Client Company incurrs cost of recall 3. Etc. Restorative Actions Liquidated Damages Cost deducted from payments Etc. § Should consider technical, commercial, safety, risks etc. § Bespoke clauses to address specific risks.

Contract Management Procedure, Guidelines & Standard Forms Generic Contract Frameworks • Direct Goods Purchasing to become a key interface between budget holders, to facilitate the evaluation of risk and specify requirements including target service levels and Legal (Sheila) (e. g. Raw Materials & Packaging) • Indirect Goods • Services (available on intranet) (e. g. Development Services) • Capital Equipment • etc. (available on intranet) (Legal & Purchasing) Risk Evaluation • Risk • Scale of Likely Impact • Probability of Occurrence • Prevention • Mitigating Action • etc (Purchasing, Internal Customer & Legal) • • Examples of good practise become future standards Bespoked Schedule/s Bespoke Contract Commercial Specification Service Level Agreement Prices & Incentivisation etc. To be used for invitation to tender (ITT) & contract negotiation. (Purchasing & Legal) Guidelines for Drafting Purchasing Specifications --including Service Level -Agreements (SLAs) - -(available on intranet) (Purchasing) On-line Contract Repository Signed contracts to scanned & be held in. pdf form on a central Server i. e. accessible to Legal, Purchasing, etc. with change control procedure.

Checklist for Drafting Purchasing Specifications… General Product/Service Specifications and Objectives Product/Service Specification (e. g. product specification, engineering drawings, technical standards, description, bills of materials etc. ) Standards Referenced Objectives, Quantifiable Targets, Service Level Agreement (SLA): § Cost (target prices & internal acquisition cost targets) § Delivery (OTIF, delivery lead time) § Quality (PPM scrap/rework/defects/concessions, Warranty Claims) § Service/Added Value ? Performance improvement review process and incentivisation mechanism Packaging Specification Documentation required Transportation requirements (e. g. Milk Run, Hub & Spoke) Supplier Quality Assurance (SQA) standards/audit procedure Supplier Product Quality Assurance (SPQA) /audit procedure Acceptance Procedure: e. g. GI Quality Control, Inspection & Test Procedures, Timesheet sign-off etc. Consignment Stocks Supplier Shelf Management/Vendor Managed Inventory Environmental Health & Safety (EH&S) standards (e. g. Safety Data Sheets) Project Plan (key milestones, critical path activities identified, ownership of work-packages assigned clearly) Customer service help line support Management reports, definition and frequency Invoices (consolidated monthly not sent individually) Suppliers’ Anticipated Requirements from Client Company Contacts Access times Storage space Delivery Address Invoice Address

Checklist for Drafting Purchasing Specifications (cont)… Specific to Capital Equipment Total Cost of Ownership Model: Installation, Commissioning, Calibration Acceptance procedure Warranty: parts/parts & labour (identify exclusions), service levels etc. Service engineer service level agreement Planned maintenance schedules Schedule of critical/recommended spares Overhaul/rebuild Safe disposal of waste by-products Training Documentation, manuals Stage payments Means of recourse in the event of non-compliance with specifications e. g. liquidated damages. Specific to On Site Contractors Supplier staff working on site (“in-plants”) or site visits Client Company HR policy Behavioural & ethical standards Disciplinary/escalation/resolution procedures Union membership policy Expertise, Experience, Skills and Qualifications required for contractors Client Company induction programme Appropriate supervisory levels/procedures for contractors Use of Client Company facilities Times of work/access Timesheets (frequency) / acceptance procedures Reporting requirements Ownership of intellectual property produced Suitability of plant and equipment to be used by contractors IR 35 risk mitigation Professional indemnity insurance Confidentiality Standards for supplier’s recruitment process Ethical standards e. g. conflicts of interests

Checklist for Drafting Purchasing Specifications (cont)… Contractual Framework Which model contract will be used? Has a risk analysis specific to the proposed supplier relationship been conducted with the internal customer and legal? Confirmation of acceptance of Client Company’s T&Cs ? E. g. acceptance of Client Company T&Cs as a pre-requisite to quotation? Supply copy of the proposed contract with the invitation to tender or a top level summary of he key points that suppliers need to be aware of when quoting prices. Identify Client Company’s right to terminate for persistent breaches of performance targets (e. g. x times in x months) Risk during transportation lies with the supplier – otherwise need to ensure safe packaging and transportation Title/ownership transfers upon payment Safety stocks Maximum contract termination period required for us Maximum contract termination period for them Contract term/length Assessment of formula for, and limit to, liquidated damages.

Contract Management Procedure, Guidelines & Standard Forms Generic Contract Frameworks • Direct Goods Purchasing to become a key interface between budget holders, to facilitate the evaluation of risk and specify requirements including target service levels and Legal (Sheila) (e. g. Raw Materials & Packaging) • Indirect Goods • Services (available on intranet) (e. g. Development Services) • Capital Equipment • etc. (available on intranet) (Legal & Purchasing) Risk Evaluation • Risk • Scale of Likely Impact • Probability of Occurrence • Prevention • Mitigating Action • etc (Purchasing, Internal Customer & Legal) • • Examples of good practise become future standards Bespoked Schedule/s Bespoke Contract Commercial Specification Service Level Agreement Prices & Incentivisation etc. To be used for invitation to tender (ITT) & contract negotiation. (Purchasing & Legal) Guidelines for Drafting Purchasing Specifications --including Service Level -Agreements (SLAs) - -(available on intranet) (Purchasing) On-line Contract Repository Signed contracts to scanned & be held in. pdf form on a central Server i. e. accessible to Legal, Purchasing, etc. with change control procedure.

“Contracts for Purchased Goods & Services” N: /GROUP/ Contracts for Purchased Goods & Services Global Direct Local Indirect Hengoed Dreux Indirect Direct Model Contracts Paris & Benelux Harefield D Au CH & Client Company Pharma SA & Client Company Ltd. Direct Client Compa Indirect & Client Company Pharmaceuticals Ltd.