goods_and_service_procurement_practice_guide.doc

Incur additional costs of maintaining their current

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incur additional costs of maintaining their current system, maintaining the external project manager etc. The amount payable (the liquidated damages) upon the occurrence of a trigger event must be clearly set out in the contract. The liquidated damages must be a genuine accurate pre- estimate of the loss incurred. The purpose is usually to ensure prompt delivery or action rather than provide compensation. Financial guarantees Financial guarantees may be included in high risk contracts where: Access to immediate funds in the event of termination of the Contract due to a material breach; or 51 Ver. December 2017 Appendix
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Liquidated damages are included in the contract. The decision to include financial guarantees should be made prior to tender, but certainly before contract award. Reference should be made to the required value of the guarantee. There are usually costs associated with these as they are procured through the banks. Such undertakings can also affect the credit rating of the company as the banks may insist that the value of the guarantees be held in trust, thus reducing the company’s borrowing capacity. Where liquidated damages are included in the contract, the financial guarantee gives immediate access to the liquidated damages amounts where trigger event(s) occur. The guarantee value should cover the total likely liquidated damages that may be levied prior to any contract termination. Performance guarantees Performance guarantees may be included in high risk contracts where performance of the contract is critical. Unlike financial guarantees, performance guarantees ensure the performance of the contract requirements only – they do not provide any money to the agency in the event of performance failure. In the event of a performance failure, a performance guarantee ensures someone steps in to perform the contract. There are two forms of guarantee: Parent Company Guarantee; or Director Guarantee. A performance guarantee may be included where the financial due diligence of the respondent exposes some risk to the performance of the contract, and where the services or products required are critical. Options relating to liquidated damages and guarantees are included in the Department of Finance’s Request templates. Client satisfaction The extent to which the needs of clients’ or end users have been satisfied is traditionally considered as part of the review and evaluation process on the completion of a contract. However, feedback remains a valid part of the contract review process and should be provided throughout the term of the contract. Public authorities must therefore establish a mechanism for obtaining regular feedback on contractor performance. The contract management plan As previously outlined a contract management plan contains all of the pertinent information about how the contract is to be managed. It is a dynamic document that starts during the contract planning stage, is further developed during contract formation, and may continue to be modified throughout the period of the contract.
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