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1 Contract Management. 2 Outline  practices  Bethlehem Steel Corp.  clincial service  elements in a contract  examples.

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Presentation on theme: "1 Contract Management. 2 Outline  practices  Bethlehem Steel Corp.  clincial service  elements in a contract  examples."— Presentation transcript:

1 1 Contract Management

2 2 Outline  practices  Bethlehem Steel Corp.  clincial service  elements in a contract  examples

3 3 Contract  the document defines terms and specify relationship, conditions, obligations and rights to be discussed and eventually approved by relevant parties  the understanding of the parties

4 4 Bethlehem Steel Corp.

5 5 Willing to Accept the Contract?  Bethlehem Steel Corp. at 1999 Bethlehem Steel Corp  generally annual contract in industry  a four-year contract proposed by GM, with price 3% to 5% lower than before  what factors for  what factors for Bethlehem Steel Corp. to consider?

6 6 Willing to Accept the Contract?  factors to consider  overcapacity in steel production  keen competition from the emerging markets, Russia, Brazil, Korea, etc.  financial strength from the stable source of income to upgrade technology  better quality cold-rolled steel  JIT service from local company  bargain chip from lower price to negotiation with labor union

7 7 When Outsourcing Goes Awry Richard Pesisch (1995) When Outsourcing Goes Awry, Harvard Business Review, May-June, 24-26.

8 8 Case Context  organizations  Regional Medical Center (RMC)  Physicians Development Services (PDS)  characters  Mr. Grant Newman, CEO of Regional Medical Center (RMC)  Dr. Barry Doane  cofounder of PDS, a former reputable employee of RMC  attracted business to PDS  Dr. George Jacques, the chief of the 5 anesthesiologists from PDS

9 9 Case Context  Regional Medical Center  a hospital with surgical and obstetric services  large turn around of anesthesia group  desire of surgeons and obstetricians: a stable group of anesthesiologists  costly lifetime-care malpractice lawsuits  business of RMC  downturn, reduction of in-patient days due to losing a large contract  competition in market

10 10 Case Context  Physicians Development Services (PDS)  a subcontractor providing contracted anesthesia services to more than 15 medical facilities  a reputation for providing high-quality doctors  management lacking business skills, and company undercapitalized  rumors: losing several big accounts, possibly bankruptcy

11 11 Case Context  relationship between RMC and PDS  contracted anesthesia services to RMC by PDS starting 18 months ago  responsibility of PDS on the anesthesiologists: everything  the management, recruiting, staffing, credentialing, and scheduling of the anesthesia group, as well as its financial management  anesthesiologists employed by PDS

12 12 Case Context  the rights and obligations of RMC  rights: to reject choices of PDS, at the expenses of PDS  obligations: penalty cost of $120,000 on RMC for each PDS contractor turned by RMC into its employee  law sue by PDS to RMC if RMC interfering in any resolvable dispute between PDS and its employees

13 13 Case Context  relationship between PDS and its employees  smooth first year, trouble started the second year  in three months, several times, late and bounced paychecks from PDS  failure to renew contracts for 3 months for Jacques's group  late and then bounced paychecks this month  a fruitless conversation between Jacques and Doane

14 14 Case Context  reasons for the failure of renewal of contract  failure of PDS to pay the $300K year end bonus  suspicion of the group on PDS for falsifying the financial statement to cheat $I50K bonus this year  refusal by PDS to provide the group the financial statement for no contract renewal  theoretically not even providing the salary

15 15 Case Context  demands of Jacques to Newman  help from RMC  break the contract with PDS  hired the anesthesia group either as contractors or employees  otherwise the group leaving next week, with no surgical services in RMC  meeting the anesthesia group in 45 minutes  Jacques in contact with local news media

16 16 Case Context  situation faced by Newman  walk out of anesthesiologists  losing reputation of RMC  closing of surgical and obstetric services  no right to interfere  PDS still holding the contract  issues between PDS and its employees  any interfere affecting future negotiation with similar service providers

17 17 When Outsourcing Goes Awry When Outsourcing Goes Awry  What should Newman do now?  What kind of tasks can be outsourced?  What should the relationship with a critical supplier be?  What mistakes were committed by Newman?  Should there be any changes in the clauses of the contract?  Were there any problems in RMC in the first place?

18 18 Elements in a Contract

19 19 Elements of a Purchase Contract  introduction of the contracting parties  definitions  scope of agreement  purchase orders  supply and delivery  specifications, quality, and health, safety, and environment

20 20 Elements of a Purchase Contract  payment  liability  force majeure  effective date and termination  intellectual property  assignment and contracting  technology improvements

21 21 Elements of a Purchase Contract  most favored customer  confidentiality  statistics  key performance indicators and compensation  notices  severability

22 22 Elements of a Purchase Contract  third-party rights  free trade areas  minority- or women-owned business enterprises  general  governing law  signatures  appendices (schedules)

23 23 Information in Purchase Contracts  items bought, and their costs  shipment method and schedule of items  installation of items  warranties  remedies and penalties, for quality, damages, tardiness  standard terms and conditions

24 24 Information in Purchase Contracts  dispute resolution mechanisms  choice of laws and place for a  choice of laws and place for arbitration  currency  language  force majeure

25 25 How to Write a Contract  modified from earlier agreements  started with a general form and/or sample contracts  advised from corporate counsel

26 26 Samples of Purchase Agreement  Airbus A350 Purchase Agreement – AVSA SARL, US Airways Inc, America West Airlines Inc. and US Airways Group Inc. (SEP 27, 2005) Airbus A350 Purchase Agreement – AVSA SARL, US Airways Inc, America West Airlines Inc. and US Airways Group Inc. Airbus A350 Purchase Agreement – AVSA SARL, US Airways Inc, America West Airlines Inc. and US Airways Group Inc.  Semiconductor Purchase Agreement - Motorola Inc. and Freescale Semiconductor Inc. (2004) Semiconductor Purchase Agreement - Motorola Inc. and Freescale Semiconductor Inc. Semiconductor Purchase Agreement - Motorola Inc. and Freescale Semiconductor Inc.  Manufacturing and Purchase Agreement - Flash Electronics Inc. and 3PARdata Inc. (Sep 5, 2003) Manufacturing and Purchase Agreement - Flash Electronics Inc. and 3PARdata Inc.


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