(Solution) CIPS ROSHN Terms and conditions (T&Cs) of a contract
Solution
Executive Summary
In this project, the focus is to evaluate terms and conditions (T&Cs) of a contract. This is by focusing on the ROSHN organisation which operate in Saudi Arabia (KSA) property industry. The focus on the different T&Cs is on their success in guiding management of risks of quality, time extension, costs overruns and ethics impacting supply chain practices. Also, performance measures monitoring and evaluation as stipulated in the T&Cs has also been offered.
By focusing on ROSHN organisation operations, contracts management are essential for leveraging on competitive advantage and market dominance. These T&Cs are appropriate for effectiveness in managing risks and source of power amongst various stakeholders.
The key findings in this project identify that T&Cs guide achievement of quality risks management by ensuring relevant KPIs are followed. Further, being conditions, decisions making for contracts termination upon failure of adhering to the standards are reflected in the T&Cs. In regard to time and costs overruns, the risks management is noted in the T&Cs as being guided by sourcing best choice with maximum value, performance level and managing risks (risk registers). Another main finding is that ethical and performance measures evaluated, a guidance on relations of different departments in ROSHN as part of sourcing has been provided. Finally, in this research, the battle of the forms have been noted to promote developing common appreciation of best practice in executing a contracts. This is while initiating common knowledge of the underlying issues.
The noted gaps/limitations can be managed by pursuing the following recommendations;
- Increase in partnering with various higher learning organisations and international players for bridging knowledge gaps
- Customised T&Cs in different spend categories contrary to working within broadened terms
- Embrace alternative agreement in their T&Cs to mitigate Battle of the forms contributed by lack of elaborate knowledge/understanding
- Using digitisation to enhance awareness and understand best strategy for pursuing the T&Cs
Table of Contents
1.1 Organisation Background of ROSHN.. 3
1.2 Terms and Conditions Background. 4
2.0 Impacts of the Terms and Conditions in the Following Areas. 6
2.1 Managing Risk of Poor Quality. 6
2.2 Managing the Risk of Extension of Time. 10
2.3 Managing the Risks of Increased Costs. 12
2.4 Managing the Risk of Unethical Practice. 14
3.0 Performance Measures Monitoring and Management. 17
5.0 Conclusion and Recommendations. 20
Appendix 1: Summary of the Used T&Cs. 27
Figure 1:Summary of ROSHN Organisation Objectives. 4
Figure 2:Mendelow Matrix Analysis Components. 5
Figure 3:Analysis of the Vulnerability and Risks; Relative Values and Impacts. 7
Figure 4:The procedure of managing the Force Majeure in Time Extension Risk. 13
Figure 5:Key Performance Indicatros on the Contracts Management in Costs Management 14
Figure 6:The Vienna Convention International Laws Summarised Analysis. 17
Figure 7:Different requirements for QHSE System factors. 18
Figure 8:Performance measures indicators summary. 19
Table 1:A summary of ROSHN Risk Register in previous Project 9
1.0 Introduction
1.1 Organisation Background of ROSHN
The organisation has been in active operations since 2020 interested with achieving progressive objective of 70% houses ownership in Saudi Arabia as part of Vision 2030. Also, part of their mandate is identified in ROSHN (2024) as ensuring provision of appropriate input in KSA Real Estate and Infrastructure Development. A recent popular project is the Giga-Project financed from Public Investment Fund (PIF) with best practice including making KSA a premier player of Real Estate facilitator. The outcome of this is achieving an improved quality of life for overall population/citizens.
Currently, in line with Arab News (2023), it is one of the market leaders in KSA private industry with a market value of SR8.0 billion (approx.$2.30 billion) to develop modern infrastructural projects and facility development crucial for KSA economy. The outcome of this would include a surge in number of bookings of the real estate sector increasing the entire market capitalisation to achieve 20% future growth. The different objectives of ROSHN organisation are as shown herein;
Figure 1:Summary of ROSHN Organisation Objectives
Source: ROSHN (2024)
For achieving the identified milestones, ROSHN operates different contracts of approximately SAR120 Million. These are in areas of IT, Motor Vehicles, Exploration programs, Research and Development, research and development and sites evaluation. This is while outsourcing and getting logistics all guiding their successful operations. This can only be possible when they have clearly set T&Cs used for guiding their active operations.
1.2 Terms and Conditions Background
The set of T&Cs used in this report are as summarised in appendix 1. These T&Cs are noted to be blanket and not dependent on existing risks or budget allocated.
Considering the Information Technology (IT) systems sourcing, which is strategic, various suppliers are involved in ROSHN. The different stakeholders involved are Oracle, Amazon, IBM, SAT Microsystems and Dirayahh Smart Technology. Cumulatively, the suppliers adhere to T&Cs for an effective management of risks and stakeholders’ analysis. For the different stakeholders, according to Farshid et al. (2022), Mendelow Matrix Analysis can be used;
Figure 2:Mendelow Matrix Analysis Components
Source: Summarised from CIPS Module Notes
High Power; High Interest- The senior management/executive in ROSHN, managers of Public Investment Fund (PIF) significantly impact the relevance of different T&Cs. They ought to work within closer terms to develop T&Cs with their requirements integrated.
High Power; Low interest- In KSA, real estate regulators and industrial regulators are largely impacted by the different T&Cs. Their impact ought to provide opportunity for active monitoring and interests prioritisation.
Low Power; High Interest- Employees in ROSHN, PS&M teams possess lower powers to develop the T&Cs. This is albeit necessity to guarantee interest inclusion in the T&Cs.
Low Power; Low Interest– In ROSHN, their houses end-users, suppliers/vendors are influenced lowly and interested. Therefore, the best strategy includes monitor of their issues passively, grant data and avoiding overly investing in the T&Cs embrace.
Additionally, for distributing the risks which impact PS&M practices, their T&Cs are relevant. This is informed by evident definition of the stakeholders’ relations, managing risks and strategic oriented procurement process. According to Sharif et al. (2020), to support the T&Cs relevance, model evaluating how vulnerable and risks and overall appropriate value/impacts prioritised.
Additionally, for risks which impact PS&M practices, the T&Cs identified are relevant. The relevance of this is defining relations of stakeholders, managing risks and strategic sourcing strategy. In line with Sharif et al. (2020), to support relevance of T&Cs, model evaluating how vulnerable and risks averse organisation is prioritised;
Figure 3:Analysis of the Vulnerability and Risks; Relative Values and Impacts
Source: CIPS Module Notes
In identified contracts, the T&Cs are highly vulnerable, potential risks, valuable and implications. In regard to IT sourcing, there are various risks evident limiting their success. Further, to conform with the T&Cs is essential to meet buyers’ expectation, suppliers’ relations and expectation. The conformance imply the T&Cs well estimated having technical understanding of the buyer expectation and informing their practice. This imply risks are well managed with the affected by these risks noted well and resolutions gotten.
2.0 Impacts of the Terms and Conditions in the Following Areas
2.1 Managing Risk of Poor Quality
Adopting the definition of Dong et al. (2023), quality is implemented in procurement contracts through ensuring the products and services sourced are meeting their buyers/end-users’ expectations and well defined. This is from beginning of the contract. In ROSHN for example, in IT category sourcing, quality is core to guarantee they meet all the standards. This is with varying Key Performance Indicators (KPIs) in place to promote qualities. In specific, the T&Cs sub-section 7.1 note;
Therefore, the ROSHN T&Cs possess sufficient quality management systems (QMS) and the ISO 9000 Quality Accreditation Process. The contents of the QMS are relevant for suppliers adhering to ROSHN identified in Magd (2016) varying;
Components of Quality Management Systems (QMS)
Source: ROSHN T&CS Template
Failing in adhering with the noted KPIs in the illustration lead to vendors or suppliers including the costs. This is particularly the case when any loss is linked to lack of quality by the suppliers.
In ROSHN, Post COVID-19 occurrence, they input the Defects Rates (DR) as part of their KPIs in meeting qualities. For example, in sourcing for IT spend area, the defect rates or failure to meet expectations in terms of quality were evident. In line with Mulder (2021), anything lower than 2% in the IT systems sourcing represent defect rates enormous.
The T&Cs cannot be classified as Warranty owing to the elaborate guidance on termination execution owing to failing in an entity in meeting quality levels. In sub-section 21.1; a&b of T&Cs, they highlight;
Therefore, when ROSHN suppliers/vendors have failed in achieving the set quality of IT systems, the contract termination is an option. Hence, as evidenced in the T&Cs, they mutually agree on risks monitoring/management undertaking to mitigate them. The risk register example is illustrated here;
Table 1:A summary of ROSHN Risk Register in previous Project
Source: ROSHN Internal documentation
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