2.4 - Identify the process for terminating stakeholder relationships

Question 1

Name 11 reasons why a buyer-supplier relationship may come to an end

Answer 1

1. The contract comes to a natural end and there is no longer a requirement to purchase that product or service
2. The contract has reached the end date specified in the terms and conditions
3. The contract is re-tendered and another supplier can provide a more competitive offer
4. The buyer may be undertaking a process of supply base rationalisation
5. The supplier suddenly increases prices with no justifiable reason
6. The contract with the supplier is terminated due to a material breach such as poor performance
7. The supplier is involved in activities that could damage the reputation of the buyer by association
8. The supplier becomes insolvent
9. The supplier merges with or is acquired by another company
10. The supplier may terminate the relationship because it no longer wishes to deal with the buyer as a customer, for example, if the business is not profitable
11. In rare circumstances a contract can terminate due to contract frustration

Question 2

Contract frustration

Answer 2

As a result of an unforeseen incident either beyond either parties control, the obligations of the contract become impossible to perform. UK law states that when contract frustration occurs the contract can be terminated. This can be avoided by adding a force majeure clause naming the possible events. Those events are now classed as foreseen

Question 3

BATNA - best alternative to a negotiated agreement

Answer 3

Often called a Plan B, a negotiation should always have a back-up position in case no deal can be agreed.

Question 4

Name the 7 steps of the supplier termination proess

Answer 4

1. Supplier performance issues
2. Contract management, supplier fails to improve performance
3. Obtain business approval to terminate
4. Develop exit strategy
5. Review market / qualify new supplier
6. Give written notice of termination
7. Manage exit strategy / new supplier onboarding

Question 5

Name 4 practical considerations when developing an exit strategy

Answer 5

1. What will happen to any stock currently on supplier premises
2. What will happen to any assets or equipment that belong to the supplier or have joint ownership
3. What about any outstanding work the supplier is required to complete?
4. What about outstanding payments to the supplier?

Question 6

Name 3 forms of alternative dispute resolution

Answer 6

1. Mediation
2. Reconciliation
3. Arbitration

Question 7

Mediation

Answer 7

This involves a third party which encourages the buyer and supplier not just to think about their legal rights under the contract but also their commercial interests. Mediation attempts to get both parties to reach a compromise

Question 8

Reconciliation

Answer 8

A process designed to bring two parties in conflict back together again in an effort to resolve their differences

Question 9

Arbitration

Answer 9

The settling of a dispute between buyer and supplier by an impartial third party. This party may be named in the contract. The buyer and supplier agree to accept the third partys decision

Question 10

Litigation

Answer 10

The settling of a dispute using a legal court or juidicary

Question 11

Alternative dispute resolutions

Answer 11

Any method of resolving a dispute between two parties which does not involve court action, including escalation to higher levels of authority, mediation, adjudication and arbitration. ADR may include negotiation, mediation, reconcilliation, arbitration and then litigation

Question 12

Evergreen contracts

Answer 12

These are contracts with no end dates. Like an evergreen tree that never loses its leaves, an evergreen contract is never ending, until it is cancelled by either party

Question 13

Auto-renewal clauses

Answer 13

Clauses in a contract which state that if the buyer does not give sufficient notice then the contract will auto-renew for another period. These clauses are common in software licences

Question 14

Service credits

Answer 14

A contract mechanism for performance management. If a supplier fails to meet the standard set in the service credits the buyer has the rights to deduct set amounts of money from the payments owed to the supplier

Question 15

Commercial queries (CQ)

Answer 15

These are queries, administrative omissions or minor disputes that have arisen in the contractual operation

Question 16

Name the 4 main types of IPR

Answer 16

1. Patents - they protect inventive, functional design ideas
2. Copyrights - these protect original works of expression
3. Trade secrets - valuable information on technology that is regarded as confidential and/or providing competitive advantage
4. Trademarks - marks and symbols that distinguish the products and services of a provider from those of other companies

Question 17

Name the 3 situations when TUPE applies

Answer 17

1. Outsourcing - a supplier takes over activities from a buying organisation
2. Re-tendering - a new supplier takes over activities from another supplier
3. Insourcing - a buying organisation takes over activities from a supplier and brings them back in-house

Question 18

Name 5 points the exit strategy should detail in terms of continuity of supply

Answer 18

1. An obligation for the current supplier to continue delivering the services at the same level of quality for the transition period
2. An obligation for the supplier to continue to abide by all the terms and conditions of the contract
3. A requirement for the supplier to provide access fir the buyer to all the necessary information that will be required to keep delivering the service after the transition period
4. A requirement for a parallel service for a given period of time while the new supplier gets the service up and running
5. A requirement for the supplier to keep the same team performing the services during the transition period