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Contract Justifications Form

Contract Justifications Form

The assessment of current situation before signing a contract, deemed as one of the important Key Performance Indicators (KPIs) that professional companies rely on. Beside drawing a roadmap to the owner of a business through contractual stages, the assessment of current situation can form a first line of defense in business’s risks management by assessing the effect of particular contract, both negative and positive sides. As a result, this assessment is a key factor in taking the decision on whether enter a contract or not.

As part of ADP contributions, some companies such as (Aramco and Saudi Electricity Company) rely on a justification form contains six points required to be filled by the requesting department before issuing any Request for Quotation form (RFQ) by the company. These six points are usually the following:

  1. Current Status:

The status of the issue/site that the form submitter of the Form sees the justification to procure a contractor to develop/fix/initiate. Moreover, the main reasons why the company should follow the procurement method (a detailed justifications to be stated in Justifications section explained below). In addition, the form submitter of the form should provide a summary of the current and prior contractual relationships conducted to the issue/site and the kind of development done through those contracts. Finally, the form submitter must provide the justified reasons to do a new contract at this time for the issue/site in question.

  1. Proposal:

 This section should include the following: the proposed contractual process, the name of the proposed contractor, a description the desirable work, contract duration, and any proposed options – if available -. The form submitter must provide an estimated value of the suggested contract.

  1. Justifications:

The circumstances justify the proposed procedure, the importance of proposed contract timeframe, the proposed amount by a contractor to execute the contract, the capabilities and track record of the contractor and/or other factors that indicate it is in the favor of the company to select a specific contractor. Also, the form submitter advice on best methods to negotiate the contractor.  In case there are more than one justification, the form submitter must focus on the material justifications

  1. Alternatives:

The practical alternatives which were taken into consideration, and a brief description on the reasons that led to reject or omit these alternatives. However, the form submitter must list other alternatives in case of failing to secure the favored option.

  1. Risks:

Identify any prospected risks if the contract was awarded to a specific contractor and the conditions of the awarding.

  1. Future Development:

What are the steps should be taken in the future to assure that the similar contracts be proposed by a number of competent competitors.

Finally, the importance of this form cannot be denied due to its direct effect on the outcomes of procurement operations. By using this kind of forms, business can   identify the suitable decision when it comes to outsourcing its operations or part of it. However, this form represents the pre-contractual phase, where identifying the justifications of a contract can work as a standard to predict the deviation of the contract.