CIPS Diploma in Procurement and Supply Commercial Contracting

CIPS Diploma in Procurement and Supply Commercial Contracting

Module purpose

On completion of this module, learners will be able to describe the key elements and legal aspects of formal commercial contracts, and analyse and interpret the fundamentals of specifications and key performance indicators that are included in contractual arrangements made with suppliers

Module aim(s)

In any organisation, a significant element of the procurement and supply function is based around the contracting process. If they are to be successful, contracts must be clearly defined, be cognisant of legal requirements and contain key clauses and terms. This module is designed for those working in the procurement and supply field, or those who have responsibility for the development of legally binding contracts with suppliers.

Learning outcomes, assessment criteria and indicative content

1.0 Understand the legal issues that relate to the formation of contracts

1.1 Analyse the documentation that can comprise a commercial agreement for the supply of goods or


Invitation to tender or request for quotation


Key performance indicators (KPIs)

Contractual terms

Pricing and other schedules (such as for health and safety records, details of suppliers staff, use of sub-contractors, non-disclosure/confidentiality agreements)

1.2 Analyse the legal issues that relate to the creation of commercial agreements with customers or suppliers

Invitations to treat or invitations to negotiate

Rules relating to offer and acceptance, consideration, intention to create legal relations and capacity to contract

The battle of the forms and precedence of contract terms

Risks presented by contracting on suppliers terms or through oral contracts

The Vienna Convention on the International Sales of Goods

Misrepresentations made pre-contract award

1.3 Compare types of contractual agreements made between customers and suppliers One off purchases

Framework arrangements and agreements

The use of mini-competitions

Call offs

Services contracts

Contracts for the hire and leasing of assets

2.0 Understand the fundamentals of specifications and key performance indicators that are included in contractual arrangements made with suppliers

2.1 Analyse the content of specifications for procurements

Drafting specifications and developing market dialogue with suppliers

The use of standards in specifications

Typical sections of a specification

Standardisation of requirements versus increasing the range of products

Including social and environmental criteria in specifications

The role of Information Assurance in developing specifications

2.2 Appraise examples of key performance indicators (KPIs) in contractual agreements

Defining contractual performance measures or key performance indicators (KPI)

The use of service level agreements

Typical KPI measures to assess quality performance, timeliness, cost management, resources and delivery

3.0 Understand the key clauses that are included in formal contracts

3.1 Analyse contractual terms for contracts that are created with external organisations

The use of express terms

The use of standard terms of business by both purchasers and suppliers

The use of model form contracts such as NEC, FIDIC, IMechIEE

3.2 Recognise examples of contractual terms typically incorporated into contracts that are created with

external organisations

Key terms in contracts for indemnities and liabilities, sub-contracting, insurances, guarantees and liquidated damages

Terms that apply to labour standards and ethical sourcing

3.3 Recognise types of pricing arrangements in commercial agreements

The use of pricing schedules

The use of fixed pricing arrangements

Cost plus and cost reimbursable pricing arrangements

The use of indexation and price adjustment formulae

The use of incentivised contracts

Payment terms

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