DEWR Certificate in Contract Management

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DEWR Certificate in Contract Management

• Face to Face Presentation
• Module 9

2
Introduction

• Welcome
• Housekeeping

• Please ask questions throughout the workshop

3

Module 9

• Managing Contract Variations

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Learning Outcomes

• Describe the types of information required to
  analyse a contract variation request
• Discuss the risks involved in an uncontrolled
  variation process
• Analyse a contract variation request to determine
  the validity of the request
• Understand how variation formulae might be
  applied

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Contract Variations

• "Contract variation" means any change in the
  terms and conditions of a contract. Variations
  may involve
• Increasing, decreasing or omitting any part of
  the contract deliverables
• Amending contract terms and conditions and
• Administrative changes.

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Contract Variations

• Bilateral or unilateral
• Commonwealth policy for bilateral
• An amendment clause permits cm to make
  unilateral amendments
• Distinguished from Employment Services Notice or
  Directions
• Scope of variations
• Variation Clauses limit authority
• Stipulate variations in general scope of contract
• Describe type of variations allowable

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Issues with variations

• Scope of original competition
• Changes in quantity
• Collateral impacts of variation
• Legally binding variations
• Verbal
• Action /In action
• Estoppel
• Partnering

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Types of Contract Variation

• Novation
• Assignment
• Contract Expiry / End Date
• Administrative Changes
• Employment Services-devolution principles
• Policy Changes

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Risks in Variations

• Inconsistency in the decisions
• Legally unenforceable decisions
• Exposure to legal challenge
• Scrutiny and criticism by Parliament and the
  community
• Wider scale impact on other departmental outcomes
• Misinterpretation and
• Not taking into account previous variations or
  precedents (eg the collective impact)

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Testing the Variation

• Is the variation
• Justified within the original scope of work
• Legal in terms of the contract and other
  legislation
• In the department's interest
• Consistent - are there precedents
• Workable, understandable and defensible?

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More Testing

• Will the variation
• Diminish or improve access to the quality of
  services, choice or competition
• Increase or decrease costs of services or
  coverage
• Have an impact on other service providers or the
  client/end user
• Improve the effectiveness of the project and/or
• Fundamentally alter the contract

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Variation Checklist

• Identify and understand DEWR's legal position
• Check that the request is within budgetary
  limitations
• It is also important to refer to the contract to
• Check if the situation is covered/affected by a
  contract condition
• Check if the request is allowable under the terms
  of the contract
• Check whether the additional work is within or
  beyond the original scope of work
• Check the impact of a variation with agency staff
  and end users
• Confirm the work is required

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Preparing the Variation

• Ensure the variation is correctly specified
• Check the price (is it at the revised contractual
  rate?) - Note some contracts preclude price
  variations during the life of the principal
  contracts
• Ensure that any additional costs are reasonable
  (do they represent value for money?)
• Ensure all contract details are accurate (right
  contract number, right contact person, right
  address etc)
• Where the variation increases the total contract
  price, check the CE Financial Delegations for a
  possible change of delegate

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Specific Issues

• Employment Services - Devolution Principles
• Documenting Variations updating, etc
• Avoid the common failure of not documenting
• Publicising the variation

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Price variations

• Uncertainty increases with
• longer term contracts (the longer the contract
  periods the greater the chance that costs will
  increase),
• indefinite requirements or
• imported content involving foreign currency
  exposure.

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Price variation formula

• a non variable component (varies inversely with
  contract period)
• a price index which measures the price movement
  of a component, it must be relevant, independent
  and verifiable
• base dates, cut-off dates and dates for
  recalculating index numbers.

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Material price variations
P P (X Y Mn) Mt
newprice
material costs n newt tendered
tenderedprice
non variable
proportion of tendered price subject to material
variation
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Labour price variation
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Direct labour costs

• Components of labour costs
• hourly rate for agreed award
• leave loading
• workers compensation insurance
• superannuation guarantee levy
• payroll tax

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Variations in Work for the Dole

• Change in CWC Infrastructure Funding/Broadband
  Connectivity to CWA. This variation was
  necessary to compensate providers for the
  changing IT environment. It was initiated by
  DEWR who wanted to improve and upgrade the system
  used to manage Work for the Dole (and other
  programs). These changes were at the behest of
  the purchaser and beyond the control of the
  provider.

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Variations

• Modify Management Fee payments was to allow for
  varying environment reasons. Commencement
  numbers were below expectations and beyond
  Provider control. A variation was therefore
  needed to offset the reduction in advance
  payments for providers. This is an example of a
  best guess on behalf of DEWR not being accurate
  and therefore needing modification.

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Variations

• Modification of Work Experience Fee payments and
  was initiated to ensure that Sponsors were
  reimbursed for expenditure greater than the 80
  up front fees paid by CWCs. Again a best guess
  by DEWR needing modification.

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Variations

• Extension of the contract. This is a
  circumstance outside the control of the provider
  in that DEWR needed more time to prepare for the
  next contract round. The variation also provided
  options for CWCs in relation to the transition
  from one contract to the next.

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THE END

• Thank you for your participation