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Closing Out Procurement Contracts Essay

3248 words - 13 pages


The Close-out of Procurement Contracts: The Steps to Successfully
Close Out a Contract Including the Processes of
Termination and Settlement of Seller Claims
Kelley L. Clanton
Northcentral University


The Close-out of Procurement Contracts: The Steps to Successfully
Close Out a Contract Including the Processes of
Termination and Settlement of Seller Claims

Procurement contract close-out is a heavy and important topic for organizations that have procurements needs on a consistent or ...view middle of the document...

This paper will explore the process of contract close-out including what can happen when things go terribly wrong, for example, early termination and settlement of seller claims and what happens under normal conditions.
Analyzing the Close-Out Processes
The best way for a procurement contract to end is that the procurement of goods and services is done on-time, on-budget and in a complete manner. However, there are instances where this may not occur, and the Buyer and sometimes the Seller may want to end their relationship before the completion of the procurement (Fleming, 2003). In other words, there may be conditions and events that arise that lead both parties to not wanting to pursue the contract any further. This is not hard to execute as long as the buyer and the seller are both on board with doing that. At this stage, the buyer and the seller need to receive competent legal advice, coming either from their corporate legal counsel or more likely from the professional purchasing organization assigned to support them. There are essentially three situations in which the contractual relationship between the Buyer and the Seller can be terminated early.
termination for default
The most common cause of early termination is likely to be through the actions of the Seller, which falls short of fulfilling the critical requirements of their procurement contract. The Seller breaches their contract, which is defined as: “Failure, without legal excuse, to perform any promise which forms the whole or part of a contract” (Fleming, 2003). In short, the Seller fails to perform the critical obligations required by their contract, and these actions provide sufficient justification for the Buyer to terminate their contract. A breach of contract must be based on a significant event, going to the core of the buyer and seller relationship. There are two types of breach of contract: anticipatory and constructive. Anticipatory occurs when, say a Seller indicates to a Buyer that they have no intention or no capability of completing a particular
procurement, and Constructive occurs when, say a construction project manager de-mobilizes the work force, sends everyone home, and returns all equipment. Termination for Default should be used as a last resort and not as punishment. The purpose of a termination for default is essentially to protect the interests of the Buyer while obtaining the necessary goods and services from another source (Texas Administrative Code).
The Buyer is not required to terminate a contract even though the circumstances permit such action. Buyers may determine that it is in their best interest to pursue other alternatives including extending the delivery or completion date, allowing the seller to continue working...

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