1. Challenges in Supply Contracting in Prevailing Conditions: Navigating Landmines Dr. Victor Gekara A Presentation for the Chartered Institute of Purchasing and Supply 25 th September 2014

2. The Prevailing Conditions and the Landmines Increasing complexity Growing competitive pressure Mounting social/political pressure on business Shifting government policies RMIT University©yyyy School of Business Information Technology 2

3. International Case Study One - who is party to the contract? Contract activity: Exploration and extraction of coal Contract ID: Chinese mining company Location: Country in Africa Challenges: –Technical skills availability/pressure to recruit locally –Socio-political pressure on environment –Social-political pressure on community engagement –Social-political pressure on community benefits Outcome: stalled projects and on-going legal battles RMIT University©yyyy School of Business Information Technology 3

4. International Case Study Two – who is party to the contract? Contract activity: Exploration and extraction of crude oil Contract ID: Australian company Location: Country in Africa Challenges: –Technical skills availability/pressure to recruit locally –Socio-political pressure on environment –Social-political pressure on community engagement –Social-political pressure on community benefits Outcome: stalled project, company action for compensation RMIT University©yyyy School of Business Information Technology 4

5. International Case Study Three: who to trust? Contract activity: Procurement of cultural artefacts Principal party: The National Gallery of Australia Location: India Problems: –Due diligence failure –Procurement of stolen property Outcome: –Financial loss –Public embarrassment RMIT University©yyyy School of Business Information Technology 5

6. International Case Study Four – consumer awareness and civil pressure Activity: Live export Developments: –Inhumane cattle slaughter Outcome: –Mounting social/political pressure –Cancelled export contracts –Financial implications for business RMIT University©yyyy School of Business Information Technology 6

7. RMIT University©yyyy School of Business Information Technology 7 Local Case Study One: Retail Price Competition and Supply Pressure Unconscionable activity? Undue influence? Abuse of duopoly power? Imbalanced contractual benefits?

8. Common Pitfalls in the Contracting Process Failure of due diligence Failure to collect sufficient intelligence Failure to recognise extra-contractual parties Failure to recognise and ensure balance of benefit Failure to recognise the importance of delicate relationship management Failure to set up an effective contract management system RMIT University©yyyy School of Business Information Technology 8

9. RMIT University©yyyy School of Business Information Technology 9 The Ideal Contract – Perspectives on the Contract The contact as a technical instrument which allocates risk and determines legal rights and liabilities The contract as an instrument which negotiates, establishes and maintains the balance of power between the parties The contract as a living instrument meant to maintain flexible, long-term and viable business relations.

10. Thank You! Victor.gekara@rmit.edu.au RMIT University©yyyy School of Business Information Technology 10