Читать книгу Contract management with CATS CM® version 4 - Gert-Jan Vlasveld - Страница 15

The contract will cost the supplier more than just the cost price of the products and services provided. Other costs that may have to be included are costs for making the proposal, contract management, quality control on delivery, and storage. It goes without saying that suppliers are very much aware of the fact that the contracted delivery costs more than just the people and resources involved, and that this must be included in the cost price calculation on which the quoted price is based. Suppliers understand this concept very well. We now see that clients are also becoming increasingly aware of this. The costs incurred by a client for entering into and performing a contract include more than just the amounts payable to the supplier. Such costs can include activities related to the procurement department, legal advisers, contract management, quality controls on receipt, and the financial department.

The contract value plus the operational costs incurred by the party’s organization to ‘own’ the contract is called the Total Cost of Contract Ownership (TCCO). In addition to the contract value, TCCO also covers the costs of entering into the contract as well as contract execution and termination costs. The supplier has to include the sum of all these costs in the cost price of what is to be delivered. The client needs to include the TCCO in the make-or-buy decision: the business case based on which the decision for buying goods or services is made.

To understand the concept of TCCO, the organization must know which and how many employees are involved with the contract, in addition to the direct costs incurred in paying the supplier or spent by the supplier on the delivery to the client. These may include the employee responsible for the contract, the co-workers who have to be consulted regarding the contract, and colleagues who spend time ensuring the optimal execution of the contract. To this, costs for legal advice, financial administration, and the organization’s own project and service management must be added. Furthermore, the TCCO may also include costs for materials storage, workplaces for the supplier’s staff, and costs related to providing access to the organization’s locations. As the contract value grows, and with the increased variability of the environment, correspondingly larger budgets must be set aside to cover the costs of contract governance, contract extensions, continuing modified contracts, or terminating them. The termination of a contract also means that the supplier’s involvement with the client must be terminated organizationally. This contract phase-out also involves costs that are part of the Total Cost of Contract Ownership.