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CIPS Level 3: Contract Administration (L3M3)

The CIPS Level 3 Contract Administration (L3M3) unit focuses on the essential administrative processes, documentation, and key tasks involved in managing commercial contracts in procurement and supply. This unit equips learners with the knowledge to develop business cases, conduct competitive pricing, negotiate contracts, manage tendering processes, and measure contract performance effectively.

By completing this unit, learners will gain insights into various contract types, negotiation techniques, risk management, and performance measurement. The unit is particularly beneficial for procurement professionals, contract managers, and supply chain specialists, helping them enhance their expertise in managing contracts efficiently to support organisational goals and strategic procurement decisions.

Unit Objectives

The primary objectives of CIPS Level 3 Contract Administration (L3M3) include:

• To equip learners with an in-depth understanding of contract administration, including the different types of contracts and agreements used in procurement and supply.
• To enhance knowledge of key contract documents such as specifications, KPIs, pricing schedules, and confidentiality agreements.
• To develop learners’ ability to conduct competitive pricing and negotiations, ensuring cost-effectiveness in procurement and supply operations.
• To improve understanding of tendering processes, including prequalification, bid evaluation, and compliance with international procurement regulations.
• To enable learners to assess contract performance using data-driven methods, including KPIs, audits, and performance analysis.

Learning Outcomes

The significant learning outcomes of the unit CIPS Level 3 Contract Administration (L3M3) are demonstrated below:

LO1: Know the administrative content and key tasks associated with commercial contracts

This learning outcome focuses on the types of contracts and agreements used in procurement, including spot purchases, term contracts, framework agreements, and call-off contracts. Learners will explore the key contract documents such as specifications, KPIs, pricing schedules, and contract terms, along with supplementary documents like confidentiality agreements and health and safety schedules. Additionally, learners will understand the contract formation process, from requests for quotations to invoicing and payment, and how to develop business cases to justify expenditures. By achieving this outcome, learners will enhance their ability to structure, administer, and justify procurement contracts effectively.

LO2: Understand how to achieve competitive pricing and the role of negotiation in procurement and supply

Learners will develop an understanding of how to secure competitive pricing through market analysis, historical price comparisons, and supplier quotations. The outcome also explores commercial negotiation techniques, including collaborative win-win approaches and distributive win-lose strategies. Learners will examine sources of conflict in procurement negotiations, the influence of stakeholders, and how to evaluate actual negotiation outcomes against planned objectives. By mastering this outcome, learners will develop strong negotiation skills to achieve cost efficiency, value for money, and sustainable procurement practices.

LO3: Know how effective tendering is achieved

This learning outcome equips learners with knowledge of tendering procedures, covering market research, supplier engagement, and pre-contract dialogues. Learners will explore tender documentation, including invitations to tender, contract terms, KPIs, and prequalification questionnaires. The unit also covers the tender evaluation and acceptance process, emphasizing specification compliance and risk mitigation. Furthermore, learners will gain insight into regulatory frameworks affecting the tendering process, such as international trade laws, transparency requirements, and ethical codes of conduct. By mastering this outcome, learners will improve their ability to conduct fair, competitive, and compliant tendering processes.

LO4: Understand how to measure contract performance

This learning outcome focuses on the use of data and KPIs to assess contract performance, including quality, cost management, resource efficiency, and delivery metrics. Learners will explore methods for data collection, analysis, and corrective actions to address underperformance, including penalty clauses. Additionally, the unit covers risk management in contracts, emphasizing the use of risk registers, internal and external risk factors, and performance-based risks. By achieving this outcome, learners will develop proficiency in contract monitoring, supplier performance evaluation, and risk mitigation strategies.

Assessment Criteria

1.0 Know the administrative content and key tasks associated with commercial contracts

1.1 Identify types of contracts and agreements

• Spot purchases
• Term contracts
• Framework agreements (or blanket orders/panel agreements)
• Call-offs

1.2 Describe the purpose of the documents that compose a contract for the purchasing or supply of goods and/or services

• The specification
• The key performance indicators (KPIs)
• The contract terms
• The pricing schedule
• Other schedules (such as health and safety, use of subcontractors)
• Non-disclosure/confidentiality agreements

1.3 Describe the stages involved in forming contracts for the purchasing or supply of goods and/or services

• Requests for quotations/information/tender enquiries
• Quotations/tenders received
• Orders/acceptance of tenders
• Delivery notes/acknowledgements
• Invoicing and payment
• The use of contract registers

1.4 Describe how to develop and present business cases to justify expenditure on supplies, services or projects

• Costs
• Benefits
• Options
• Alignment with organisational needs
• Timescales

2.0 Understand how to achieve competitive pricing and the role of negotiation in procurement and supply

2.1 Explain the use and comparison of competition to obtain quotations on price

• The use of competitive pricing with suppliers through monitoring prices and obtaining quotations
• Comparing historical prices with newly quoted prices and evaluating the reasons for any significant discrepancies
• Taking appropriate actions to secure competitive pricing

2.2 Recognise the role of commercial negotiations in the work of procurement and supply

• Definitions of commercial negotiation
• Collaborative win-win integrative approaches to negotiation
• Distributive win-lose distributive approaches to negotiation
• Negotiation in relation to the stages of the sourcing process
• Sources of conflict that can arise in the work of procurement and supply
• The influence of stakeholders in negotiation

2.3 Explain approaches to negotiate competitive prices

• The link between costs, price, margins, and mark-ups
• Use available data on submitted prices
• Retain or improve other aspects of value for money such as quality, availability, and sustainability within the negotiation process
• Analyse actual outcomes from the negotiation process with planned outcomes and evaluate the reasons behind any differences

3.0 Know how effective tendering is achieved

3.1 Identify the initial actions and processes associated with the tendering process

• Supply/market research
• Early supplier engagement
• Pre-contract dialogue
• Develop and improve commercial and technical solutions

3.2 Describe initial tender process documentation and associated content

• Invitations to tender
• KPIs
• Contract terms
• Pricing schedule and other special-to-type schedules
• Prequalification questionnaires

3.3 Identify the tender evaluation and acceptance process

• Check tender details and take any necessary remedial actions
• Assess tender proposals against initial requirements
• Awareness of specification creep

3.4 Outline the regulations that can impact the tendering process

• International frameworks
• Non-discrimination
• Free movement of goods
• Freedom to provide services
• Freedom of establishment
• Equality of treatment
• Transparency
• Mutual recognition
• Code of ethics
• Codes of conduct

4.0 Understand how to measure contract performance

4.1 Describe the use of data as a contract performance measure

• Types of data
• Data gathering and analysis methods
• Actions to address underperformance
• Penalty clauses

4.2 Explain the use of Key Performance Indicators (KPIs)

• Quality performance
• Cost management
• Resources and delivery
• The use of audits to verify performance and costs
• The use of SMART targets for supplier performance and agree their application with suppliers and other stakeholders
• Agree mitigating actions with suppliers and other stakeholders

4.3 Explain types of contractual risk and how to manage them

• Use of risk registers
• Internal organisational risk
• Market economic risk
• Performance-based risk

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