Standard Forms of Contracts

“Contract Management Services” Article Review

Over the years, communities have worked with private management companies to enhance the operation of their public water supply systems. The arrangements are an important part of the communities and take various forms based on the needs of the particular community. The article by Heneghan (2004) focuses on highlighting the collaboration between water supply systems service providers and the communities in the provision of safe and reliable water. Ideally, as Heneghan points out, contract management services have been in existence for several years, begging the need to assess their strengths and limitations. Unfortunately, a majority of the authors have focused on large systems and completely ignored small systems. The literature has also been biased when reporting on the advantages and limitations of hiring contract management services. On this, Heneghan admits that contract management services do not make sense. However, it is important for water system boards to evaluate the advantages and disadvantages of contract management services to make the right decision. The author further goes on to highlight some of the functions that may require communities to contract Water Management Service providers as well as their benefits.

Some sections of the water supply system would require the communities to contract the services of water management services. For instance, the services of a licensed operator are better obtained from a private service provider. According to Heneghan, some of the reasons forcing communities to contract the services of a licensed operator is because many small systems cannot afford a full-time operator due to the liability issues that have made the operator unwilling to work in a small community. Another factor is the growth in cost of benefits including sick leave, health insurance, vacations, and retirement. The other reason that would prompt small communities to hire the services of water supply system provider is the computerized automation of management, which is beyond their reach. Although the hardware parts can be affordable, software is expensive, forcing the communities to operate a manual billing or hire the services of a service provider. Consequently, meter reading is an essential task. While it is an easy task, it requires an astute meter reader to do the reading regularly and reliably. Hiring the services of a service provider can help in other things like discovering a water leak, or even help in data collection, which can enhance the effectiveness of a meter reader. Along with that, a water supply system requires the services of a treasure to provide essential services to support billing and payments. A contract service provider will offer the communities with qualified personnel with an accounting background and knowledge of financial information to help with the management decisions. Nonetheless, although the services of a service provider are essential to complete these four core services, Heneghan also recommends that it is important for the community to weigh the costs against the benefits. Some services can be contracted and benefit the system, while others the community can overlook the services of a contractor.

Application

As a citizen, the article can be helpful in case we are faced with the need to hire the services of a Water Supply Systems service provider. The knowledge acquired can be helpful in advising the community and aid them in deciding whether to hire the services of a water systems service provider or not.

“Energy Contracts Management” Article Review

Physical energy markets often handle both long-term supply and demand contracts. Due to this, it is important to accommodate the needs of every stakeholder involved in the arrangement. According to Bonnans, Cen, and Christel (2011), the energy contracts are designed in a way that on one side the producer will be keen to sell energy on a long-term basis, while on the other hand, it is important to assure the consumer on the certainty about volumes and eliminate future short-term uncertainties. In a literature review, the authors explore the features of long-term energy contracts. Typical of a long-term energy contract, they contain a granularity defining the duration of the energy exchange. The contracts also contain the amount of traded energy including the upper, lower bounded, as well as the overall contract. The last feature is the cost at which the energy was purchased at a given period, which is also referred to as the index spot price or stochastic variable. The features allow the energy consumer to make the most informed decision when choosing the quantity and the price. It is also important to note that as compared to pipeline natural gas, it is different for sea shipped commodities since any decision taken affects the contract to the end. It is not possible to assume that any quantity of sea-shipped gas can be exchanged for as long as the contractual boundaries are fulfilled because the quantity of energy to be allocated is determined by the number of vessels dispatched. Consequently, as the authors elaborate, combining the stochastic and the discrete decisions makes it very difficult forcing them to consider a continuous relaxation of the problem.

 Thus, based on the problem with the optimal management of energy contracts and considering the local amount against global amounts being traded against the decision variables, as well as uncertainties on prices, the authors rely on stochastic dual dynamic programming to solve the problem. In section two, the authors explore the model and its properties by first considering the Framework, which is formulated based on the Markov process. The authors also use the structure for the dynamic programming principle to explore further the problem under study. On feasibility, the property of relatively complete recourse associated with the Bellman value seems unstable because the corresponding value keeps on changing. However, the SDDP approach can be used to deal with the situation by generating feasibility cuts although it may be a long process prompting a different direct approach.

In section three, the authors explore the vectorial quantization tree to find the best possible approximation on the probability space. More specifically, the authors use optimal quantization, quantization tree, dual dynamic programming formulation of quantization tree, and aggregated function. In section four, the authors focus on the algorithm and rely on the stochastic dual dynamic programming method to calculate the cuts on every quantization tree. Lastly, the authors perform two numerical tests – swing option and another one related to the LNG portfolio optimization. In conclusion, the authors draw that the deterministic value is clear using the stochastic programming and in a continuous relaxation, the optimal value obtained is five times better than the deterministic value. They also found that the optimal value for a stochastic integer is between 41.00 continuous relations value and 13.41 integer sub-optimal value, prompting the need to reduce the value in future.

Personal Application

Although it is not exhaustive, the article gives me an idea about the energy sector contracts. It is also important to mention that, this may be hard to apply in real life. Nonetheless, the article can be useful if I encountered an investor who needed my input in advising them how the energy contracts work. It has also opened up a need to explore further and understand better about the energy sector contracts.

“Contract-management duties as a new regulatory device” Article Review

The issue about managing contracts has been in existence for a very long time and when the obligations contained in a contract are not fulfilled on time, parties must at least to achieve the objectives of the contract. Recently, technological advancement has enabled new ways to manage contracts, which has made the exercise easier. Contract law scholarship seems to be unbothered about these new developments despite some of the developments taking place within the spheres of law. However, some legislators have seized the new opportunities and used them in different ways such as the Sarbanes-Oxley Act of 2002 of the U.S. that requires the establishment of risk management in contracts (Kahler, 2013). Consistently, the author examines the possibility of contract management becoming a legal issue and goes on to elaborate reasons behind the transformation.

First, the author starts by elaborating on the rise of contract management, which has recently developed into a major business. The author cites factors such as accessibility of information technology tools that have made the work easier and the emergency of contract managers who understand the profession with all the techniques, literature, and vocabulary. Further, she elaborates four factors starting with the total number of contracts making it mandatory to have central and standardized management. The other factors include the increasing length and complexity of contracts, the vague content contained in contracts, and globalization.

From there, Kahler (2013) goes on to examine the legal duties to manage contracts. As the author notes, firstly, the decision to establish a contract management system is purely based on a business judgment and as far as the law is concerned, the company should fulfill its obligations. Thus, a company is free to decide, although when a contract management system aligns with the best practices of the specific industry, the stronger the question on the necessity of establishing a legal duty.  According to the author, one way that a contract management system can become a legal matter is the presence of a contractual obligation. Another factor is the procedural consequences, the type of the industry, and the presence of risk management systems.

Along with that, the author goes on to examine the relationship between contract regulation and contract-management regulation. According to Kahler, the two are independent, but influence each other, which means companies must comply with the legally imposed contract-management system. Towards the end, the author explores the advantages and disadvantages of contract-management regulations. Kahler found that contract-management systems are more effective and protect vulnerable customers, the regulation is adaptable to new contracts, and change of factual circumstances, and enhances transparency among companies. On the disadvantages, Kahler found that contract management regulation concerns a small set of questions, they can be costly, and increase bureaucracy in a company. Thus, when considering contract-management, companies should do so cautiously and weigh the benefits against the limitations to make an informed decision.

Personal Application

Initially, I was not fully aware of the importance of a contract-management system. The article gives a comprehensive overview of the importance of a contract-management system. It also highlights the advantages and disadvantages of having one.  The article is informative and the knowledge acquired can be applied when drafting lengthy contracts that may require risk management systems.

References

Bonnans, J. Frédéric, Cen, Zhihao, & Christel, Thibault. (2012). Energy Contracts Management. Stochastic Programming Techniques. Annals of Operations Research, ISSN 0254-5330, 200(1), 199 – 222.

Heneghan, D.P. (2004). Contract Management Services. Journal of Contemporary Water Research & Education, 128(1), 35-37.

Kahler, L. (2013). Contract-management duties as a new regulatory device. Law & Contemporary Problems, 76(2), 89-103.