The Health computing services made a contract with a large international organisation (the Contractor) for taking the services of centralised computing system. As per this, it was a contracted that high quality services related to primary and secondary data centre facility will be provided. The data centre is a service that is used for housing computer systems and related elements like telecommunication and storage. As per this facility, the data centre will support in teaching at regional and other metro hospitals (YUAN, GAO, YANG, and ZHANG, 2011). Besides this, it guaranteed the recovery of crucial information if lost and a high degree of flexibility in handling fluctuating demands in health. The contract was arranged initially for 4 years, according to which current agreement will run till 2016. However, the management of centralised computing system was not done properly by Health because of which the additional cost of Health in IT services increased a lot. Apart from this, the financial management was also poor where a lot of variations were found. The prepared budget and expenditure occurred did not match properly.
Pre Award (Major Issue)
The issues were many in the management of contract and its expenditures that were incurred on IT services as a result of frequent errors in IT systems. Author analysed that the contact was developed for Health sector and was expected to record the budget of entire contract properly in sufficient manner so as to keep track of various expenditures incurred (Resh and Marvel, 2012). Besides this, author evaluated that it was expected to check invoice details as well so that a justification related to contractual expenditures can be checked. There were different variations in the contract for which, health did not track expenditures against these variations. As such Health failed to keep track of actual expenditures against the determined budget. Author also identified that company did not maintain a standard procedure to track all types of costing, variation in the contract and differences raised after making variations in initial contract (Rene, 2010). According to Author differences and expenditures were recorded in a number of places due to which, it created confusions. In addition to this, there was no arrangement of coding various invoices to the contract number which made it difficult to identify that how much was the actual expenditure. In the mid of 2014, the team of Heath attempted to monitor and write down all expenses manually on the basis of invoices totalling (Olatunji, 2014). However, this procedure was not reliable as Health did not follow a stable route to circulate the invoices between groups. The contract managers checked the rates of the invoices, where it was found from the invoices that many of them were overcharged (Joaquin, and Greitens, 2012). Only 1 invoice revealed the exact rate on which the contract was agreed upon. Apart from this, author examined that Health also entered into various lease agreements and that also without having a full knowledge of arrangements within it. In many of the lease arrangements they did not have authority for it as well. In such condition, where, company did not have the proper knowledge of lease type, it classified the lease arrangements improperly. As a result, Health made a breach of Treasurer’s instruction 822. Thus, it is clear that Health was suffering through a number of issues in the management of data centre and contract related to it (Yucong, 2012).
Post Award (Critical Analysis)
As per the above issue identified in Health related to financial management of data computing system, it is evident that it is essential to monitor and maintain the records of each and every cost that is incurred by company. According to author, in practical world, the companies enter into a number of contracts and also have variations in them timely. As per this, there must be a centralised system and a procedure which can keep track of all the transactions, changes and cost related information (Resh and Marvel 2012). In Health organisation, there were various areas in which mismanagement occurred that resulted into increased costs for business. Invoices that were made for various types of expenditures were also not recorded properly, because of which ultimately, the firm was not able to differentiate between actual expenses and the budgeted figures. Author argues that, if a company enters into a contract for any type of services, it is essential to be in line with all types of variations made in it as well. Most of the times, it is apparent that there are many employees who use to handle a single unit (Miku?ov?-Meri?kov? and Nemec, 2013). In such situation, it becomes confusing to decide that who will execute a particular function. Therefore, for each kind of work there should be a single person who is assigned with a particular task. Yucong (2012) contradicts that the major necessity while entering into a contract is to have a full knowledge about the deal in which a person is making agreement. In case of less knowledge, a person may breach a crucial condition that can cost highly. Apart from this, companies may hire a professional in the field of finance who has a diverse knowledge of financial matters. Thus, author analysed that it will help in managing different contracts, budgets and variations in terms and conditions of contract in a systematic manner. A standard guideline explaining various policies and procedures must also be there which can help in getting all processes and functions lined in systematic manner. Health can also adopt an option of consulting an expert in the matters of financial deals who can keep track of all financial matters of organisation. The managers are responsible for studying the contracts, its terms and conditions while entering and agreeing on it so that differences can be identified in later stages related to changes made on it (Fleming and Koppelman, 2016).
The above report entails about a contract entered into by ‘Health’ with the ‘Contractor.’ It has been concluded in the report that as per the contract of availing services related to data computing, the contractor agreed to deliver a number of services through this system. But Health did not manage the system properly, because of which the company had to incur various costs on IT department. The company also failed to manage the finances and budget prepared for the new system. As per this, it has been recommended to arrange some specialists who can aid in giving advisory services for managing finances and expenses related to the data centre facility.
Books and Journals
Duan, Yucong. "A survey on service contract." In Software Engineering, Artificial Intelligence, Networking and Parallel & Distributed Computing (SNPD), 2012 13th ACIS International Conference on, pp. 805-810. IEEE, 2012.
Ernita Joaquin, M., and Thomas J. Greitens. "Contract management capacity breakdown? An analysis of US local governments." Public Administration Review 72, no. 6 (2012): 807-816.
Fleming, Quentin W., and Joel M. Koppelman. "Earned value project management." Project Management Institute, 2016.
Miku?ov?-Meri?kov?, Be?ta, and Juraj Nemec. "Contract management and its impact on contracting public services: Slovak Republic." Ekonomick? ?asopis (Journal of Economics) 7, no. 61 (2013): Nemec.
Olatunji, Oluwole Alfred. "Views on building information modelling, procurement and contract management." Proceedings of the Institution of Civil Engineers-Management, Procurement and Law 167, no. 3 (2014): 117-126.
Rendon, Rene G. "Critical success factors in government contract management." (2010).
Resh, William G., and John D. Marvel. "Loopholes to load-shed: Contract management capacity, representative bureaucracy, and goal displacement in federal procurement decisions." International Public Management Journal 15, no. 4 (2012): 525-547.
YUAN, Haizhen, Xiaojun GAO, Chunquan YANG, and Xingping ZHANG. "Status, Problems and Solutions of Energy Management Contract in China [J]." Energy Technology and Economics 1 (2011).