Chemical Leasing Toolkit

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Task 9: Establish a contract

The final task before actually implementing the optimization option(s) is to establish a contract between the chemical user and supplier.

Every company has its own contractual standards and forms, but to facilitate implementation of a Chemical Leasing contract, the key elements listed below should be included. It is advisable to begin with only one production line for a certain period of time, and if it goes smoothly, to extend the Chemical Leasing model to other lines.

Key elements for a Chemical Leasing contract:

  1. Scope of the contract (chemicals, processes, line covered)
  2. Required quality of the chemical(s) (technical specification in Annex)
  3. Application of the Chemical Leasing business model (short definition)
  4. Agreed average consumption of chemicals and percentage of variation tolerance (deviation from agreed amount of chemicals consumed) acceptable to all parties, if applicable. If the agreed percentage is exceeded, this will have to be discussed and addressed.
  5. Unit of payment
  6. Price per unit of payment
  7. Terms of payment
  8. Way of verifying the number of units to be paid
  9. Liability (e.g. for damages to the site, quality problems with the manufacturers’ products, health or environmental impacts) and warranty
  10. Obligations of the chemical user (i.e. compliance with  process parameters, as specified by a supplier; reporting to a supplier of any significant variations in the process parameters that may influence consumption; maintenance of records and documenting of the number of  payment units as the basis for payment; refraining from using other chemical brands on the line; appointment of a person responsible for monitoring the line operation and informing the supplier of any modification or situation requiring the supplier’s attention)
  11. Obligations of the chemical supplier (i.e. provision of technical specifications and application instructions; fulfillment of required chemical quality; provision of Safety Data Sheets; industrial testing and necessary adjustments for optimal application; specification of  process parameters for optimal consumption; training of the staff; installation of additional equipment; work on further consumption optimization in line with new development, regular service)
  12. Waste and emissions management (legal compliance must be assured)
  13. Cost sharing of potential investments (recommended)
  14. Confidentiality (covering any technical ownership or other confidential business information of which the parties to the Contract become aware)
  15. Publication and utilization of results
  16. Contract duration and termination (including possible probation period)
  17. Contract modifications (e.g. price changes)
  18. Conflict resolution
  19. Applicable law
  20. Monitoring

 

If you have signed a contract and are interested in how to monitor and evaluate the results of the Chemical Leasing implementation, go to Step 3 –  Monitoring and evaluation.