Term
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Definition
| a legally binding document prepared by a purchaser to describe the terms and conditions of a purchase. In the contracting process, the PO may function as an offer, acceptance, confirmation of an oral agreement, or a trigger for periodic performance under an established contract |
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Term
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Definition
(LOI) a precontractual document used to express expectation of contract formation in the future
-Should create no binding obligation to either party
-Purpose of a letter of intent is to gain time prior to to the issuance of a more complete contract or purchase order |
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Term
Types of Letters of intent:
Binding |
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Definition
| may be binded by a letter of intent , even if you do not wish to be, unless steps such as verbage in the LOI stating that neither party wishes to be binded and the LOI is not intended to be a contract |
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Term
Types of Letters of intent:
Nonbinding |
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Definition
| if a letter of intent is to be nonbinding, it must include an explicit and clear statement to that effect |
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Term
Contract/Agreement Types:
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Definition
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Term
ADEQUECY OF PRICE/COST ANALYSIS:
PRICE ANALYSIS |
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Definition
| the examination of a supplier's price proposal or bid by comparison with reasonable benchmarks, without examination and evaluation of the separate elements of cost and profit making up the price |
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Term
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Definition
| an evaluation of actual or anticipated cost data (material, labor, overhead, administrative, and profit). The application of experience knowledge, and judgement to data to project reasonable estimated contract costs |
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Term
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Definition
| a statement of price which may be given in response to a request (RFQ) or otherwise. May or maynot be a legally binding offer |
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Term
Best Alternative to a Negotiated Agreement
(BATNA) |
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Definition
the buying organizations negotiating strenght will be greater if the supply management professional has other options available.
-Increases strength when negotiating
-three types
1. alternative sources
2. alternative products
3. In-house production |
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Term
Sellers Competitive Position
(sole source or otherwise) |
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Definition
The suppliers negotiating power can be strengthened by:
1. the supplier may be the only source for a commodity or service
2. May operate in a limited competitive market market with only 1-2 sources
3. The supplier may have a patented designor feature
4. Good quality, lead time, and track record |
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Term
| SKILL AND AUTHORITY LEVEL OF THE NEGOTIATER/NEGOTIATION TEAM |
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Definition
22 characteristics that make a skilled negotiator/team
planning ability
desire to achieve
competitiveness
persistence
personal integrity
insight
analytical ability
self-restraint
flexibility
ability to listen
verbal clarity
patience/tolerance
intelligence
ect.... |
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Term
| Extent of Planning for a Negotiation |
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Definition
Planning is the most important trait of a negotiator.
The more planning you do, the more effective you will be. |
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Term
| Sellers Financial Condition |
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Definition
| You must know what your suppliers financial condition before negotiating any prices and conditions. A supplier in a poor financial situation is less likely to provide the nessary supplies and transportation to accomodate you. |
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Term
Buyers Financial Condition
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Definition
| The stronger the the organization is financially, the more leverage and position you have in a negotiation |
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Term
| Market and product conditions |
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Definition
Sellers Market (demand exceeding supply): gives the supplier a negotiating advantage.
Buyers Market (supply exceeding demand): gives the negotiating advantage to the buying organization.
Should focus on long-term relationship building that benifits both the supplier and the buyer |
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Term
| Development of strategies and tactics |
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Definition
The planning of strategies and tactics for negotiations involves three aspects:
1. Strategic planning concerns the long range goals of the organization concerning technology, price, and policy
2. Administrative planning concerns the logistics of getting people and information in place for the negotiations
3. Tactical Planning involves achieving optimal results at the bargaining table. includes setting goals and a SWOT analysisof the other party
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Term
| Organization Culture Factors |
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Definition
| When conducting cross-cultural negotiations, the supply management professional's ability to understand the culture of the other party can reduce the number of misunderstandings that inhibit negotiations |
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Term
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Definition
| give and take is a normal part of the process. If both parties establish inflexible positions for each negotiating point, there will be little opportunity to confer, discus, or bargain to reach an agreement |
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Term
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Definition
Three basic approaches:
1. Win-win (cooperational)
2. Win-lose (adversarial/competitive)
3. Lose-lose (confrontational)
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Term
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Definition
| both parties have a high degree of concern for their own and the others outcomes. |
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Term
| Win-lose (adversarial/competitive) |
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Definition
the negotiator has a high degree of concern for his own outcome, and a low degree of concern for the other party.
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Term
| Lose-lose (confrontational) |
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Definition
| Both negotiators have a low degree of concern for their own and the others outcomes. |
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Term
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Definition
The choice of negotiation strategies and tactics results from the negotiation planning process. This includes:
-analyzing the suppliers proposal
-establishing objectives
-formulating optimistic, target, and pessimistic positions
-defining and organizing issues
-developing strategies and tactics
-selecting the negotiation team
-delevoping an agenda |
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Term
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Definition
revealing the optomistic position is the most common approach when the supply management professional has the suppliers proposal
-establishes the range for the negotiation on each issue
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Term
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Definition
are periods when the negotiator or team makes every effort to develop data and information about the other party.
-Study of the business history, length of time in business, growth, and overall success. |
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Term
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Definition
| The Federal Aquisition Regulations require that their is an opportunity for suppliers to submit final proposal revisions at the conclusion of the negotiations |
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Term
| Negotiating with sole offeror versus entire competitve range |
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Definition
When a supplier has little or no competition, the buyer is in a difficult negotiating position:
You can :
-say you are making the item in-house
-refuse to make the product that uses the expensive component
-advise the supplier you are considering substitute items
-focus on long term relationship, not a temporary price gouge by the supplier |
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Term
| Documentations for negotiations |
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Definition
Should include the following:
-subject: an overview, phone numbers, addresses
-Introductory summary
-particulars
-Procurement situation
-Negotiation Summary
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Term
| Negotiations as a Consortium or Cooperative |
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Definition
Consortium: is when several organizations combine their purchasing power for selected items to gain leverage in the market place and to reduce costs.(Private, for-profit)
Co-op: for-profit or not-for-profit business that serves members in a single industry, such as hospitals, universities, or county governments. |
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Term
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Definition
Contract: a legally enforceable written or oral agreement between two or more competent parties that defines a job or service to be performed
Whether an agreement has the legalconsequences is determined by the provisions of the act, if applicable, otherwise by the law of contracts |
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Term
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Definition
Offer: a proposal to make a contract; a binding expression of interest and willuingness to create a contractual relationship usually including certain terms
Must result from a mutual agreement (contract) |
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Term
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Definition
| is an offer to enter into a transaction on terms different from those originally proposed. |
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Term
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Definition
| a communication used to inform the buyer that the has accepted a purchase order |
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Term
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Definition
| Refers to a legal requirement for creation of a valid contract involving an exchange of value for value (money, services, ect) |
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Term
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Definition
| both parties must have the mental capacity to enter into a contract |
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Term
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Definition
| the legal requirement for creation of a valid contract that it be consistant with federal, state, and providencial constitutions and not be in violation of legal statutesor public policy |
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