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Running head: AWARD SCENARIO 1

Award Scenario
William Taylor Pittman
PJM400-1 Project Procurement and Contract Management
Colorado State University Global Campus
Professor Clara Spenny
June 6, 2014












AWARD SCENARIO 2

Award Scenario
Introduction
Many considerations must be made in the final stages of negotiation between a supplier
and customer. First, a down payment is considered by both parties. Second, the capability of the
supplier to perform the work must be assessed by the client. There must be a legal confirmation
of purpose. Finally, a mutual agreement of offer and acceptance must be present at the closing of
the negotiation
Consideration of a Down Payment/payments schedule
Generally when procuring mats, payment is made upon delivery to the project. However,
there are instances in which both the supplier and seller would consider a down payment.
Varying market conditions for mats can cause both parties to desire a down payment
option. A high market price for mats that are needed sometime in the future would position the
supplier in favor of a down payment. This would effectively secure the high market price at the
time; reducing risk. On the other hand, when the market is low, both parties may desire a down
payment. From the buyer side, a down payment would lock in the price per mat, at least for the
mats covered by the down payment. A seller may also desire a down payment in this market
situation if their current finances are suffering. A seller may need the cash because their prices
for their inventory has dropped.
The amount of mats can also be a determining factor in whether a down payment is
considered by either party. From the purchasers side, putting a down payment on an order
would guarantee supply. From the sellers point a view, a large number of mats ordered reduces
the number of mats available in inventory from the time of order to project competition. This can
potentially force the seller to turn away business that would have paid at a sooner date.
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Essentially, the seller would lack the immediate profit gain. A down payment would help mend
the gap.
Capability to Perform the Work
The capability of a supplier to produce products or services is often assessed by
customers. There exists many methods to assess the capability of a supplier to meet the needs of
a customer both initially and for the future
The Site Visit. For large orders, a site visit may become feasible. This is one of the best
way to assess the capabilities of a company as well as gather an accurate understanding of their
culture and methods of operation. A site visit provides more detail than the specifications and
company data listed on paper. It is always best to do business with a behaviorally compatible
business and a site visits is the best means for assessing compatibility
Past Performance. Sometimes, it may not be possible or financially feasible to justify a
site visit, thus other metrics must be used. Past performance is a good indicator of how a
company will perform in the future. Past performance data can be obtained in a number of ways.
For publicly traded companies, fillings such as 10-Ks show company performance figures,
analysis, and projections of the future. For privately held companies, past performance
information can sometimes be obtained directly from the supplier if requested.
Variations in Supply. For a product to be purchased in the future, the current supply,
projected supply, and projected demand must be considered in your analysis. The current supply
gives you an idea of the mass number of items available for purchase as well as an indicator of
how much buffer the supplier has in product. For custom products, with no current supply, the
ability to supply must be assessed and can be done through site visits, interviews, references, and
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market conditions. The ability to supply must consider the technological capabilities as well as
the production capabilities of a given supplier. This, when combined, with their stated projected
output, can give you a more accurate depiction of how well they can meet your goals, reducing
risk.
Interview. Conducting a telephone on in person interview with the appropriate members
of a supplier can give you more insight into how and why their product differs from others. An
interview of a supplier usually consists of interviewing five to ten individuals from that
company. Interviewing multiple people can enable you to gain more accurate, detailed
information about the company. Interviewing a variety of supplier staff also enables you to get
an idea of how the conduct business, communicate, and a general vibe.
References. References can be a powerful tool in conducting business with a new or
existing supplier. Usually, references are very accurate and the information gained from them
can be confidently used in making decisions. References can be a very powerful tool if the
referee had a positive experience receiving a product or service similar to your own effectively
Market Conditions. Lastly, market conditions, trends, and predictions must be
considered in relation to a potential supplier. An increase in business demand for a supplier could
result in higher prices, the loss of quality, and inability to meet demand. The market must be
continuously monitored for this as well as to analyze the industries or commodities the supplier
procures from. For example, an increase in the price of iron would result in increased prices for
both the supplier buying the iron and the consumer receiving the finished product. Assessing the
market for trends and attempting to predict its path can notify buyer when to procure larger
amounts of product. When the price is low, the buyer should order a higher amount, and when
the price is high, the buyer should only buy what is necessary.
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Confirmation of Legal Purpose
A confirmation of legal purpose is required in any procurement contract. Legal purpose is
confirmation that the products passing from supplier to buyer are going to be used in accordance
with the law. In an extreme example, procured trucks may not be used to transport illegal drugs
within the United States. Confirmation of legal purchase in regards to mat purchases is not given
much concentration because it is hard to use timber mats illegally.
Mutual Agreement of Offer and Acceptance
A mutual agreement of offer and acceptance is included in every contract made between
suppliers and their customers. This agreement taking place represents both parties agreeing upon
the proposed exchange and creates a binding contract. In the procurement of mats the offer is
presented by the vendor to the customer in the form of a bid, and acceptance of the bid is done so
via purchase order, or PO. Once the purchase order is sent and received by the vendor, the
contract is complete and binding.
Conclusion
Many strategies, metrics, and tools are available to the procurer in order to more
efficiently and accurately assess a supplier based on their needs. The ability to produce a
consistent, specification-satisfying product or service can affect a customer greatly in the
instance or shortages. However, with proper analysis a confident purchasing decision can be
made.