CPSM Flash Cards 1

Term 1
Purchase orders
Definition 1
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
Term 2
letters of intent (LOI)
Definition 2
(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
Term 3
Types of Letters of intent:
Binding
Definition 3
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 4
Types of Letters of intent:
Nonbinding
Definition 4
if a letter of intent is to be nonbinding,
it must include an explicit and clear
statement to that effect
Term 5 Definition 5
Term 6
Contract/Agreement Types:
Definition 6
Term 7
ADEQUECY OF PRICE/COST
ANALYSIS:
PRICE ANALYSIS
Definition 7
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
Term 8
cost analysis
Definition 8
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
Term 9
Quotation
Definition 9
a statement of price which may be
given in response to a request (RFQ)
or otherwise. May or maynot be a
legally binding offer
Term 10
Best Alternative to a Negotiated
Agreement
(BATNA)
Definition 10
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
Term 11
Sellers Competitive Position
(sole source or otherwise)
Definition 11
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
Term 12
SKILL AND AUTHORITY LEVEL OF
THE NEGOTIATER/NEGOTIATION
TEAM
Definition 12
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....
Term 13
Extent of Planning for a
Negotiation
Definition 13
Planning is the most important trait of
a negotiator.
The more planning you do, the more
effective you will be.
Term 14
Sellers Financial Condition
Definition 14
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.
Term 15
Buyers Financial Condition
Definition 15
The stronger the the organization is
financially, the more leverage and
position you have in a negotiation
Term 16
Market and product conditions
Definition 16
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
Term 17
Development of strategies and tactics
Definition 17
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
Term 18
Organization Culture Factors
Definition 18
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
Term 19
Fall Back Alternatives
Definition 19
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
Term 20
Negotiation Philosophies
Definition 20
Three basic approaches:
1. Win-win (cooperational)
2. Win-lose (adversarial/competitive)
3. Lose-lose (confrontational)
Term 21
Win-win (cooperational)
Definition 21
both parties have a high degree of
concern for their own and the others
outcomes.
Term 22
Win-lose (adversarial/competitive)
Definition 22
the negotiator has a high degree of
concern for his own outcome, and a
low degree of concern for the other
party.
Term 23
Lose-lose (confrontational)
Definition 23
Both negotiators have a low degree of
concern for their own and the others
outcomes.
Term 24
Negotiation Tactics
Definition 24
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
Term 25
Optomistic Position
Definition 25
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
Term 26
Fact Finding Sessions
Definition 26
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.
Term 27
Final Proposal Revisions
Definition 27
The Federal Aquisition Regulations
require that their is an opportunity for
suppliers to submit final proposal
revisions at the conclusion of the
negotiations
Term 28
Negotiating with sole offeror versus
entire competitve range
Definition 28
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
Term 29
Documentations for negotiations
Definition 29
Should include the following:
-subject: an overview, phone numbers,
addresses
-Introductory summary
-particulars
-Procurement situation
-Negotiation Summary
Term 30
Negotiations as a Consortium or
Cooperative
Definition 30
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.
Term 31
Elements of a contract
Definition 31
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
Term 32
Offer and Acceptance
Definition 32
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)
Term 33
Counter Offer
Definition 33
is an offer to enter into a transaction
on terms different from those
originally proposed.
Term 34
Acknoledgement
Definition 34
a communication used to inform the
buyer that the has accepted a
purchase order
Term 35
Consideration
Definition 35
Refers to a legal requirement for
creation of a valid contract involving
an exchange of value for value
(money, services, ect)
Term 36
Competent Parties
Definition 36
both parties must have the mental
capacity to enter into a contract
Term 37
Legality of purpose
Definition 37
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
Term 38 Definition 38

CPSM Flash Cards 1

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Term 1

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