DQ Week 3

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Please record that price analysis is effective when applied to products that can be contrasted to other, "similar" procurements. Essentially, the goal of a general price  analysis is to assess whether a price is reasonable. This depends on the type of market where the supplier operates. Performing a price analysis typically involves  key components that may include historical prices, market prices and published prices.

 

How can the procurement practitioner apply price analysis  to their process or to determine historical, market and published prices?

 

 

In Chapter 18, we learn how a cost analysis is different from a price analysis. The major difference is that a price analysis looks at the whole price. It does not involve an examination of the individual cost elements or components that collectively comprise the seller's total price.  A cost analysis actually examines the individual cost elements that comprise the total proposed price. Depending on the purchase, these elements may vary but generally include such things as labor rates, material costs, overhead or indirect rates, a cost of money factor, general and administrative expenses (G&A) and a profit or fee. 

 

In my experience, obtaining manufacturer buy-in for supporting a cost analysis is often difficult. I have only seen the concept in action with Department of Defense major weapon system acquisitions. 

 

When would you use the cost analysis approach instead of price analysis?

 

 

In Chapter 19  we encounter the terms "contract type" and "type of contract".  Both terms refer to the compensation arrangement defined within the contractual arrangement. The contract compensation arrangement is the method of determining the dollars due to the contractor under the contract. You will be exposed to a variety of contract compensation arrangements in this chapter, but it may be rare to see compensation arrangements outside firm-fixed price or time and material arrangements. 

From this chapter I hope you realize the design and development of your contractual arrangement can ensure success or failure of the buyer-supplier relationship. 


What considerations will drive the selection of a contract compensation arrangement (or type of contract)?

 

Negotiation is the process of using persuasion techniques to convince a counterpart to agree to a deal that is more favorable for you. By using good negotiation practices, you can realize cost savings of 5, 10, 20 percent or more.  Procurement professionals should be masters at the art of negotiation.  Unfortunately, many of our group do not use the best negotiation practices.  You will find free lancing and reliance on intuition. When this occurs money is often "left on the table."

 

Why is planning so critical to the negotiation process?  In addition, what is the advantage of a win-win negotiation?

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