Session 6 reading Flashcards
1
Q
three stages of contracting
A
- pre contractual
- contractual stage
- post contractual
2
Q
pre contractual stage
A
determining the specifications of need and tendering process
3
Q
contractual stage
A
negotiation and contract signing
4
Q
post contractual stage
A
project execution and claims handling
5
Q
main governance modes
A
- hierarchy
- bilateral contract
- spot market buying
6
Q
hierarchy contract
A
- in house supplier
- contracting within the hierarchy of the organization
- tough negotiations for internal transfer prices
7
Q
bilateral contract
A
- buyer-supplier not anonymous
- agree on a customized contract
- long term
8
Q
spot market buying
A
- buyer-supplier anonymous
- highly routinized transactions
- standardized products
- focused on price
9
Q
various contract documents
A
- letter of intent
- master of framework agreement
- purchase order
- single contract
10
Q
letter of intent
A
- general intentions
- non disclosure agreements
- before agreement is finalized
11
Q
master of framework agreement
A
- agreed pricing, general terms and conditions
- for recurring buys
12
Q
purchase order
A
- quantities, delivery dates
13
Q
single contract
A
- general terms and conditions, agreed prices
- for one off buys
14
Q
core mechanisms of contracts
A
pricing mechanisms
payment mechanisms
activity allocation mechanisms
15
Q
pricing mechanisms
A
fixed price contract
cost reimbursable
unit rate
16
Q
fixed price contract
A
- supplier receives pre determined amount of money for a specified order
17
Q
cost reimbursable
A
- supplier compensation decided after completion of tasks
- based on actual resources consumed
18
Q
unit rate contract
A
- predetermined rates for given amount of output ‘
- usually for standardized activities that are difficult to estimate in terms of time and volume
- client should insist for a fixed price
19
Q
payment mechanisms
A
- lump sum
- milestone payment
20
Q
lump sum
A
payment all at once
21
Q
milestone payment
A
- installments
- for long term projects
- when supplier incurs substantial expenses upfront
22
Q
activity allocation mechanisms
A
- construct contract
- design and construct
- engineering, procurement, and construction (EPC)
- design, build, finance, and maintain contract (DBFM)
- design, build, finance, maintain, and operate (DBFMO) contract
23
Q
construct contract
A
- supplier only needs to produce based on the specification from the customer
24
Q
design and construct
A
- supplier also has to design the object
25
EPC contract
- supplier has to additionally manage and procure all materials and contractor
26
DBFM
- supplier has to arrange for the financing of the investments and the maintenance of the object
- customer pays a periodic fee
27
DBFMO
- supplier also has to operate the object
28
more detailed variations of pricing mechanisms
- fixed price with economic price adjustment (following price changes in important cost factors)
- fixed price plus incentive fee (for early completion, quality)
- cost reimbursable contracts plus: percentage, fixed, performance based fee
29
fixed price contract advantages
- client knows where he stands financially
- supplier faces all risks
- no need for settlement
- employer has certainty about completion data
30
fixed price contract disadvantages
- difficult to get insights into cost breakdown
- difficulty judging the price quoted by supplier
- requires thorough preparation
31
cost reimbursable contract advantages
- client can start work immediately
| - client obtains exact picture of cost structure
32
cost reimbursable contract disadvantages
- no predetermined fixed price
- buyer not sure about financial outcomes
- no incentive to work fast
- every setback is charge to the client
- client needs to follow up on the quantity and quality reports of the contractor
- client is not forced to specify what he wants
- client is uncertain about exact delivery date
33
target sum contract
- variant of cost reimbursable contracts
- targets agreed in terms of cost, time, planned performance
- formulas devised for the distribution of gains and loses
- target price for the project is proposed by the contractor
34
finding of supply management ethical responsibility
strategic supply management skills and perceived reputation have a positive direct impact on performance. SMER is not directly affected by skills and has a direct impact on performance through its positive relationship with perceived reputation
