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CPSM exam 1 > Contracting And Negotiation > Flashcards

Contracting And Negotiation Flashcards

0
Q

The definition of specifications includes two components

A

The first component defines what the product must look like or do

The second component is quantitative

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1
Q

What is Statement of work?

A

A specification for service to be performed

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2
Q

Acceptance criteria for tangible goods

A

Measurement to be taken during an incoming inspection process and allowable results

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3
Q

Acceptance criteria for equipment

A

The level of performance at which the equipment must operate and for how long it must operate at the level before it is deemed acceptable

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4
Q

Acceptance criteria for service

A

May be a result, a look, a report, a product or performance equipment

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5
Q

Method of communicating attributes of a product or service

A

A. Performance and design specification (e.g. SOW)
B. Internal vs. external specifications
C. Supplier samples

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6
Q

Types of solicitations/bids

A
  1. Offer to buy vs. offer to sell
  2. Informal bid/quotation
  3. Electronic solicitation (RFx)
  4. Competitive proposals
  5. Sealed bids/formal advertising
  6. Restrictive competition
  7. Non-competitive negotiation
  8. Two step bidding
  9. Alternative/innovative proposals
  10. Pricing model/market baskets
  11. Lotting strategies (online bidding)
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7
Q

Informal bids are generally manifest in one of two ways

A

First, refer to telephone, written or electronic quotation

Second, used to solicit budgetary information for estimating purposes

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8
Q

Competitive proposal is a procurement practice that

A
  1. Is initiated by a request for proposals, setting out the organization’s requirement and criteria
  2. Contemplates the submission of timely proposal by the maximum numbers of suppliers
  3. Usually provides discussion with those suppliers found to be within competitive range
  4. Concludes with the award of contract to the one supplier whose proposal most advantageous
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9
Q

What is formal advertising being used for?

A

Procurement of services such as building or maintenance contracts, construction and equipment. Also appropriate for selling scraps and surpluses

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10
Q

What are the two steps in two steps bidding

A

First step, the bid are requested only for technical proposals, without any prices

Second steps, bids are sent only to those suppliers that submitted acceptable technical proposals

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11
Q

What are various degree of competition? 6 of them

A 
Monopoly
Monopolistic 
Oligopolistic
Perfect competition
Oligopsonictic
Monopsony
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12
Q

What is monopolistic?

A

Few seller, many buyers

Create the illusion of many seller through product differentiation. I. E breakfast cereal

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13
Q

What is oligopolistic?

A

Few seller, many buyers

Prices is controlled by industry leader or cartel. i.e. OPEC

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14
Q

What is oligopsonistic?

A

Many seller few buyers

Buyers have a major affect on pricing

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15
Q

What is monopsony?

A

Several sellers and one buyer

i.e. Military aircraft

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16
Q

When to use RFI?

A

To obtain general information about products, services or suppliers

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17
Q

What are the potential benefits of RFI?

A

Informal request, thus non-binding

Quick survey and is responded to easily

May help budgeting

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18
Q

What is potential drawback of RFI ?

A

The method is used too often, potential supplier may refuse to respond

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19
Q

When to use bidder’s conference?

A

A bid situation that are more complex due to specification, number of supplier, the amount of business to be awarded or the critical nature of the contract

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20
Q

What is the potential benefit of bidder’s conference?

A

They establish a forum for two way communication to discuss the details of RFQ, RFI, RFP or IFB packages at the beginning of the bid process

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21
Q

What should happen before bidder’s conference?

A

The participant will received the bid packages well in advance so that hey have adequate time to review the contents

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22
Q

What is the potential problem with bidder’s conference?

A

It takes time.

Overuse might discourage supplier from attending, especially during peak season for their industry

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23
Q

What is general solicitation procedures and concepts?

A 
A. Comparability
B. Fairness/business ethics
C. General format/content of bid request
D. Fair response time
E. Issue dates
F. Opening/closing dates
G. Inclusion of potential contract and Ts and Cs
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24
Q

What the general format/content of bid request should consist?

A

A complete spec of item or SOW of the service
The quantity to be quoted
Where and when the items are to be shipped or installed
The due date for quotation
The due date for the product or service

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25
Q

What are the 7 types of bonds in negotiation?

A 
Bid bonds
Performance bonds
Payment bonds
Deposits
Letter of credit
Real estate
Cash
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26
Q

What is bid bonds?

A

A third party that need to bear the extra cost of going into alternative source

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27
Q

What is performance bonds?

A

A bonds that guaranteeing prompt delivery of goods that meet specifications. In construction will be according to spec and time requirements

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28
Q

Why do we need deposit in negotiation?

A

To discourage financially unstable suppliers

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29
Q

What are the potential problem related to the solicitation and receipt of offers

A

A. Time extensions and amendments to solicitation
B. Late bids
C. Offer with errors, irregularities or omission
D. Conflict of interest
E. Protest
F. Confidentiality/security
G. Alternate proposals
H. Debriefing process
I. Procedure for cancellation of solicitation

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30
Q

Court allow the withdrawal of bids when it meet the two conditions what are they?

A
  1. The mistakes was mechanical or clerical in nature, not an error in judgement
  2. The bidder was not guilty of blame de serving negligence in making the error
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31
Q

Why do we need to prepare for negotiation?

A
  • Are unlikely to now the negotiation position
  • Are unlikely to anticipate what the other party likely to do or to understand what motivates the other party
  • Are unlikely to know what results or goals they want to achieve
  • Will be unable to respond realistically to the other party’s proposal
  • Will not know whether the negotiation is reasonable
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32
Q

What are Porter 5 forces?

A

SWOT Trends

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33
Q

What is he first thing need to do in negotiation plan?

A

Evaluate supplier’s proposal such as evaluate price, delivery specification or statement of works, terms and any deviations from your requirements

34
Q

What is the second thing that we should do in negotiation plan?

A

Set objective

Is lower price, higher quality or accelerate delivery

35
Q

What are the negatiation objectives?

A

A. Fair and reasonable price
B. Timely performance
C. Meeting the minimum essential needs of the organization
D. Control over how the contract is performed
E. Maximum supplier cooperation
F. Sound relation with suppliers

36
Q

What are the 9 things we need to know in analyzing sellers?

A
  1. Seller’s desire for a contract
  2. Seller’s certainty of getting a contract
  3. Amount of time for negotiation
  4. Adequacy of cost/price analysis
  5. BATNA
  6. Seller’s competitive position
  7. Skill and authority level of the negotiator/negotiation team
  8. Extend of planning for the negotiation
  9. Seller’s financial condition
37
Q

What are the potential seller’s competitive advantages?

A 
A. Patented design or feature
B. Closest producers
C. Higher quality product
D. Better engineering support
E. Better production capacity
Other superior customer service, low reject rates, comfortable payment term, performance track record
38
Q

What are the 5 things that should be included in document of negotiation?

A 
A. Subject
B. Introduction summary 
C. Particulars
D. Procurement situation
E. Negotiation summary
39
Q

What is the maximum percentage of purchase in market place that will not qualified as anti trust ?

A

25-35%

40
Q

What are the potential issue with collaborative purchasing?

A

Protection from antitrust problems
Limitation of liabilities concerns
Ease of entry and exit
Definition of right and obligations of members
Cost and membership fees
Requirements to buy from participating suppliers
Special needs such as storage, delivery or quality requirements
Rules of behavior

41
Q

A contract has four essential elements

A

A. Offer and acceptance
B. Consideration
C. Competent parties
D. Legality of purpose

42
Q

What is the statue of frauds?

A

A law designed to prevent fraud and perjury by requiring that certain contracts be in writing. Contract for goods worth $500 and more, as well as any other contract that cannot fully performed in a year are not enforceable

43
Q

What does UCC article 2 does?

A

It increased the statue of fraud amount into $ 5,000 from $ 500

44
Q

When is the letter of intent might be used?

A
  1. Reserving a place “in line” for standard equipment
  2. Basing volume discount on future business without giving firm order
  3. Encouraging seller to stock items of interest
  4. Providing supplier with evidence to secure bonding
45
Q

What are the two types of letter of intent?

A

Binding

non-binding

46
Q

What are the 9 types of contracts?

A 
Fixed price
Cost reimbursable
Indefinite delivery contract
Letter contracts
Dealer's agreement
Service agreement
Master purchase agreement 
Construction contract
47
Q

What are the 7 types of fixed price agreement?

A 
Firm fixed price 
Fixed price with escalation
Fixed price with re-determination
Fixed price with incentive
Fixed price level of effort
Fixed price with downward price protection
Fixed price with remedies
48
Q

What is firm fixed price?

A

Agree to pay the supplier a set of price for the specific goods or service

49
Q

What is fixed price with escalation?

A

Buyer may wish to use an adjustment/escalation clause, which provide for both upward and downward changes either in material or labor cost. Usually ties to indices and used during economic uncertainties

50
Q

What is fixed price with redetermination?

A

Used when both future cost and amount of labor or material are uncertain. The differences is the amount of labor and material are unknown

51
Q

What is fixed price with incentive ?

A

A contract that provide supplier with incentive to control cost by establishing target cost, target profit, a ceiling price and final profit formula. Typically if there is a saving, both supplier and buyer will share at predetermine rate. Appropriate in high cost, long lead time project

52
Q

What is fixed price level of effort?

A

Where the fixed price per unit level of effort are used when neither the work or results can be specifically defined prior to performance

53
Q

What is fixed price with downward price protection?

A

A contract that provides maximum protection for the buying organization. It can only adjusted downward.

54
Q

What is fixed price with remedy?

A

A fixed price contract with remedies provides fixed pricing with an option to obtain reimbursement for extraordinary expenses. For example when delivery date is extended

55
Q

What are the 6 types of cost reimbursable contract?

A 
Cost plus a fixed fees
Cost plus percentage cost
Cost plus incentives
Cost plus award fee
Cost without fee
Cost sharing
56
Q

What is cost plus a fixed fee?

A

This form guarantee the supplier reimbursement for allowable cost plus a negotiated fixed fee

57
Q

What is cost plus percentage of cost?

A

This is the most undesirable form for buyer as it provide no incentive to control cost

58
Q

What is cost plus incentive fee?

A

This is similar to fixed price with incentive contract

59
Q

What is cost sharing?

A

A contract provides for both buyer and supplier to share the costs and benefits

60
Q

What is indefinite delivery contract?

A

A contract is used when the buyer is not sure of its production or operation schedule

61
Q

What are the 5 types of indefinite delivery contract?

A 
Indefinite delivery/quantity 
Task order and delivery order
Time and material contract
Blanket agreement
Requirement contract
62
Q

What is time and material contract?

A

Generally provide payment for labor and overhead at a given rates per hour, plus sales price of parts, supplies and material. Most automobiles are repaired under time and material contract

63
Q

What is dealer agreement?

A

The dealer is granted the right to purchase, sell, distribute or service the supplier merchandise

64
Q

What are the 4 types of service agreement?

A

Master service agreement : tied to Maintanance of capital equipment
Professional service agreement: contract for legal, accounting, auditing
Maintanance agreement : contract for preventive Maintanance
Performance based agreement : contract for services in which outcomes or timelines are specified in terms

65
Q

What are the five types of intellectual properties?

A 
Patent
Copyrights
Trademark
Licensing
Confidentiality
66
Q

What is patent?

A

A monopoly created by law that gives the patent holder the sole right to make, use and sell the patented item as well as the right to prevent others from doing so for a set amount of time

67
Q

What is copyrights?

A

Right to the author of literary, artistic or audiovisual work the exclusive right to publish, reproduce, display, sell, perform, transmit or prepare derivative works for the original works

68
Q

What is trademark?

A

A name, symbol or design registered with the country trademark office for exclusive use in association to a given product or service

69
Q

What is licensing?

A

A license issue that grant the licensee the right to use the protected property. Often one time fee or an on going royalty

70
Q

What are the 4 primary US law dealing with antitrust?

A

Sherman
Clayton
Federal trade commission
Robinson-Patman act

71
Q

What are the primary objective of HSPD 12?

A

To establish a process to enhance security, increase government efficiency, reduce identity fraud and support the fight against global terorism

72
Q

What are the 4 primary US law dealing with antitrust?

A

Sherman
Clayton
Federal trade commission
Robinson-Patman act

73
Q

What are the primary objective of HSPD 12?

A

To establish a process to enhance security, increase government efficiency, reduce identity fraud and support the fight against global terorism

74
Q

What are the 4 primary US law dealing with antitrust?

A

Sherman
Clayton
Federal trade commission
Robinson-Patman act

75
Q

What are the 4 primary US law dealing with antitrust?

A

Sherman
Clayton
Federal trade commission
Robinson-Patman act

76
Q

What are the 4 primary US law dealing with antitrust?

A

Sherman
Clayton
Federal trade commission
Robinson-Patman act

77
Q

What is estoppel?

A

The doctrine of promissory estoppel holds that if one party make a promise, even orally, they cannot renege on that promise if the other party has acted in reliance of it

78
Q

What is boilerplate terms and conditions?

A

Intended to protect buyer on matter such as contract acceptance, delivery performance, contract termination, shipment rejections, assignment and subcontracting, patent rights, trademarks, copyrights and payment procedures

79
Q

What are the termination option?

A

For cause or default. Typically result in cancellation
For convenient. Agreement between parties
Frustration of purpose. Also known as commercially impracticable. Doesn’t cover lose money, shifts in markets, changes in cost
Inexcusable delay. Not because of force majeure

80
Q

What is estoppel?

A

The doctrine of promissory estoppel holds that if one party make a promise, even orally, they cannot renege on that promise if the other party has acted in reliance of it

81
Q

What is estoppel?

A

The doctrine of promissory estoppel holds that if one party make a promise, even orally, they cannot renege on that promise if the other party has acted in reliance of it

82
Q

What is estoppel?

A

The doctrine of promissory estoppel holds that if one party make a promise, even orally, they cannot renege on that promise if the other party has acted in reliance of it

CPSM exam 1 (2 decks)

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