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PSM > Session 6 reading > Flashcards

Session 6 reading Flashcards

1
Q

three stages of contracting

A
  • pre contractual
  • contractual stage
  • post contractual
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2
Q

pre contractual stage

A

determining the specifications of need and tendering process

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3
Q

contractual stage

A

negotiation and contract signing

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4
Q

post contractual stage

A

project execution and claims handling

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5
Q

main governance modes

A
  • hierarchy
  • bilateral contract
  • spot market buying
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6
Q

hierarchy contract

A
  • in house supplier
  • contracting within the hierarchy of the organization
  • tough negotiations for internal transfer prices
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7
Q

bilateral contract

A
  • buyer-supplier not anonymous
  • agree on a customized contract
  • long term
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8
Q

spot market buying

A
  • buyer-supplier anonymous
  • highly routinized transactions
  • standardized products
  • focused on price
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9
Q

various contract documents

A
  • letter of intent
  • master of framework agreement
  • purchase order
  • single contract
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10
Q

letter of intent

A
  • general intentions
  • non disclosure agreements
  • before agreement is finalized
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11
Q

master of framework agreement

A
  • agreed pricing, general terms and conditions

- for recurring buys

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12
Q

purchase order

A
  • quantities, delivery dates
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13
Q

single contract

A
  • general terms and conditions, agreed prices

- for one off buys

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14
Q

core mechanisms of contracts

A

pricing mechanisms
payment mechanisms
activity allocation mechanisms

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15
Q

pricing mechanisms

A

fixed price contract
cost reimbursable
unit rate

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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
Q

EPC contract

A
  • supplier has to additionally manage and procure all materials and contractor
26
Q

DBFM

A
  • supplier has to arrange for the financing of the investments and the maintenance of the object
  • customer pays a periodic fee
27
Q

DBFMO

A
  • supplier also has to operate the object
28
Q

more detailed variations of pricing mechanisms

A
  • 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
Q

fixed price contract advantages

A
  • client knows where he stands financially
  • supplier faces all risks
  • no need for settlement
  • employer has certainty about completion data
30
Q

fixed price contract disadvantages

A
  • difficult to get insights into cost breakdown
  • difficulty judging the price quoted by supplier
  • requires thorough preparation
31
Q

cost reimbursable contract advantages

A
  • client can start work immediately

- client obtains exact picture of cost structure

32
Q

cost reimbursable contract disadvantages

A
  • 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
Q

target sum contract

A
  • 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
Q

finding of supply management ethical responsibility

A

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

PSM (10 decks)

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