BBA 4326 Unit IV Assessment

BBA 4326 Unit IV Assessment

QUESTION 1

During the procurement planning step of the procurement process preaward phase, the buyer should consider relevant constraints. Describe at least two constraints a buyer might encounter in the procurement planning step for pricing contracts.

Buyer step number one within the preaward phase is procurement planning. This step “is the process of identifying which business needs can be best met by procuring products or services outside the organization” and also “involves determining whether to procure, how to procure, what to procure, how much to procure, and when to procure” (Garrett, 2015, p. 70). Input to procurement planning includes several important factors including consideration of constraints. Constraints are factors that can or have the possibility to limit a particular buyers options. One typical constraint faced by many projects is the availability of funds. Other constraints to consider could be the availability of resources and time constraints (Garrett, 2015).

Reference:

Garrett, G. A. (2015). World class contracting (6th ed.). Riverwoods, IL: CCH.

QUESTION 2

If a fixed-price contract pricing agreement specifies the price that will be paid to the seller, how can incentives be used to encourage improved performance by the seller under such a contract pricing agreement?

Businesses use contract incentives as a means of motivating desired performance in one or multiple specific areas. Incentives are typically classified and evaluated as either objectively based or subjectively based and each category is further classified as either positive incentives; which are rewards (more money), or negative incentives; which are penalties (less money), and sometimes even a combination of the two. Objectively based incentives commonly include performance areas based on cost performance, schedule and delivery performance, and quality performance while subjectively based and evaluated incentives typically include award fees and other special incentives (Garrett, 2015). When it comes to fixed-price incentive contracts, “seller profit is linked to another aspect of performance-cost, schedule, quality, or a combination of all three. The objective is to give the seller a monetary incentive to optimize cost performance” (Garrett, 2015, p. 106).

Reference:

Garrett, G. A. (2015). World class contracting (6th ed.). Riverwoods, IL: CCH.

QUESTION 3

How can sellers use market research in deciding whether to pursue a contract pricing agreement with a specific buyer for creating pricing contracts?

According to Garrett (2015), market research is a process that involves gathering and collecting information that can be of value to the improvement of internal processes, products, and services within an organization. Additionally, market research involves the gathering of intelligence form one or more marketplaces that the business may operate within. Numerous organizations today gather this intelligence with the help of various professional marketing research services and tools in an effort to aid in gathering and analyzing market and competitor information. Sellers use market research in many different ways to help give their organization an advantage in the marketplace. Sellers use market research as a means of identifying customers and obtaining information regarding potential buyers and monitoring their needs continually. Prior to entering into any contract pricing agreement, sellers must learn who buys the type of product or service that they sell and make contact with these buyers. Sellers also use market research to identify and evaluate competitors. Any effort to enter into a pricing agreement and win a buyers business should be based upon an objective analysis of the competitive environment. This includes the buyer and the seller, but also the seller’s competitors. Sellers use market research to determine how their products measure up to competitors, compare prices, determine market share, figure market share, and evaluate their reputation within the market. All important information to gather and know prior to pursuing and contract pricing agreement (Garrett, 2015).

Reference:

Garrett, G. A. (2015). World class contracting (6th ed.). Riverwoods, IL: CCH.