Procurement

Procurement is

• a Process a company uses to plan, sources, purchase and pay for goods and service

• The most straightforward type of contract is the fixed price contract

• is getting goods and services according to user specifications at a reasonable price and the right delivery time

• Strategic sourcing can have a significant influence in determining the TCO along with quality and performance of supply chain

Types Of Procurement Contracts

• 1.       Fixed Price Contract (FPC)

  Firm Fixed Price (FFP)

  Fixed Price & Incentive Fee (FPIF)

  Fixed Pricing With Economic Price Adjustment (FPEPA)

  2.       Cost Reimbursement Contract (CRC)

  Cost Plus Fixed Fee (CPFF)

  Cost Plus Incentive Fee (CPIF)

  Cost Plus Award Fee (CPAF)

  Cost Plus Percentage Of Cost (CPPC)

  3.       Time And Material

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• aD

• aF

The best value is

• getting goods and services according to user specifications at a reasonable price and the right delivery time

• Process a company uses to plan, sources, purchase and pay for goods and service

• a production system used to meet customer needs on time in accordance with the desired quantity

• In this approach, businesses keep more stock in case the need arises. Therefore, stock is available at all times. Businesses using this approach tend to buy supplies in bulk

Fixed Price Contract (FPC) is

• The most straightforward type of contract is the fixed price contract, where buyers and sellers agree upon a fixed price for the supplies. The buyer must meet the minimum order quantity to invoke this type of contract. Essential supplies crucial to the supply chain are usually secured under a fixed price contract that provides a cost benefit for the buyer. Both buyer and seller will get reasonable pricing, and the seller will get assured minimum order quantity.

• When buyer and seller enter into a cost-reimbursement contract, the buyer will reimburse the capital cost that the seller invested in a product or a service during the course of the project. 

Firm Fixed Price (FFP)

• The buyers and sellers have exact numbers on the agreement. The buyer will agree to purchase the minimum order quantity, and the seller will fix a reasonable price for the order.

• advantage to the supplier because the buyer agrees to pay an incentive apart from the fixed price. The supplier will get the incentive if he meets and exceeds the contract terms. Buyers will get an assured volume of their orders, and suppliers will benefit from the incentive for offering the item at a discounted price. This contract is usually used for high-demand items, and the

• contract allows the seller to adjust the pricing if the production cost of the supplies varies. In this type of contract, a buyer and the seller will agree to a price that is fixed as long as the production cost remains the same. If the supplier proves that the production cost exceeded the agreed-upon value, they can increase the price. The contract helps the buyer lock in on an affordable price, and suppliers can protect their margins if they can justify increased production costs. Usually, FPEPA contracts are used for purchasing a pre-built product that the supplier wants regularly.

Fixed Pricing With Economic Price Adjustment (FPEPA)

• contract provides an advantage to the supplier because the buyer agrees to pay an incentive apart from the fixed price. The supplier will get the incentive if he meets and exceeds the contract terms. Buyers will get an assured volume of their orders, and suppliers will benefit from the incentive for offering the item at a discounted price. This contract is usually used for high-demand items, and the

• contract allows the seller to adjust the pricing if the production cost of the supplies varies. In this type of contract, a buyer and the seller will agree to a price that is fixed as long as the production cost remains the same. If the supplier proves that the production cost exceeded the agreed-upon value, they can increase the price. The contract helps the buyer lock in on an affordable price, and suppliers can protect their margins if they can justify increased production costs. Usually, FPEPA contracts are used for purchasing a pre-built product that the supplier wants regularly.

• The buyers and sellers have exact numbers on the agreement. The buyer will agree to purchase the minimum order quantity, and the seller will fix a reasonable price for the order.

Cost Reimbursement Contract (CRC)

• When buyer and seller enter into a cost-reimbursement contract, the buyer will reimburse the capital cost that the seller invested in a product or a service during the course of the project. 

• The most straightforward type of contract is the fixed price contract, where buyers and sellers agree upon a fixed price for the supplies. The buyer must meet the minimum order quantity to invoke this type of contract. Essential supplies crucial to the supply chain are usually secured under a fixed price contract that provides a cost benefit for the buyer. Both buyer and seller will get reasonable pricing, and the seller will get assured minimum order quantity.

• , the buyer will pay the seller for the time and materials invested in the project. Buyers can include a threshold that the time and material quoted can’t exceed. This is essential to get a fair price and also to prevent fraud.