CPSM Flash Cards 1

Term 1

Purchase orders

Definition 1

a legally binding document prepared by a purchaser to describe the terms and conditions of a purchase. In the

contracting process, the PO may function as an offer, acceptance,

confirmation of an oral agreement, or a trigger for periodic performance

under an established contract

Term 2

letters of intent (LOI)

Definition 2

(LOI) a precontractual document used to express expectation of contract

formation in the future-Should create no binding obligation

to either party-Purpose of a letter of intent is to gain time prior to to the issuance of a more complete contract or purchase order

Term 3

Types of Letters of intent:

Binding

Definition 3

may be binded by a letter of intent , even if you do not wish to be, unless

steps such as verbage in the LOI stating that neither party wishes to be binded and the LOI is not intended to

be a contract

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Term 4

Types of Letters of intent:

Nonbinding

Definition 4

if a letter of intent is to be nonbinding, it must include an explicit and clear

statement to that effect

Term 5 Definition 5

Term 6

Contract/Agreement Types:

Definition 6



Term 7

ADEQUECY OF PRICE/COST ANALYSIS:

PRICE ANALYSIS

Definition 7

the examination of a supplier's price proposal or bid by comparison with

reasonable benchmarks, without examination and evaluation of the

separate elements of cost and profit making up the price

Term 8

cost analysis

Definition 8

an evaluation of actual or anticipated cost data (material, labor, overhead,

administrative, and profit). The application of experience knowledge,

and judgement to data to project reasonable estimated contract costs

Term 9

Quotation

Definition 9

a statement of price which may be given in response to a request (RFQ)

or otherwise. May or maynot be a legally binding offer



Term 10

Best Alternative to a Negotiated Agreement(BATNA)

Definition 10

the buying organizations negotiating strenght will be greater if the supply management professional has other

options available.-Increases strength when negotiating

-three types1. alternative sources2. alternative products3. In-house production

Term 11

Sellers Competitive Position(sole source or otherwise)

Definition 11

The suppliers negotiating power can be strengthened by:

1. the supplier may be the only source for a commodity or service

2. May operate in a limited competitive market market with only 1-2 sources3. The supplier may have a patented

designor feature4. Good quality, lead time, and track

record

Term 12

SKILL AND AUTHORITY LEVEL OF THE NEGOTIATER/NEGOTIATION

TEAM

Definition 12

22 characteristics that make a skilled negotiator/teamplanning ability

desire to achievecompetitiveness

persistencepersonal integrity

insightanalytical ability

self-restraintflexibility

ability to listenverbal clarity

patience/toleranceintelligence

ect....



Term 13

Extent of Planning for a Negotiation

Definition 13

Planning is the most important trait of a negotiator.

The more planning you do, the more effective you will be.

Term 14

Sellers Financial Condition

Definition 14

You must know what your suppliers financial condition before negotiating any prices and conditions. A supplier

in a poor financial situation is less likely to provide the nessary supplies

and transportation to accomodate you.

Term 15

Buyers Financial Condition

Definition 15

The stronger the the organization is financially, the more leverage and position you have in a negotiation



Term 16

Market and product conditions

Definition 16

Sellers Market (demand exceeding supply): gives the supplier a

negotiating advantage.Buyers Market (supply exceeding

demand): gives the negotiating advantage to the buying organization.

Should focus on long-term relationship building that benifits both

the supplier and the buyer

Term 17

Development of strategies and tactics

Definition 17

The planning of strategies and tactics for negotiations involves three

aspects:1. Strategic planning concerns the

long range goals of the organization concerning technology, price, and

policy2. Administrative planning concerns the logistics of getting people and

information in place for the negotiations

3. Tactical Planning involves achieving optimal results at the bargaining table.

includes setting goals and a SWOT analysisof the other party

Term 18

Organization Culture Factors

Definition 18

When conducting cross-cultural negotiations, the supply management professional's ability to understand

the culture of the other party can reduce the number of

misunderstandings that inhibit negotiations



Term 19

Fall Back Alternatives

Definition 19

give and take is a normal part of the process. If both parties establish

inflexible positions for each negotiating point, there will be little

opportunity to confer, discus, or bargain to reach an agreement

Term 20

Negotiation Philosophies

Definition 20

Three basic approaches:1. Win-win (cooperational)

2. Win-lose (adversarial/competitive)3. Lose-lose (confrontational)

Term 21

Win-win (cooperational)

Definition 21

both parties have a high degree of concern for their own and the others

outcomes.



Term 22

Win-lose (adversarial/competitive)

Definition 22

the negotiator has a high degree of concern for his own outcome, and a low degree of concern for the other

party.

Term 23

Lose-lose (confrontational)

Definition 23

Both negotiators have a low degree of concern for their own and the others

outcomes.

Term 24

Negotiation Tactics

Definition 24

The choice of negotiation strategies and tactics results from the

negotiation planning process. This includes:

-analyzing the suppliers proposal-establishing objectives

-formulating optimistic, target, and pessimistic positions

-defining and organizing issues-developing strategies and tactics

-selecting the negotiation team-delevoping an agenda



Term 25

Optomistic Position

Definition 25

revealing the optomistic position is the most common approach when the supply management professional has

the suppliers proposal-establishes the range for the

negotiation on each issue

Term 26

Fact Finding Sessions

Definition 26

are periods when the negotiator or team makes every effort to develop

data and information about the other party.

-Study of the business history, length of time in business, growth, and

overall success.

Term 27

Final Proposal Revisions

Definition 27

The Federal Aquisition Regulations require that their is an opportunity for

suppliers to submit final proposal revisions at the conclusion of the

negotiations



Term 28

Negotiating with sole offeror versus entire competitve range

Definition 28

When a supplier has little or no competition, the buyer is in a difficult

negotiating position:You can :

-say you are making the item in-house-refuse to make the product that uses

the expensive component-advise the supplier you are considering substitute items

-focus on long term relationship, not a temporary price gouge by the supplier

Term 29

Documentations for negotiations

Definition 29

Should include the following:-subject: an overview, phone numbers,

addresses-Introductory summary

-particulars-Procurement situation-Negotiation Summary

Term 30

Negotiations as a Consortium or Cooperative

Definition 30

Consortium: is when several organizations combine their

purchasing power for selected items to gain leverage in the market place

and to reduce costs.(Private, for-profit)

Co-op: for-profit or not-for-profit business that serves members in a single industry, such as hospitals,

universities, or county governments.



Term 31

Elements of a contract

Definition 31

Contract: a legally enforceable written or oral agreement between two or

more competent parties that defines a job or service to be performed

Whether an agreement has the legalconsequences is determined by

the provisions of the act, if applicable, otherwise by the law of contracts

Term 32

Offer and Acceptance

Definition 32

Offer: a proposal to make a contract; a binding expression of interest and

willuingness to create a contractual relationship usually including certain

terms

Must result from a mutual agreement (contract)

Term 33

Counter Offer

Definition 33

is an offer to enter into a transaction on terms different from those

originally proposed.



Term 34

Acknoledgement

Definition 34

a communication used to inform the buyer that the has accepted a

purchase order

Term 35

Consideration

Definition 35

Refers to a legal requirement for creation of a valid contract involving

an exchange of value for value (money, services, ect)

Term 36

Competent Parties

Definition 36

both parties must have the mental capacity to enter into a contract



Term 37

Legality of purpose

Definition 37

the legal requirement for creation of a valid contract that it be consistant with

federal, state, and providencial constitutions and not be in violation of

legal statutesor public policy

Term 38 Definition 38



CPSM Flash Cards 1

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