Table of Contents
Negotiating to Prevent Cost Increases
One of the primary goals of purchasing and supply management is to use strategies to deal with cost management — particularly cost avoidance, containment, and reduction. Of the many approaches to this end, negotiating and contracting to prevent cost increases are powerful ways to handle cost management. This two-pronged approach provides an excellent opportunity to improve the organization's bottomline. Working with a supplier in such a process can help prevent or eliminate unjustified or unnecessary cost increases.
Contracting to Prevent Cost Increases
When negotiating for price, you must simultaneously consider the type of contract to be used. The agreement on the actual terms and conditions for a particular contract requirement is a negotiation process. Your greatest leverage in dealing with a supplier is at the time of contracting. This is the time to protect yourself against excessive price increases and negotiate all the hidden and future costs before signing.
WADE C. FERGUSON, D.B.A., C.P.M.
Wade Ferguson is contract administrator for Santee Cooper in Moncks Corner, South Carolina, and an adjunct professor for Webster University and The College of Charleston. Dr. Ferguson has presented numerous programs for NAPM affiliates and chapters, as well as at NAPM International Purchasing Conferences. He has written articles for Purchasing Today™ (formerly NAPM Insights), Southern Purchaser, and Electronic Buyers' News. Wade Ferguson currently serves as chair of both the Educational Resources and Business Survey Committees of NAPM—Carolinas-Virginia, Inc. He is also assistant director for NAPM District V.
JEFFREY A. WHITE, C.P.M.
Jeff White is manager of procurement compliance for United Defense, L.P. in Aiken, South Carolina. He is responsible for U.S. government procurement policy implementation at several United Defense, L.P. locations. He is also president of J.A. White & Associates, Columbia, South Carolina, a pricing software development organization. Mr. White has written for Purchasing Today™ (formerly NAPM Insights), served as Pre-Dinner Forum chair and second vice president of NAPM—Central Pennsylvania, Inc., and is a frequent speaker on cost/price analysis topics for NAPM and Penn State University.
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- Leenders, Michiel and Fearon, Harold. Purchasing and Materials Management, 10th Ed. Irwin, 1993
- Leenders, Michiel and Flynn, Anna E. Value-Driven Purchasing: Managing the Key Steps in the Acquisition Process. Irwin, 1995
- NAPM Insights, June 1993, "Back to Basics — Purchasers and the Law of Agency"
- NAPM Insights, October 1993, "The 'How To' of Outsourcing Contracts"
- NAPM Insights, March 1994, "The Contract Extension Considered"
- NAPM Insights, April 1994, "A Statement of Work Primer"
- NAPM Insights, July 1994, "Contracting for Medical Services"
- NAPM Insights, August 1994, "How to Better Use Your Lawyer as a Resource"
- NAPM Insights, August 1994, "Three Steps to Purchasing Travel Services"
- NAPM Insights, February 1995, "Construction Services"
- NAPM Insights, April 1995, "Managing Service Contracts"
- NAPM Insights, May 1995, "Drafting Enforceable Performance Clauses"
- NAPM Insights, June 1995, "Law of Agency and Your Authority"
- NAPM Insights, September 1995, "Contract Clauses for Price Protection"
- NAPM Insights, September 1995, "Learning Pricing Moves and Strategies"
- Negotiating A Quality Contract, NCMA National Education Seminar 1992
- Ore, Norbert. Developing Contracts with Confidence (Seminar Notes),1995
- STAT-USA/US Commerce Home Page
FOR FURTHER READING
- NAPM Insights, January 1995, "Using Key Economic Indicators"
- Purchasing Today™, January 1996, "Cost Reduction Resources"
- International Journal of Purchasing and Materials Management, Winter 1994, "Forecasting Practices in Purchasing"
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