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Negotiating Contracts on Behalf of the Church

Negotiating Contracts on Behalf of the Church. Module 3 Researching Vendors March 12, 2009. Confidential: For Purchasing and Travel Employees only. Introduction. Module 3: Researching Vendors. 1. Why. 2. What. 3. How. Basic Procure to Pay Process. What will you learn today?.

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Negotiating Contracts on Behalf of the Church

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  1. Negotiating Contracts on Behalf of the Church Module 3 Researching Vendors March 12, 2009 Confidential: For Purchasing and Travel Employees only

  2. Introduction Module 3: Researching Vendors 1. Why 2. What 3. How

  3. Basic Procure to Pay Process

  4. What will you learn today? • Recognize the value of conducting in-depth research on vendor finalists prior to negotiations • Know how to use available tools for researching important vendor data • Identify information to collect during vendor research • Name important research data points related to an industry and commodity • Know how and when to conduct a successful vendor visit

  5. Vendor Research How important is it to research your vendors?

  6. Vendor Research: Meetinghouse Carpet Researching the 4 finalists • 10-12 needs and expectations identified • 2nd RFP • Industry analysis - Freedoniagroup.com report • Current and past users • Vendor presentations

  7. Why do we research vendors? Researching vendors is a vital step in preparing for negotiations. Information Why? Relationship of Understanding Information

  8. What are we looking for? • What types of information should be known about a vendor prior to a negotiation? • Why are these vital to know?

  9. How do we research our finalists? • Vendor Analysis Resources • Price Indexes • Industry and Commodity Analysis • Vendor Visits

  10. Vendor Financial Analysis • Risk Assessment • How strategic is the commodity? • Total dollar amount? • Contract length? • Viable substitute with sufficient lead time? • Payment terms • Warranty concern? • Type of contract

  11. Vendor Financial Analysis Financial Analysis Resources D&B Report Experian Credit Agency Financial Statement Analysis

  12. Vendor Financial Analysis Spend Information Dashboard

  13. Vendor Analysis D&Bs Corporation Linkage Industry Publications Other Web Resources Non-Financial Resources

  14. Vendor Analysis Information Chase

  15. Industry and Commodity Analysis Knowledge of the existing market can greatly assist you in understanding your supplier and give you confidence during the negotiation process.

  16. Industry and Commodity Analysis • Commodity Indices • PPI • Cost Evaluation • Quotation • Price Analysis • Laws

  17. Price Indices • Monitoring the frequency of increases or decreases in past periods can enable you to project future changes. • Information on future pricing allows you to be informed of market expectations.

  18. Producer Price Index (PPI) Index measures the average change over time in selling prices received by domestic producers for their output.

  19. Cost Evaluation • Manufacturing costs • Direct Labor • Overhead • Shipping Expenses • Administrative Expenses

  20. Value of Cost Evaluation • Analysis of cost components is a good method for isolation and eliminating unnecessary costs • Use the application of experience, knowledge and judgment to data to project reasonable estimated contract costs • These costs serve as the basis for buyer-seller negotiation to arrive at mutually agreeable contract prices

  21. Quotation & Price Analysis Quotation Statement of price given in response to a request which may or may not be legally binding Price Analysis Examination of a supplier’s price proposal or bid by comparison with reasonable benchmarks, without examination and evaluation of the separate element of cost and profit making up the price.

  22. I.  Contractual Provisions That Affect Pricing (and Vendor Selection), Part I A.  Templates        1.  Standardized agreements        2.  Revisions  legal review        3.  Acts  legal review B.  Price        1.  Cap on increases C.  Taxes D.  Minimum Purchase Requirements E.  Additional Charges       1.  Freight       2.  Expedited handling       3.  Special orders       4.  Holidays       5.  Customs

  23. I.  Contractual Provisions That Affect Pricing (and Vendor Selection), Part I F.  Payment Terms      1.  Early pay discount (2%-10 days)      2.  Late fees      3.  Interest G.  Disputed Charges       H.  Shipping Terms             1.  Who pays shipping /insurance costs?             2.  Risk of loss/Title transfer

  24. I.  Contractual Provisions That Affect Pricing (and Vendor Selection), Part I I.  Intellectual Property    1.  Royalties/License fees J.  Confidential Information      1.  Are obligations mutual?      2.  Separate agreements K.  Insurance

  25. II.  Contractual Provisions That Affect Pricing (and Vendor Selection), Part II L.  Warranties      1.  Merchantable      2.  Fit for a particular purpose      3.  Possess requisite experience and training      4.  Conform to Buyer’s specifications      5.  Liable for acts/omissions of Vendor’s Agents      6.  Repair or replace non-conforming goods      7.  Cure non-conforming Service      8.  Refund M.  Limitation on Liability         1.  Limited to contract value?        2.  Unacceptable exclusions              a.  no third party claims              b.  no consequential, punitive damages

  26. II.  Contractual Provisions That Affect Pricing (and Vendor Selection), Part II N.  Indemnification        1.  Defend, indemnify, hold harmless             a.  Infringement claims             b.  Products liability               c.  Vendor’s Agents acts/omissions O.  Term/Termination        1.  Long enough        2.  Early termination/liquidated damages P.  Dispute Resolution       1.  Governing law Utah       2.  Venue Salt Lake City, Utah       3.  Attorneys’ fees provision

  27. Laws • Sherman Antitrust Act • Davis-Bacon Act • Immigration Reform and Control Act of 1986 (“IRCA”) • Clayton Antitrust Act • Occupational Safety and Health Act of 1970 (“OSHA”) • Equal Employment Opportunity Act of 1964

  28. Visits with Strategic Suppliers • Build relationships • Create understanding of requirements, policies, and problems of supply management • Gather information on the supplier • Culture • Investment in creating quality products • Financially stable – condition of machines, work areas, etc.

  29. Keys to a Successful Vendor Visit Where?

  30. Keys to a Successful Vendor Visit When? Qualification of Vendors Review of Vendor Finalists Negotiation with Final Selection

  31. Keys to a Successful Vendor Visit Who should be on the team? • SRM • Industry Expert • End customer • Planning • Supply management • Quality control • Others as needed (accounts payable, distribution, warehousing, etc.) Site Visit Consultants

  32. Keys to a Successful Vendor Visit What should you look for?

  33. Not Part of Site Visits Before the visit: • Documentation • Metrics After the visit: • Performance review – if necessary • Share experience with all SRMs

  34. Conclusion

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