Procurement Contract Types

TYPES OF PROCUREMENT CONTRACTS 1.0 INTRODUCTION Sollish et al (2011) states that the decision over what contract example to use is one of the some important strategic decisions; because the fount of contract has an influence on how the contractor is paid and the risk of infection allocation between the contracting parties. In making much(prenominal) a decision the goal should be to get the best project objective attainment likelihood. 2.0 CONTRACT TYPES According to Sollish et al (2011), there are two major types of contracts: * Price-based contracts: give the supplier the incentive to work efficiently, encloseling costs while maximize profits. In general, the supplier only provides services and goods that meet the imperative minimum specification requirements. The supplier bears a comparatively high risk level. From the buyers perspective, this type of contract presents a contract structure that is relatively inflexible. * Cost-based contracts: tend to be much collaborative though they present a lower control degree on the supplier thus demanding more managerial effort on the buyers part. The risk borne by the contractor is reduced whereas that of the buyer is increased. There is relatively high flexibility and therefore can accommodate high tilt levels. 3.

0 RECOMMENDED CONTRACT TYPE Turner and Simister (in Sollish et al 2011) recommend that the uncertainly of the closing product and not necessarily the risk should determine the take into account contract type to be used in feat cost analysis. They authors goes on to suggest that goal alignment is more important when the objective is develop a project arrangement based on cooperation and not conflict. Consideration should be inclined to incentivize all contract parties. Given that the project involves specifications that are presumable to change during the project life, a cost-based contract would be most appropriate in this case. This is supported by Sollish et al (2011) in their recommendation that... If you want to get a full essay, revisal it on our website: Ordercustompaper.com

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