Where Do You Believe Buyers Spend Most Of Their Time In Nego ✓ Solved

Where Do You Believe Buyers Spend Most of Their Time in Negot

Where do you believe buyers spend most of their time in negotiations? I believe buyers focus most of their time and effort on preparing for the negotiation instead of the scheduled phases. Failing to prepare for the negotiation is a common mistake made by many buyers, which resulted in an undesirable outcome. I believe it is the most crucial stage of the negotiating process.

To prepare, the buyer should research both sides of the discussion, identify any possible trade-offs, determine their most-desired, and least-desired possible outcomes. Negotiation preparation also includes defining the ground rules: determining where, when, with whom, and under what time constraints the negotiations will take place.

What are risks to buyers associated with each of the different types of contracts (fixed price, incentive, and cost-based contracts)?

Fixed-price contracts: With a fixed-price contract, the buyer does not take on much risk. This is great for the project's risk register but not so great for the project budget. As the seller adopts all the risks, they usually add a bit to the price to allow for any risks.

Cost-reimbursable contracts: With a cost-reimbursable contract, the purchasing agency pays the vendor for the actual cost of the work, which includes materials, equipment, and whatever and generally includes direct (e.g., raw materials or labor cost) and indirect costs (e.g., Quality Control Cost). There is a high level of uncertainty. The buyer assumes the contract's risks, benefiting if the actual cost is lower than the expected cost, while losing if the work cannot be completed within the anticipated cost of performance. Another risk is that the contractor may be less efficient since they will profit either way.

Incentive Contracts: It creates additional administrative costs for the buyer because these types of contracts have more oversight responsibilities. It requires extra negotiation time. It can change the priority of the contract. The vendor may focus more on the incentive rather than the contract requirements and costs. It increases the risk that a dispute will occur.

Suppose a supplier gives you a price on a contract and then later comes back and claims that he mistakenly wrote down the wrong price. Do you have a right to sue the supplier over breach of contract? The question to ask here is if there a contract established? If the essential elements for this agreement are present, then legally, yes, you can sue. Once a contract has formed, both parties are expected to uphold their end of the terms. When one party fails to fulfill any of its contractual obligations, it is known as a breach of the contract. In this scenario, the supplier claims that he mistakenly wrote down the wrong price, and if they attempt to terminate this contract, it will be a breach. However, business ethics should be practiced when establishing relationships with contractors. I.e., if the error was an apparent mistake, and there is no significant setback, then the vendor should be allowed to correct this mistake.

Why do many firms attempt to avoid litigation in settling contract disputes? Litigation can bring many challenges to firms, avoiding litigations can only help the firms out. There are many reasons that firms avoid litigations, the following are all reasons why firms try to avoid litigation: Litigation creates a financial burden where budget constraints and cost controls are affected. Unfortunately, there isn’t a high chance of a litigation being granted to firms, and most instances it's only a 50% chance. In instances when things don’t go according to plan, overall productivity will decrease, people will show resentment and relationships will shatter. The business relationships between the firms would also be affected and at times prove costly. Going into litigation can also cause a hit on the firm’s reputation.

Under what conditions can purchasing agents be held personally responsible for abusing their position? There is a fine line that must be observed whenever purchasing agents are at work. In certain situations when the purchasing agents act beyond their authority then there are consequences. The agent should be well aware of their limitations and apparent authority. Whenever these limitations are broken, then the employer could seek legal actions against him/her, and they will be held accountable. Any activities that are performed by the purchasing manager without the authority of the firm automatically makes them liable. If there are issues that arise as a result of the activities performed beyond the scope of authority, the agents are held responsible. Another instance is if any activities performed with intention to gain personal interest, and violation of laws or misuse of company information will cause the purchasing agent to be held personally responsible.

What are risks to suppliers associated with each of the different types of contracts (fixed price, incentive, and cost-based contracts)? Fixed – If market price of a good or service rises then the supplier will lose money from sales. Each item sold at the agreed-upon price could have been sold for more. Incentive – Fixed price with incentives is similar to a fixed price contract; however, when there is a savings found due to materials or cost-saving measures they must split that with the buyer. A part that they used to make ten dollars is now 5 dollars cheaper to make would usually now make them 15 dollars. After splitting the saving with the buyer, it will only make them 7 dollars and 50 cents. Cost-based – Cost-based contracts have very little risk for the supplier as all the costs of manufacturing are passed on to the buyer.

Discuss the concept of ethics. Why is the purchasing profession particularly sensitive to this topic? Ethics is something we encounter all day in normal life; it could be as simple as what to do after noticing you didn’t get charged for the extra fries in your fast food bag, or making a purchase for a company that you have stock in. Ethics is something that we could use a little more of in our world. The purchasing profession would encounter ethics by ensuring the organization's benefit is the priority and not their own personal gain. They must also have ethical relations with both suppliers and future buyers. These professionals must also uphold the ethics set forth by the organization as well as the purchasing profession.

Paper For Above Instructions

Effective negotiation is a vital skill in the realm of purchasing and vendor management. Buyers spend significant time preparing for negotiation sessions, which is often the most crucial phase of the negotiation process. During preparation, buyers engage in thorough research to understand both parties' positions, potential trade-offs, and desired outcomes. This groundwork lays the foundation for successful negotiations, ensuring that buyers present their case assertively and are ready to navigate complex discussions (MasterClass, 2020).

In the context of contractual agreements, risks associated with different contract types must be understood by buyers. Fixed-price contracts are advantageous as they limit the buyer's risk; however, they may result in higher initial costs as suppliers account for potential risks within the agreement. Conversely, cost-reimbursable contracts shift the risk to the buyer, as they are responsible for actual costs incurred, which often leads to uncertainties about overall expenditure. Incentive contracts, while beneficial in creating a shared interest between the buyer and vendor, introduce administrative complexities and may prompt the vendor to prioritize incentive goals over meeting contract requirements.

The question of breach of contract also emerges when suppliers later dispute terms or provide incorrect pricing. Legally, if a binding contract exists, the buyer may indeed pursue legal recourse in such situations. However, ethical considerations play a critical role in contract dealings. If a pricing error is genuine and rectifiable without major financial loss, practicing business ethics could lead buyers to allow corrections rather than seeking litigation.

Firms often avoid litigation due to its associated costs and the uncertainty of outcomes. The financial implications can significantly disrupt budget management and negatively impact organizational relationships. Furthermore, businesses must be wary of reputational damage that can accompany public litigation cases (Tjan, 2014).

Personal responsibility of purchasing agents is another essential aspect of ethical conduct within the profession. Agents must be acutely aware of their authority limits. Engaging in actions beyond this authority or in a self-serving manner can expose the agent and their organization to legal ramifications.

Comparatively analyzing risks for suppliers within fixed-price, incentive, and cost-based contracts unveils a distinct perspective. While fixed-price contracts feature a cap on supplier income, cost-based contracts protect suppliers from financial loss but can render buyers subject to unforeseen expenses. Ethical purchasing should emphasize transparency and fair practices to ensure that relationships between buyers and suppliers remain solid and mutually beneficial (Lee, 2014).

In conclusion, the cyclical nature of purchasing and vendor management revolves around preparation, understanding risks, contractual integrity, and ethical negotiation practices. As the purchasing profession navigates these dimensions, professionals must balance organizational benefit and ethical obligations to foster a conducive environment for meaningful negotiations.

References

• Lee, A.K. (2014). Four Rules for Effective Negotiations. Retrieved from [URL]
• MasterClass. (2020, November 08). How to Negotiate: The 5 Stages of the Negotiation Process. Retrieved from [URL]
• Tjan, A.K. (2014, July 23). Why Do Many Firms Attempt to Avoid Litigation? [URL]
• American Psychological Association. (2003). Ethical Principles of Psychologists and Code of Conduct.
• Loganbill, C., & Stoltenberg, C.D. (1983). Multicultural Case Conceptualization Models.
• Sue, S., & Sue, D.W. (2003). Counseling the Culturally Diverse: Theory and Practice.
• FAR 16.2, FAR 16.3, FAR 16.4. Federal Acquisition Regulation.
• Office of Federal Procurement Policy. (2015). Contract Types.
• Procurement Learning Center. (2021). Understanding Contract Types and Risks.
• Harvard Business Review. (2019). The Ethics of Negotiation: Principles and Practices.