Negotiations Can Be Preferred Over Competitive Bidding

Negotiations can be preferred over competitive bidding because significant cost advantages can be gained through this process which might be available through competitive bidding. When bidding is open to a large number of suppliers, the winner doesn't bother to negotiate because he has won fair and square and the buyer now has the obligation to buy from on his terms. That can be avoided with the use of negotiation method.

Epsilon's alternative proposal should be considered seriously because while it may have limitations, it is not entirely a bad choice and may offer certain advantages otherwise not possible. For one, it allows requirements contract to be imposed which means the supplier would be the only party fulfilling all orders for a certain time period. The supplier would be interested in providing the best quality so that he doesn't lose the account and the trust of the buyer. Ruhling can stop the bidding process with the notification that a winner has been selected and then proceed with award process whereby it establishes a requirements contract with Epsilon and agrees to buy from this company for the next one year.

If I were at Ruhling's, I would be more interested in agreeing to the alternative proposal by Epsilon instead of proceeding with the bidding process. I would have done that because Epsilon is giving me a good price and after checking the track record of the firm, I would recommend signing a contract with this firm. However if it appeared that Epsilon had a bad track record, I would have recommended proceeding with the bidding process.

Dual sourcing is a very good practice and makes a lot of business sense because it tends to help the company save costs on procurement and also makes the suppliers more competitive when they know there is more than one party offering its services to the buyer and the one who provides better service might be favored more in the future. (Lyon, 2006)

AAV ANSWERS

Bolger itself is responsible for the poor performance of its contract. For one it doesn't have enough aluminum wielders as it mostly deals with steel wielders, secondly the contract negotiators of the company are very slow in processing cost details and hence any changes in the contract can result in unnecessary delays.

Delays in the completion and production were caused by inefficient work practices that were found at Bolger. Had hydro sub-engineers chosen to work on the prototype themselves, things would have been much different since they are most skilled and hydro sub-could choose to work at its own pace. Unfortunately due to capacity issues, the company had to take services of Bolger Shipyard where several problems existed including insufficient material, inadequate supply of wielders, and poor cost reporting system. This had led to many delays which were now bothering Kathleen.

Kathleen will need to force Bolger to work as quickly as possible on resolution of cost issues. She can choose to adopt two approaches:

a. She can either ask Bolger people to start working on the new design / design changes without worrying about renegotiating the contract since that could be handled later

b. Or she can simply ask Bolger to present all cost details and other changes needed in the contract within few days so things could be processed faster

Either way she will need to take on the role of a commander without unnecessarily worrying about Bolger's reaction because in this case, Bolger is clearly at fault and the only way it can be resolved is by becoming firm and getting the work done in given timeframe.

Hydro sub's staff should have been more careful in choosing the supplier. This means that instead of choosing Bolger that has only given Hydro sub -- a major headache, the company should have allowed competitive bidding on the project and then checked on each potential supplier's history. The best one should not have been chosen on cost issue alone but also on track record.

FLORIDA RETAIL COMPANY ANSWERS

A fixed price contract was a sensible option in the eyes of FRC when it first established the contract. This is because it had a long association with ACME and did not think that it would need to add other conditions based on economic conditions or application. This turned against FRC because while it did agree to pay a hefty price of $350,000 for the computer software system, it never realized that the system might not work at the most critical time i.e. On the opening day. Since ACME had been given enough time to design the new software for larger operations, the fixed price contract now appears like the wrong choice which FRC signed in its haste to get the software.

Statement of work refers to the document that details the services that one party would provide to its client in exchange of money. This is part of the contract that is signed between the client and the supplier. FRC may have mentioned all what it expected ACME would do in exchange for the amount of $350,000. However it may need to change it to include that if the system did not work by the time the store opened, the company will not pay the remaining amount to the firm; All after installation services would be free of cost till the system started working and for each day that FRC went without the system, the company will deduct 2% from the remaining amount and the system failed to work within one week after first trial, the company will cancel the contract completely and will not be responsible for paying the rest of the amount.