CPSM Blog

Back to Contracting and Negotiation Task 1-A-1

This is the start of the second round of the topics of the CPSM exam. See the first post on this section from February 2008. While negotiation is huge in supply management remember that the Internet has become big in the last fifteen years. So although my version of the study guide does not talk a whole lot of the role of the Internet in contracting and negotiation, I would encourage you to think about the role of the Internet in contracting and negotiation. Do you seriously believe that you or your negotiating suppliers will not check out each other and competitors before contracting? So you need to think about the Internet when dealing with this section. But please check the language of the question, if the Internet is not mentioned at all- do not assume the role of Internet in contract and negotiation. Perhaps the question is written several years ago.

So what are the bridge topics of this section?

• Electronic solicitations (RFx) : these include the ones (perhaps all in the US) sent out by e-mail  that the supplier  needs to access via the e-sourcing platform of the client. 
• Pricing models  and market structure: refers to types of markets that you need to recognize because in some markets there may be many suppliers and this would allow you to send out RFx to all the players. Obviously when say a hundred suppliers learn that they are all bidding then you can expect to come down to the perfect competition state.  In the real world things are not perfect and you need to think about imperfect competition that is a mixed state.

Promissory Estoppel, Fixed Prices and preparing contracts

I am always looking for interesting things in the CPSM notes and I thought Promissory Estoppel was pretty impressive. The concept follows from British contracting law and generally speaks to one of the many points to consider when preparing contracts. This section has 29 pages with 8 types of "Fixed Prices". Most of these are definitional but quite a lot of material to cover.Coming back to promissory estoppel the key message is that an implied agreement can also result in conflict and disagreement. It is therefore important to spell everything out in writing so that things are clear going forward to contract implementation. The suggestion to follow verbal orders with written documents brought back some of the classic practical learnings I had in my early days after my MBA which basically taught me the same thing  in the real world...

Preparing solicitations for competitive bids

This section provides a great overview of what the supply manager must consider while preparing a SOW (Statement of Work) ; electronic solicitations (RFx) ; Request for information (RFI). The section also discusses the role of bonds and surety, problems related to solicitation of offers and receipts of offers , questions of conflicts of interest,confidentiality and debriefing.

The coolest thing in this section were the  terms oligopsonistic and monopsony. Do check them out.

At a conceptual level this section tries to emphasize that in competitive bidding the supply manager must be clear, fair and be seen to  fair and clear by the supplier community.

Foundations of Supply Management

What I like about the the CPSM study guide is the rather clear manner in which the exam is described. For example the first exam "Foundation of Supply Management" has a Section A - Contracting and Negotiation that has five sections with a total of 26 questions. The very first section (Task 1-A-1) asks the examinees to be familiar with preparing solicitations for competitive bids,quotations and proposals with pertinent specifications, terms and conditions. There are 14 pages here with eight sections. More on what the sections contain later...