Download - Buying at Right Price

8/9/2019 Buying at Right Price

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Buying at Right PriceBuying at Right Price

S.C. SEHGALS.C. SEHGAL

MATERIALS MANAGEMENT CONSULTANTMATERIALS MANAGEMENT CONSULTANT


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PRICEPRICE

Can be defined asCan be defined as

Value of commodi! o" se"#ice measu"ed inValue of commodi! o" se"#ice measu"ed ine"ms of Sanda"d Monea"! Uni. Ine"ms of Sanda"d Monea"! Uni. Incom$a"in% &o 'uoaions $"ice enables uscom$a"in% &o 'uoaions $"ice enables us

o a$$"aise "elai#e #alue offe"ed b! eac(o a$$"aise "elai#e #alue offe"ed b! eac(su$$lie"su$$lie"


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P"ice Info"maionP"ice Info"maion

) P"ice Caalo%ue) P"ice Caalo%ue) T"ade *ou"nals) T"ade *ou"nals

) Tende"in%) Tende"in%


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TENDERINGTENDERING

Tende"in% is o $"esen an!(in% fo"Tende"in% is o $"esen an!(in% fo"a$$"o#al and acce$ancea$$"o#al and acce$ance

) In Pu"c(asin% ende"in% ma! be defined asIn Pu"c(asin% ende"in% ma! be defined as

P"ocedu"es b! &(ic( $oenial su$$lie"sP"ocedu"es b! &(ic( $oenial su$$lie"s

a"e in#ied o ma+e a fi"m anda"e in#ied o ma+e a fi"m and

une'ui#ocal offe" of $"ice , e"ms ,une'ui#ocal offe" of $"ice , e"ms ,condiions &(ic(- on acce$ance- s(allcondiions &(ic(- on acce$ance- s(all bebe(e basis of subse'uen con"ac(e basis of subse'uen con"ac


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TENDERINGTENDERING

) Tende"in% mosl! used b! Go#.Tende"in% mosl! used b! Go#.

o"%aniaions o ensu"eo"%aniaions o ensu"e

) obse"#ance of $"inci$le of $ublicobse"#ance of $"inci$le of $ublicaccounabili!-accounabili!-

) al(ou%( i is someime used b! $"i#aeal(ou%( i is someime used b! $"i#aeo"%aniaion alsoo"%aniaion also


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Competitive BiddingsCompetitive Biddings

PrerequisitesPrerequisites

) Ru$ee #alue of s$ecific $u"c(ase mus beRu$ee #alue of s$ecific $u"c(ase mus besufficien o 4usif! e3$enses bo( o bu!e"sufficien o 4usif! e3$enses bo( o bu!e"and selle" (a accom$anies (is me(od ofand selle" (a accom$anies (is me(od ofsou"ce selecion and $"icin%.sou"ce selecion and $"icin%.

) S$ecificaion of iems o" se"#ices o beS$ecificaion of iems o" se"#ices o be$u"c(ased mus be e3$licil! clea" o bo($u"c(ased mus be e3$licil! clea" o bo(bu!e" and selle".bu!e" and selle".

) Ma"+e mus consis of ade'uae No ofMa"+e mus consis of ade'uae No ofselle"s.selle"s.


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PrerequisitesPrerequisites

) Selle"s (a ma+e ma"+e mus beSelle"s (a ma+e ma"+e mus be

ec(nicall! 'ualified andec(nicall! 'ualified and

) aci#el! &an con"ac and (e"efo"e beaci#el! &an con"ac and (e"efo"e be&illin% o 'uoe com$eii#el!&illin% o 'uoe com$eii#el!

) Time a#ailable mus be sufficienTime a#ailable mus be sufficien


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Conditions must be fufiedConditions must be fufied

) Aleas &o 'ualified su$$lie"s 5P"efe"abl!Aleas &o 'ualified su$$lie"s 5P"efe"abl!

("ee in Go#. de$s6 (a#e "es$onded o("ee in Go#. de$s6 (a#e "es$onded o

soliciaionsoliciaion

) P"o$osal a"e "es$onsi#e o bu!in% fi"ms7P"o$osal a"e "es$onsi#e o bu!in% fi"ms7

needsneeds

) Su$$lie"s com$eed inde$endenl! fo" (eSu$$lie"s com$eed inde$endenl! fo" (e

a&a"da&a"d


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Conditions must be fufiedConditions must be fufied

) Su$$lie" submiin% lo&es offe" does noSu$$lie" submiin% lo&es offe" does no

(a#e an unfai" ad#ana%e o#e" is(a#e an unfai" ad#ana%e o#e" iscom$eio"s.com$eio"s.

) Lo&es e#aluaed $"ice is "easonableLo&es e#aluaed $"ice is "easonable..


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Tendering! Broad ProceduresTendering! Broad Procedures

Sanda"d $"ocedu"e $"o#ides a monea"!Sanda"d $"ocedu"e $"o#ides a monea"!

limi abo#e &(ic( ende" mus be in#iedlimi abo#e &(ic( ende" mus be in#ied

Tende" ma! a+e &o fo"ms- i.e. OT 5NIT o"Tende" ma! a+e &o fo"ms- i.e. OT 5NIT o"8o"mal Tende"6 , LT 5Seleced9 Info"mal8o"mal Tende"6 , LT 5Seleced9 Info"mal

Tende"6Tende"6

Since cos of OT and len%( of LT is (i%(-Since cos of OT and len%( of LT is (i%(-

suiable limis a"e fi3ed- abo#e &(ic( NIT a"esuiable limis a"e fi3ed- abo#e &(ic( NIT a"e

"eso"ed"eso"ed


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8ull and idenical s$ecificaions a"e issued8ull and idenical s$ecificaions a"e issued

o all $"os$eci#e su$$lie"so all $"os$eci#e su$$lie"s

P"os$eci#e su$$lie"s a"e "e'ui"ed oP"os$eci#e su$$lie"s a"e "e'ui"ed o

submi (ei" offe"9ende" in a sealed andsubmi (ei" offe"9ende" in a sealed and

idenifiable en#elo$e b! a $"esc"ibedidenifiable en#elo$e b! a $"esc"ibeddae and imedae and ime


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On due dae and ime- ende"s a"eOn due dae and ime- ende"s a"eo$ened b! a commiee no"mall!o$ened b! a commiee no"mall!

com$"isin% of office"s f"om Accouns andcom$"isin% of office"s f"om Accouns and

Mae"ials de$a"mens.Mae"ials de$a"mens.

Some o"%aniaion allo& su$$lie"sSome o"%aniaion allo& su$$lie"s

"e$"esenai#e &iness o$enin% of ende" if"e$"esenai#e &iness o$enin% of ende" if

(e! so &is((e! so &is(


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Lae ende" a"e no usuall! conside"ed andLae ende" a"e no usuall! conside"ed and

"eu"ned o su$$lie"s uno$ened"eu"ned o su$$lie"s uno$ened

Tende"s a"e lised- iniialed and ene"ed inoTende"s a"e lised- iniialed and ene"ed inoende" o$enin% "e%ise" andende" o$enin% "e%ise" and

)) bid anal!sis s(ee- s(o&in% deails ofbid anal!sis s(ee- s(o&in% deails of

$"ice- $"ice basis- a3es9 duies) e3"a$"ice- $"ice basis- a3es9 duies) e3"a o"o"

inclusi#e- "ans$o"aion c(a"%es-inclusi#e- "ans$o"aion c(a"%es-

deli#e"!- $a!mens , o(e" "ele#andeli#e"!- $a!mens , o(e" "ele#an

info"maion fo" ende" e#aluaioninfo"maion fo" ende" e#aluaion


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Com$a"ison of $"ices is done on basis ofCom$a"ison of $"ices is done on basis oflanded $"ices ,landed $"ices ,

)) 'uoed $"ices a"e suiabl! loaded fo"'uoed $"ices a"e suiabl! loaded fo"de#iaions o bu!e" sanda"d e"ms ,de#iaions o bu!e" sanda"d e"ms ,condiions so as o b"in% (em a acondiions so as o b"in% (em a a

common $lafo"mcommon $lafo"m

Tec(. e#aluaion of offe"s is done b! use"Tec(. e#aluaion of offe"s is done b! use"de$sde$s


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O"de"s a"e no"mall! $laced on lo&esO"de"s a"e no"mall! $laced on lo&esamon% (e ec(nicall! 'ualified bidde".amon% (e ec(nicall! 'ualified bidde".

Sanda"d $"ocedu"e no"mall! dele%aeSanda"d $"ocedu"e no"mall! dele%ae$o&e" o Pu"c(ase Mana%e" o" office" of$o&e" o Pu"c(ase Mana%e" o" office" of$u"c(ase funcions o $lace o"de"s uno$u"c(ase funcions o $lace o"de"s uno

s$ecified limis on lo&es bidde"s$ecified limis on lo&es bidde"


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2(e"e acce$ance of lo&es ec(nicall!2(e"e acce$ance of lo&es ec(nicall!

'ualified bidde" is no "ecommended o"'ualified bidde" is no "ecommended o"

#alue of $u"c(ase is mo"e (an s$ecified#alue of $u"c(ase is mo"e (an s$ecified

limis-limis-

)) a$$"o#al of (i%(e" au(o"i! is obaineda$$"o#al of (i%(e" au(o"i! is obained

as $e" dele%aion.as $e" dele%aion.


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Tendering! DisadvantagesTendering! Disadvantages

Su$$lie"s ma! 'uoe oo lo& $"ices o obainSu$$lie"s ma! 'uoe oo lo& $"ices o obainbusiness)$"oblems of unsaisfaco"! 'uali!-business)$"oblems of unsaisfaco"! 'uali!-

dela!ed su$$lies ecdela!ed su$$lies ec

Cos of bu!in% es$eciall! in case of OT isCos of bu!in% es$eciall! in case of OT is

#e"! (i%(#e"! (i%(

S!sem is oo slo& fo" eme"%encies and e#enS!sem is oo slo& fo" eme"%encies and e#eno(e"&ise lead)ime is lon% es$eciall! in caseo(e"&ise lead)ime is lon% es$eciall! in case

of OTof OT


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Tendering! DisadvantagesTendering! Disadvantages

Tende"s a"e no"mall! acce$ed on lo&esTende"s a"e no"mall! acce$ed on lo&es

$"ice- if e#e"!(in% o(e"&ise e'ual$"ice- if e#e"!(in% o(e"&ise e'ual

)) lon% lasin% "elaions(i$ &i(lon% lasin% "elaions(i$ &i(

su$$lie"s a"e difficul-su$$lie"s a"e difficul-

)) no c"edi fo" $as $e"fo"manceno c"edi fo" $as $e"fo"mance


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NegotiationsNegotiations

Ne%oiaion isNe%oiaion is

-- any form of verbal communicationin which participant seeks to exploitthe relative strengths of theirrespective bargaining positions toachieve explicit or implicit objectives

- within overall purpose of seekingto resolve identified areas ofdisagreement.


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Negotiation as such can be defined asNegotiation as such can be defined as

!! ""The process by which weThe process by which we search forsearch for

terms to obtain what we want fromterms to obtain what we want fromsomebody who wants something fromsomebody who wants something from us”us”

!! The definition points up a #ey factor thatThe definition points up a #ey factor that

negotiation impies some mutuaity of $ants%negotiation impies some mutuaity of $ants%resoved by e&change'resoved by e&change'


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8o" (i%( #alue con"acs fo" $lan ,8o" (i%( #alue con"acs fo" $lan ,

E'ui$mens and o(e" mae"ials &(e"eE'ui$mens and o(e" mae"ials &(e"e

o"de"s canno be finalied on basis ofo"de"s canno be finalied on basis of

ende"9offe"s- $"ice and o(e" e"ms ma!ende"9offe"s- $"ice and o(e" e"ms ma!be dee"mined ("ou%( ne%oiaionsbe dee"mined ("ou%( ne%oiaions

Iniial 'uoed $"ice- (o&e#e" fo"ms basisIniial 'uoed $"ice- (o&e#e" fo"ms basis

fo" fu"(e" ne%oiaion be&een bu!e" andfo" fu"(e" ne%oiaion be&een bu!e" and

selle" so as o "eac( an a%"eemen onselle" so as o "eac( an a%"eemen on

$"ice- 'uali!- deli#e"! ec$"ice- 'uali!- deli#e"! ec


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Negotiations as means of source seectionNegotiations as means of source seection

and price determinationand price determination

2(en all "e)"e'uisies fo" com$eii#e2(en all "e)"e'uisies fo" com$eii#eende"in% a"e no saisfied- ne%oiaionende"in% a"e no saisfied- ne%oiaion$"ocess s(all be em$lo!ed o selec sou"ces$"ocess s(all be em$lo!ed o selec sou"ces, o a""i#e a $"ice:, o a""i#e a $"ice:

Se#e"al $"o%"essi#e $"ofessionals fa#ou"Se#e"al $"o%"essi#e $"ofessionals fa#ou"use of ne%oiaions o#e" com$eii#euse of ne%oiaions o#e" com$eii#eende"in% due oende"in% due o

P"ocess fa" mo"e li+el! o lead o com$leeP"ocess fa" mo"e li+el! o lead o com$leeunde"sandin% of all issues of $"ocu"emen.unde"sandin% of all issues of $"ocu"emen.


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T(is im$"o#ed unde"sandin% %"eal! "eT(is im$"o#ed unde"sandin% %"eal! "e

subse'uen 'uali! and sc(edule $"oblemssubse'uen 'uali! and sc(edule $"oblems

Com$eii#e biddin% end o $u %"eae"Com$eii#e biddin% end o $u %"eae"

$"essu"e on su$$lie"s o 'uoe lo& 5bu$"essu"e on su$$lie"s o 'uoe lo& 5bu

$"ofiable6 $"ices$"ofiable6 $"ices


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T(is $"essu"e of lo& $"ice ma! "esul inT(is $"essu"e of lo& $"ice ma! "esul in

sac"ifices in $"oduc 'uali!- de#elo$mensac"ifices in $"oduc 'uali!- de#elo$men

effo"s and o(e" #ial se"#iceseffo"s and o(e" #ial se"#ices

T(is me(od ma!- (o&e#e"- be %ood fo"T(is me(od ma!- (o&e#e"- be %ood fo"

$"i#ae seco" , no feasible fo" Go#. and$"i#ae seco" , no feasible fo" Go#. and

PSU $u"c(ase due o limiaion of $ublicPSU $u"c(ase due o limiaion of $ublic

accounabili! and s"ic ad(e"ence oaccounabili! and s"ic ad(e"ence o

s!sem and $"ocedu"es- com$eii#es!sem and $"ocedu"es- com$eii#e

biddin% o"ienedbiddin% o"iened


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AVOI;ANCE O8 NEGOTIATIONSAVOI;ANCE O8 NEGOTIATIONS In o"de" o ensu"e bidde" 'uoe lo&esIn o"de" o ensu"e bidde" 'uoe lo&es

$"ices- o"de" s(all be finalied on lo&es$"ices- o"de" s(all be finalied on lo&es

'ualified bidde" afe" o$enin% of bids'ualified bidde" afe" o$enin% of bids

If o"%aniaion %ains "e$uaion ofIf o"%aniaion %ains "e$uaion ofne%oiain% lo&es bidde" afe" o$enin%ne%oiain% lo&es bidde" afe" o$enin%and e#aluaion of bids- bidde" s(all endand e#aluaion of bids- bidde" s(all endno 'uoin% lo&es $"ice iniiall! belie#in%no 'uoin% lo&es $"ice iniiall! belie#in%(a $"ices s(all be "educed du"in%(a $"ices s(all be "educed du"in%subse'uen ne%oiaions.subse'uen ne%oiaions.


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T(e! ma! ado$ a s"ae%! of submiin% aT(e! ma! ado$ a s"ae%! of submiin% a

bid lo& enou%( o allo& (em o be in#iedbid lo& enou%( o allo& (em o be in#ied

in an ne%oiaionsin an ne%oiaions

A $"uden bu!e" ne#e" %oes fo"A $"uden bu!e" ne#e" %oes fo"

ne%oiaion afe" o$enin% bids- unil (e"ene%oiaion afe" o$enin% bids- unil (e"e

a"e com$ellin% and #alid "easonsa"e com$ellin% and #alid "easons


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E&ceptiona cases of negotiations $ith *+E&ceptiona cases of negotiations $ith *+

bidder bidder

If bidde"s (a#e fo"med a ca"el and "aesIf bidde"s (a#e fo"med a ca"el and "aes

of L/ bidde" a"e subsaniall! (i%(of L/ bidde" a"e subsaniall! (i%(

com$a"ed o cos esimae o" LPP ifcom$a"ed o cos esimae o" LPP if

a#ailablea#ailable

2(en (e mae"ials bein% $u"c(ased is2(en (e mae"ials bein% $u"c(ased is

one of c"iical in$us of $lan9$"oducion- ione of c"iical in$us of $lan9$"oducion- i

ma! be fel necessa"! o ene" ino $a"allelma! be fel necessa"! o ene" ino $a"allel

con"ac &i( &o o" mo"e $a"iescon"ac &i( &o o" mo"e $a"ies


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Negotiations $ith bidder other than *+Negotiations $ith bidder other than *+

In (ese cases NIT and biddin% documensIn (ese cases NIT and biddin% documenss(all s$ecificall! si$ulae (is "e'ui"emens(all s$ecificall! si$ulae (is "e'ui"emen

so (a bidde"s a"e a&a"e befo"e (and ofso (a bidde"s a"e a&a"e befo"e (and ofa&a"din% $a"allel con"aca&a"din% $a"allel con"ac

In suc( siuaions- ne%oiaion &i( $"io"In suc( siuaions- ne%oiaion &i( $"io"

a$$"o#al com$een au(o"i! s(all bea$$"o#al com$een au(o"i! s(all beconduced &i( L1 bidde" o mac( $"icesconduced &i( L1 bidde" o mac( $"icesand condiions &i( e#aluaed L/ bidde".and condiions &i( e#aluaed L/ bidde".


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Negotiations $ith bidder other than *+Negotiations $ith bidder other than *+

If ne%oiaion succeed- $a"allel con"ac 5s6If ne%oiaion succeed- $a"allel con"ac 5s6is9a"e a&a"ded.is9a"e a&a"ded.

2(a needed is (a 'uani! o"de"ed ma!2(a needed is (a 'uani! o"de"ed ma!be dis"ibued in suc( a manne" (abe dis"ibued in suc( a manne" (a$u"c(ase is done in a fai"- "ans$a"en and$u"c(ase is done in a fai"- "ans$a"en ande'uiable manne"e'uiable manne"

Ho&e#e"- if Ne%oiaion fail &i( L1 bidde"-Ho&e#e"- if Ne%oiaion fail &i( L1 bidde"-fu"(e" ne%oiaion can be (eld &i( allfu"(e" ne%oiaion can be (eld &i( allbidde"s o mac( (ei" $"ices &i( e#aluaedbidde"s o mac( (ei" $"ices &i( e#aluaedL/ bidde".L/ bidde".


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Pricing ,greementsPricing ,greements

8I


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Advantages to buyer of fixed priceAdvantages to buyer of fixed priceagreementsagreements

P"o#ide %"eae" ce"ain! o bu!e" &(oP"o#ide %"eae" ce"ain! o bu!e" &(o+no&s f"om sa"- &(a (e is li+el! o $a!+no&s f"om sa"- &(a (e is li+el! o $a!

In case of ende"in%- es$eciall! in Go#.In case of ende"in%- es$eciall! in Go#.bu!in% com$a"ison of offe" is con#enienbu!in% com$a"ison of offe" is con#enien

I $"o#ides an inceni#e o (e su$$lie" oI $"o#ides an inceni#e o (e su$$lie" ocom$lee (e &o"+ &i(in $"esc"ibed imecom$lee (e &o"+ &i(in $"esc"ibed ime


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Re-determinable Fixed PriceRe-determinable Fixed Price 8i"m $"ice is dee"mined a an a%"eed $oin8i"m $"ice is dee"mined a an a%"eed $oin

of con"ac 5sa! =>? com$leion6 in li%( ofof con"ac 5sa! =>? com$leion6 in li%( ofacual e3$e"ience of $"oducion cosacual e3$e"ience of $"oducion cos

P"ice ma! be "e"os$eci#e oP"ice ma! be "e"os$eci#e ocommencemen of con"ac9 $"os$eci#e ocommencemen of con"ac9 $"os$eci#e ocom$leioncom$leion

Suc( $"ice a"e a$$licable &(e"eSuc( $"ice a"e a$$licable &(e"ede#elo$men and $"oducion $"oceedde#elo$men and $"oducion $"oceedconcu""enl!- suc( as Im$o" Subsiuionconcu""enl!- suc( as Im$o" Subsiuion


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Fixed Price subject to adjustment i.e.Fixed Price subject to adjustment i.e.Price ruling at time of executing orderPrice ruling at time of executing order

8i3ed $"ice as $e" offe"9o"de" is ad4used on8i3ed $"ice as $e" offe"9o"de" is ad4used ona%"eed basis o co#e" escalaion in cos ofa%"eed basis o co#e" escalaion in cos oflabou" and mae"ials.labou" and mae"ials.

A$$licable o con"acs e3endin% o#e"A$$licable o con"acs e3endin% o#e"

$e"iod of ime du"in% &(ic( su$$lie"9$e"iod of ime du"in% &(ic( su$$lie"9con"aco" ma! "e'ui"e o allo& fo" inc"easecon"aco" ma! "e'ui"e o allo& fo" inc"easein cos due o inflaion o" o(e" faco"in cos due o inflaion o" o(e" faco"affecin% labou" 9mae"ialaffecin% labou" 9mae"ial


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Suc( $"ices a"e mo"e common in coun"iesSuc( $"ices a"e mo"e common in coun"ies&(e"e inflaion "ae is #e"! (i%( i. e. $"ices&(e"e inflaion "ae is #e"! (i%( i. e. $"icesa"e no sablea"e no sable

E#en fo" s(o" e"m con"ac- a mono$ol!E#en fo" s(o" e"m con"ac- a mono$ol!su$$lie" insiss on suc( $"icessu$$lie" insiss on suc( $"ices

T(ese a"e difficul and e3$ensi#e oT(ese a"e difficul and e3$ensi#e o

adminise" since su$$lie" cos sc(edule &illadminise" since su$$lie" cos sc(edule &illbe "e'ui"ed o be c(ec+ed b! cos de$ ofbe "e'ui"ed o be c(ec+ed b! cos de$ ofbu!e" o" se"#ices of ouside s$ecialis ma!bu!e" o" se"#ices of ouside s$ecialis ma!be "e'ui"edbe "e'ui"ed


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O$e"aion of suc( $"ices fu"(e" becomeO$e"aion of suc( $"ices fu"(e" become

difficul as su$$lie" do no $"o#idedifficul as su$$lie" do no $"o#ide

'uanifiable daa in su$$o" of $"ice'uanifiable daa in su$$o" of $"ice

inc"easeinc"ease

T(is as$ec- (o&e#e" can be a+en ca"e ifT(is as$ec- (o&e#e" can be a+en ca"e if

a $"ice #a"iaion fo"mula &i( 'uanifiablea $"ice #a"iaion fo"mula &i( 'uanifiable

a"ibues is a%"eed u$on- befo"e a&a"d ofa"ibues is a%"eed u$on- befo"e a&a"d of

con"ac.con"ac.


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In #a"iable $"ice con"ac all financial "is+In #a"iable $"ice con"ac all financial "is+

acc"ue o bu!e"acc"ue o bu!e"

ost Plus Pricesost Plus Prices

8inal $"ice is dee"mined on (e basis of8inal $"ice is dee"mined on (e basis of

acual cos and a%"eed fo"mula fo"acual cos and a%"eed fo"mula fo"dee"minaion of $"ofidee"minaion of $"ofi


40/40


T(e basis ma! beT(e basis ma! be

a6 cos $lus a fi3ed feea6 cos $lus a fi3ed fee

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c6 cos s(a"in%c6 cos s(a"in%

Suc( !$e of $"ice is a$$licable oSuc( !$e of $"ice is a$$licable o

cons"ucion and se"#ice con"acs- "e$ai"cons"ucion and se"#ice con"acs- "e$ai"&o"+&o"+

THAN@STHAN@S