The first activity would be to engage in problem recognition in order to ensure that the correct need is addressed. In the case of administering contracts for 12-cell computer batteries, the responsible agent would have to specify if the trigger is an internal or an external need (Adams & Kramer, 2020). The rationale behind this activity is to ensure that the need for the contracts can be streamlined and backed up with relevant evidence. Accordingly, the team will have the ability to decide quicker while not losing any of its significant resources to a failure. Without the problem recognition activity, other activities are not going to function as expected due to the lack of insight into the fundamental issues in the market. This is especially important for technology-related incentives, such as administering a contract for 12-cell computer batteries.
The next activity would be to conduct a thorough information search in order to see how the potential purchase might alter the current state of affairs for the organization. In a sense, this could require the team to gather additional evidence online to see if the future contract is going to benefit the organization (Jones, 2019). The intended contract administration for 12-cell computer batteries has to include the information search stage in order to provide the team with an opportunity to choose all relevant vendors and see how different merchants could alter the purchase cycle for the organization. This phase also depends on the budget and the needs that have been recognized during the first step. The team will have to evaluate all sources of information to reach a verdict on the overall profitability of the battery sector and find the most efficient partner.
The third activity to be deployed by the responsible agents is the assessment of alternatives. Prior to making any purchasing decisions, the team would have to go through a number of backup options to ensure that contracts will be administered for the best available product, such as 12-cell computer batteries (Adams & Kramer, 2020). The team is not required to make impulsive buying decisions, as it is crucial to control the demand and supply curve by picking the best batteries in the market in terms of price-quality ratio. Another way to explain this activity is to address the team’s need to address the existing competition and see how other players manage their supply and demand concerns.
While making the purchase decision during the fourth activity, the team is going to consider all of the bits of evidence that have been collected. It will help the team decide on the vendor and the quantity of 12-cell computer batteries that are going to be placed in the contract. According to Jones (2019), the best way to address this stage is to investigate all the benefits of each of the vendors and then pick the one where the upside-downside ratio is the highest. Over time, it will be rather unlikely that any more solid alternatives are going to appear. The team will be required to administer the contract with strict budgeting and timeline management in order to be able to assess the effectiveness of the purchase in the future. This is an essential concept for the computer battery market, as poor-quality manufacturers would not be able to survive several failing contract administration efforts.
The final activity would be to revisit the team’s contract-related decisions and see how the previous activities contributed to a potential win-win scenario. For the majority of companies, this post-purchase stage can be evaluated using the satisfied-dissatisfied scale, as there are going to be certain advantages and disadvantages of picking one vendor over another (Adams & Kramer, 2020). When administering contracts for 12-cell computer batteries, the team will be most likely to focus on the product’s durability and performance. The post-purchase stage activities will also define if the team wants to keep the same vendor or reference a different manufacturer with similar characteristics.
The two activities that can be highlighted as critical are the assessment of alternatives (Activity 3) and the willingness to revisit the contract after administering it (Activity 5). The primary reason to assess alternatives available in the market is the opportunity to boost the organization’s competitiveness by looking at the same products that are manufactured by the same vendors. Even though 12-cell computer batteries are relatively common, some of the manufacturers could focus on durability for a slightly higher price, and other manufacturers would prioritize lower price over product quality. On a long-term scale, the management will be responsible for administering contracts that benefit the organization and all stakeholders (Jones, 2019). The need to revisit the contract stems from the idea that the process of administering them could be altered in the future to bring more mutual benefits to the manufacturers and the purchasers. According to Adams and Kramer (2020), contract follow-ups create premises for stronger contract management and improve the quality of professional partnerships between respective parties.
A fixed-price contract stands for an agreement between the purchaser and the vendor where an agreed fixed price is paid by the customer to acquire the goods or services. Even though different circumstances could come up, the price of the contract would not change as per the specifications of the contract (Wilson, 2019). Even though there are several upsides and downsides to fixed-price contracts, the core idea is that shipping costs or the actual cost of the product or service could increase instantly without any of these changes being reflected in the contract. To a certain extent, fixed-price contracts could be deemed predictable. This is not the case for option contracts, where an offer can only be active for a certain period (Knapp et al., 2019). Even with the ethanol manufacturer case, the option contract selection would bring uncontrolled variables into play, making it harder to find alternatives or reach new agreements.
Therefore, the procurement strategy for the ethanol manufacturer could be accompanied by a fixed-price contract. Despite the option choice being cheaper in the beginning, the long-term upside is higher for the fixed price contract alternative. While the initial expenditures are going to be bigger, the company will have a chance to save some of the funds to cover the overall cost of the contract. This would also protect the buyer from a scenario where the cost of the ethanol manufacturer contract would increase drastically, causing the sides to review their agreements from scratch. As an essential asset for the buyer, the ethanol manufacturer contract should be fixed price in order to help the purchasing party asses all the potential costs in advance. Even so, the proposed fixed price contract remains a risk unless agreements on timely contract renewals will be reached between the buyer and the vendor.
Adams, C., & Kramer, P. (2020). A practical guide to drafting contracts: From concept to closure. Wolters Kluwer Law & Business.
Jones, L. (2019). Introduction to business law. Oxford University Press.
Knapp, C. L., Crystal, N. M., & Prince, H. G. (2019). Problems in contract law: Cases and materials. Aspen Publishers.
Wilson, S. (2019). Recommended contract practices for underground construction (2nd ed.). SME.