Price Analysis Performance Objectives
Price
evaluation is discussed with the understanding that
it has its own language or jargon. The student learns
the language of price evaluation through the unobtrusive
repetitive use of the concepts in actual application.
Each of the major concepts of price evaluation is
identified and explained, most with examples.
Understand
the Impact of Market Dynamics on Price
The
impact of competition on price evaluation is described
in the context of sellers' approach to pricing, beginning
with one extreme of justifying no profit, or a loss,
and ending on the other extreme with a discussion
justifying, usually, unreasonably high profits. In
the middle the student learns the law of supply
and demand, and the concepts perfect competition,
effective competition, adequate competition, and the
types of imperfect competition and their impact on
price evaluation.
Develop
Price Evaluation Competencies
Price
evaluation competencies are developed by learning how
price evaluation is impacted by competition, performance
evaluation criteria, the type of specification, the
type contract, market research, and the accumulation
and analysis of pricing data.
Use Price Adjustment
Techniques
Price
adjustment techniques are tools used in actual application
to account for differences in pricing data caused
by quality differences in offers based upon solicitation
best value evaluation criteria, quantity differences;
the passing of time or inflation which is accounted
for by use of trend analysis; and include ratio analysis
where random sampling is necessary for efficient price
evaluation.
The
primary techniques of price evaluation are taught, including
comparing offers received in response to the solicitation,
and comparing offers to historical prices. The student
is provided many opportunities to perform price evaluation
and price analysis, including during the quality or
product variance exercise, the comprehensive Norman
Training exercise, and the cost analysis exercise.
Become
Familiar with Cost Analysis Procedures
Cost
analysis is taught through actual application in a
purchase situation, beginning with the definitions
and language of cost analysis, which include illustrations
of direct labor, overhead, direct materials, other
direct costs, G&A and the applicable type of contract.
Using an audit report, the student conducts a cost
analysis, and establishes price negotiation objectives
by disallowing objectionable costs. Finally, the role
of profit and profit factors are considered in establishing
a reasonable price.
Employ
the Concept "Best Value"
Best
value is a constant focus throughout the training,
beginning with purchase planning, the discussion of
performance evaluation, including: proposal specific
factors, and supplier specific evaluation factors
of past performance, and supplier capability. During
several exercises, the student is asked to select
best value. The final stage of a best value buy is
closing the deal, which may include price discussions,
and should include planning, presentation, execution
of the plan, and documentation of the process and
the agreement.
