Analysis of Sealed Bidding and Negotiation Contracts

This assignment delves into the realm of sealed bidding and negotiation contracts, providing a comprehensive analysis of their advantages, disadvantages, and practical applications. The solution explores the benefits and drawbacks of sealed bidding, including price-based awards, clear requirements, and fair competition, while also addressing potential issues like being 'gazumped' and inflated prices. Furthermore, the assignment examines negotiation contracts, highlighting their benefits, such as client choice and cost transparency, alongside potential limitations in design creativity and increased costs due to a lack of competition. The assignment also presents different types of contracts like cost-sharing, firm fixed, and fixed-price incentive contracts, each suited for specific scenarios, such as new product development, established pricing, and uncertain production environments. The assignment is designed to provide a solid understanding of these contracting methods and their implications for business decisions.

Answer 1
Advantages of sealed bidding
1 The award is made on the basis of price and other price related factors
2 clearness and completeness of requirements
3 ensure a fair and open competition where the buying organization
does not have the opportunity to influence the bidding process
Disadvantages
1 the chance of being gazumped is high
2 the bid is not legally binding
3 prices can end up being inflated if you are then offered the chance to
raise your bid again
4 cumbersome process
Advantages of contracting by negotiation
1 client gets to choose favorite contractor
2 you avoid wasting a lot of time and money on a design you can not
afford
3 contractor’s cost and pricing are more transparent
Disadvantages of contracting by negotiation
1 design may be less creative
2 lack of competition may drive up cost
3 depends heavily on trust in contractor
Answer 2
1 Cost sharing contract
these contracts are appropriate when a new product will be developed
which the supplier may be to market elsewhere. This allows the supplier
to have all their costs paid while developing a new product. These might
be used when the supplier is not assured of a future market for the
product or the supplier is not sure how large the market will be. These

can be accepted by universities and NGOs
2 Firm fixed type contract
It is type of contract used for items purchased which are easily defined
and have established pricing. The buyer agrees to pay a fixed price for a
fixed quantity of goods. It provides the buyer with the most control of
any of those which will be discussed but may not always be the best
type to use.
3 Fixed price incentive contract
It should be used for purchasing any item which is difficult to define or
has never been produced in the past. It will protect the buyer from
contracting at a very high price to cover any and all of the supplier’s
areas of uncertainty.
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