Cost Analysis and Negotiation Techniques - Business Development Report

This report provides an analysis of cost analysis and negotiation techniques, focusing on contract audits and negotiation strategies. It defines contract audits as buyer-initiated processes to reduce information asymmetry and highlights their application in markets with formal written contracts. The report also discusses the challenges companies face in government contracts, particularly regarding subcontractor accounting system compliance. Furthermore, it outlines the process for conducting contract negotiations, including contract preparation, negotiation meetings, and the importance of summarizing key points. The report references several academic sources to support its findings, offering valuable insights into the complexities of cost analysis and negotiation within a business context. This assignment is available on Desklib, a platform offering AI-powered study tools and resources for students.

Running head: COST ANALYSIS AND NEGOTIATION TECHNIQUES
Cost Analysis and Negotiation Techniques
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1COST ANALYSIS AND NEGOTIATION TECHNIQUES
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to question 3:.................................................................................................................3
Reference List:...........................................................................................................................4

2COST ANALYSIS AND NEGOTIATION TECHNIQUES
Answer to question 1:
A contract audit is referred as the buyer initiated audit of prices and other conditions
that targets to lower the information asymmetry amid the buyer and the seller.
Application of contract audits:
a. Contract audits are applied by the organizations that purchase through the formal
written contracts under the imperfect markets of the goods and services (Brown et al.,
2017).
b. Contract audits are often applied to determine the contract price and the profit mark-
up of the seller’s cost.
Use of contract audits:
a. Contract audits are useful in monopolistic and oligopolistic markets in the form of
government procurement.
b. Contract audit is useful in providing access to the confidential seller with the data of
the company such as price computations, breakdown of costs and underlying data.
c. The purchaser can buy more experienced auditors at the higher price and this provides
the contract auditors to decide on the amount of time which they intend to spend on
audit based on the amount they are paid (Hong et al., 2017).
Answer to question 2:
Companies generally faces numerous challenges while making an attempt to grow in
the market of government contract. To add to the challenging situation, several price
contractors are under the obligations of subcontractors to illustrate the compliance with the
accounting system benchmarks even though the subcontractors is not binding on the cost that
is reimbursable on the contract (Bonneau et al., 2016). A contractor estimate accounting

3COST ANALYSIS AND NEGOTIATION TECHNIQUES
system so that they could offer to execute the review of their subcontractor’s accounting
system. A large number of the subcontractors does not favour in allowing the prime
contractor to review their accounting system merely because the prime might be competitor
and this provides the access to the proprietary cost data which could be considered as
detrimental in winning the future work.
Answer to question 3:
The process for conducting contract negotiations are as follows;
a. Contract preparation: Contract preparation is considered as the important step in the
preparation of the contract negotiations. Primarily, the issues must be identified that
an individual want to negotiate. Secondly, the contract negotiator must possess a good
information regarding the each of the issue which they want to negotiate and
simultaneously classifying them according to the issues which is flexible.
b. Contract negotiation meeting: Under the contract negotiation meeting the negotiator
would sit down with the supplier to negotiate the contract (Nikoofal & Gumus 2014).
An individual’s outcome of negotiations is most likely to attain prior to the meeting
i.e. due to the stage of preparation. Under the contract negotiating meeting the
individual parties are required to be friendly but professional and prepare the agenda
of meeting by simply outlining the issue contained in the contract.
c. Summarizing of all points: This is third step under the contract negotiation process
where important points containing to contract is summarized. This step is regarded as
vital as the parties involved in this process is required to get the other party agreement
fall in place.

4COST ANALYSIS AND NEGOTIATION TECHNIQUES
Reference List:
Bonneau, J. (2016, February). EthIKS: Using Ethereum to audit a CONIKS key transparency
log. In International Conference on Financial Cryptography and Data Security (pp.
95-105). Springer Berlin Heidelberg.
Brown, J. C., Shaw, E. J., Morbey, H., & Pickup, R. W. (2017). Contract Researcher Audit
and Survey–Foundation Report.
Hong-jo, P., Choi, J. U., & Cheung, J. (2017). The Effect Of Auditor Change On Initial Audit
Fee Discount And Non-Audit Services. Journal of Applied Business Research, 33(1),
95.
Nikoofal, M. E., & Gumus, M. (2014). The value of audit in managing supplier’s process
improvement. Technical report, Working paper, McGill University, Montréal, Canada.