Suitable for long-term projects

allow for changes based on conditions (such as inflation rates), Change the contract price according to the pre-agreed price adjustment method

On the basis of the total price, the corresponding incentive fee is stipulated, To mobilize the enthusiasm of sellers and make the goals of buyers and sellers consistent

Contracts are elements: target cost, target profit, cost sharing ratio, maximum price

Usually a price cap is set and the seller must complete the work and be responsible All costs above the cap

The scope of work is fixed and the contract price is fully fixed

Scope changes often result in contract price changes

Most buyers prefer, minimal buyer risk

An upfront payment is made to the seller when the seller reaches specified performance targets. Determined incentive fee. This solution is the most cost-effective

Total contract price = actual cost, target incentive fee, sharing ratio

Total Contract Price = Actual Cost Initial Estimated Cost * Percent

Pay a fixed fee to the seller. Does not change due to seller’s performance

Incentive fees are paid to the seller only if certain subjective performance standards are met.

Incentive fees are determined entirely by the buyer based on his or her subjective judgment of the seller’s performance. and usually no appeals are allowed

Select only specific sellers

Make choices based on fixed costs

Suitable for purchases of small value and not worth the effort

Suitable for standardized or routine procurement

Includes: product cost, delivery date; technical expertise and methods, Specific relevant experience; Qualifications, availability and competencies of key employees; Financial stability of the company; management experience

Statement of work detailing required product attributes and measurements required

Score each bid according to relevant evaluation criteria

Compare the potential seller's price with the buyer's pre-prepared bid and score the difference.

Gradually eliminate sellers who do not meet the standards until the last one is left

Techniques for Evaluating Proposals