The Basics of Good Purchasing Contracts

If you are a professional purchasing agent, you know what you need and how to get it. You may be a great educator but that doesn’t necessarily mean that you are good in business, which can create problems.

What goes into creating a good RFP? Avoid vague language, outrageous budgets and impossible timelines. How can your school avoid these pitfalls and make the paper pushing and number crunching a bit easier?

First, don’t create inconsistent RFPs fraught with errors. Considering the amount of hours companies put into responding to RFPs, it only seems fair to put out a clear, consistent document.

When putting out a RFP for furnishings, the more specific the better. Materials, design specs, colors, quantities, warranties, delivery dates and installation need to be included. These factors affect the price, so the more information you provide, the better and more accurate the quote will be.

To be as clear as possible, the best RFPs include a brief description of specifications and a few manufacturers’ model numbers of products that fit the job’s needs. This lets companies know exactly what you are looking for and levels the bidding field. While it is great for a manufacturer to be named in the RFP, it doesn’t mean that said company will automatically get the business.

How does a school determne the quaity of products? Don’t rely on a picture in the catalog, ask the manufacturers or distributors to supply samples so you can compare products side by side.

Penalty clauses represent an expected part of any contract. When laying them out, it’s best to think each detail through. For instances, sometimes furniture will come early. This could be a problem if the goods are for a facility that isn’t built yet. Not every school has a place to store a truckload of desks.

Early delivery is just one example of non-performance that might be covered by a penalty clause. Schools can take a flat fee or percentages from the budget to cover these problems. The penalty must be high enough for the bidder to take it seriously.

Hammering out penalty clauses, warranties and liability often sets off a dance knows as the “battle of the forms.” This is where vendor terms conflict with purchasing terms and each is trying to incorporate their conditions by being the last form sent. This “last shot rule” is generally accepted in courts. It is best to take a proactive stance by making terms readily available and by pre-signing agreements.

Budget, of course, remains a compelling factor in any RFP or contract. Multiyear deals, however, don’t always have a clear bottom time, and asking for a fixed price over a span of time can create conflict becasue costs go up and down over time.

Allowing a price escalator that is tied to a nationally published price index is one fair option. The best contract develops relationships beneficial to both parties.

Those relationships often grow into better deals down the line. Many states allow schools to award contracts to multiple manufacturers. It is known as a “hunting license” in the trade because it lets schools pick the cheapest deal, but it doesn’t always foster good business relationships.

Remember, price does not represent the bottom line in awarding contracts. The lowest bid is not always the right choice. You need to purchase the right product, delivered at the right time in the right quality.

This article originally appeared in the issue of .

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