CONTRACT PURCHASING CASE STUDY

Purchase Agreements

Purchasing Services Co. (PSC) writes purchase agreements for clients. (These are contracts with suppliers for specified items with line item pricing and controls for a defined time period.)

Purchase agreements increase a company's buying power by combining requirements and promoting long-term relationships. In addition, they reduce administration costs by streamlining systems and allowing buyers to focus on contract issues.

Clients contact us because their internal purchasing organization does not have experience in this area or to alleviate workload.

1. We wrote a complete agreement system for a large client that included issuing agreement releases for multiple locations. This agreement also included pricing controls and specific negotiated contract terms.

This client had a special requirement because they were a contractor of the Commonwealth of Pennsylvania. All of their orders needed to include a specific nondiscrimination clause to comply with Pennsylvania requirements. We generated this clause to allow them to comply with this requirement, resolving any supplier issues/concerns along the way.

Using these agreements, we reduced their costs by over 20%. In addition, tracking of purchases was easier and delivery expenses were reduced. PSC issued the releases against the agreement until their staff was trained. This gave us the opportunity to resolve start-up problems with the suppliers before turning over the administration to the client. Additionally, PSC provided advice for the company's personnel who would be requesting material.

2. Another client had a problem with a buyer being overloaded with low value purchase requests. After discussions, we suggested writing an agreement, allowing the user department to directly release the material they needed while still interfacing with the balance of the company's systems.

We negotiated a contract with a plastic supplier for this purpose. Our client used this example agreement to negotiate similar agreements with other suppliers. By combining their requirements, they could identify buying patterns and negotiate reduced pricing from these suppliers with better control.