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CHAPTER 8
Development costs:
Supplier’s expenses in development of a design or a prototype to
help the buyer decide whether the product conforming to this would
meet his intended use. As part of a two-stage tendering procedure
these costs will not be reimbursed by the buyer.
Direct contracting:
Selection of a supplier without obtaining tenders/offers from
tenderers. Used for small purchase values or in case of extreme
urgency.
Discount:
Price deduction granted by the supplier to the buyer, usually when
certain stipulated conditions are met by the buyer such as prompt
payment, bulk order quantity, etc. Discounts are also granted by a
supplier on nominal list prices which may vary from one buyer to
another because of either order size, payment terms, relationship or
as an element of marketing strategy of the supplier. See also Cash
discount, Quantity discount, Concealed discount, List price, Price
discrimination and Trade discount.
Discrepancy report:
Report indicating that the delivered goods were unsatisfactory for
any reason or that the goods (their number, packages, etc.) did not
correspond with those indicated in various shipping documents.
e.g., the invoice.
Draft contract:
A contract specimen filled in and signed by the tenderer and
submitted to the buyer as part of his tender. See also Bid, Offer
and Tender.
Earnest money:
A sum of money given by one contracting party to another on
entering into the contract, to be forfeited by the giver if he fails to
carry out his obligations under the contract. See also Bond.
Economic analysis:
Economic evaluation of offers, particularly in case of capital
equipment of high value, where different tenderers may offer different
payment and/or financing terms with an impact on the total cost
of acquisition. Also refers to evaluation of when and how much to
buy, taking into account the level of inventories, the likely demand,
ordering and holding costs, as well as the present and the likely
international market situation.
Economic order
quantity:
That order quantity which gives lowest total variable costs, including
costs of both procurement and stock holding. See also Inventory
control.
Economies of scale:
A concept that, when procuring goods or services, examines
the effect of combining like requirements to increase the scale
of procurement, thereby providing greater leverage in achieving
maximum value for money when getting tenders/offers from
tenderers. See also Aggregation and Bulk buying.
GLOSSARY