Contracts in procurement management

During the procurement phase, the first thing that should come into mind is to either make or buy. If we can produce in-house, it's always cost and time effective and there is no dependency and risks with the associated vendor.

The buyer is the person who is purchasing the product, goods, and services from the vendor and suppliers.          

So, what are the criteria if we are giving a work order (contract) outside the premises?

Just I informed XYZ vendor on the phone to make 100 microphones and he started manufacturing, is it possible to attain...... No.........Not at all, need to look for inventory, need small advance payments to buy tools and tackles, necessary government approvals, etc...............

If buyers want to take some services or products from the vendor, we prepare the legal document which is abided by both parties involved till the work completion and after the objectives are attained, we close the contract. so is there only one type of contract that is enough for all procurement needs ..................

The answer will be no, let us understand the below few types of contracts.

1. Fixed price contract - simply when the scope is fixed and crystal clear as the organization has already done similar projects in the past we go for this contract without any doubt. The seller is taking the risk for on-time delivery within a fixed price, but the buyer is happy with the fixed price and has less liability.
2. Time and material - Used when the scope is not defined and for a shorter period, the Buyer and seller agree to the fixed rate but there is no precise statement of work. e.g. for new staff deputation, any subject matter expertise work, and other support work.
3. Cost-reimbursable contract- for this contract, we pay the seller based on the actual cost incurred by him after submission of bills + fee to the seller as his profit margin for competing that service or product. We generally adopt this contract when the scope is not defined and excepted to frequent changes in the scope.

Thanks /Deepak