Perspectives on costs, pricing and payment (for Contract Parties).

The customer's starting point is their business case; a requirement has been identified, with needed business benefits, and initial approval obtained for the project, The customer must now gain a realistic understanding of the likely cost of the project and the associated risks.

Some useful tools and techniques for customers to evaluate costs include Monte Carlo simulation (to create cost scenarios with different cash flows) and the Balanced Scorecard (to link business objectives and desired outcomes from the investment in the project to future performance).

Many factors affect a supplier's pricing of products or services. Regardless of location the primary factors in any pricing decision are basically the same factors. These are Customer's willing, charges, costs of sale, options of pricing and charging of the products, gov. price controls and etc.

Every contract pricing and payment type has risks and rewards and should bey matched with a suitable requirement. Discussions about price should never be divorced from wider considerations of contract terms because they are interdependent. To establish the supplier's contract baseline, and to establish the final price, the supplier must come up with an accurate and reasonable cost estimate. Poor estimated and scheduling are two of the biggest causes of project failures.

When companies sell goods or services to customers, one of the most critical aspects of the sale is analyzing the customer's ability and willingness to pay for the goods or the services. There are may arise some risks like that customer insolvency, debt rescheduling, political instability, war and etc. Along the contract negotiations, Both Sides have to perform analysis of the credit and finance, country risk, bank negotiations, open account collection, third party or parent guarantee, standby letter of credit or surety bond negotiations and etc.

Cost, price and payment analysis cannot be done in isolation from risk analysis.

Suppliers and Buyers always have concerns about a ability to both to payment and to the delivering and Parties insures these concerns by the structuring payment methods and other terms of contract.

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