Case 1-3: Southeastern University
Situation:
* Heather Sloman is a buyer in the purchasing department for Southeastern University * Walter bought a $14,000 piece of equipment without following standard university purchasing policies * Purchasing is centralized and responsible for negotiating with suppliers, signing contracts with suppliers, and supervising the execution of contracts * Supplier is not on the approved supplier list and quotes from three approved suppliers are less than the one Walter chose or involve better service * $75 million spend

Basic Issues

1. Acceptable suppliers
2. Price, quality, service
3. Budgeting
4. Authority for internal users/following purchasing policies
5. Purchasing for a public institution/service organization

Tasks: * Define alternatives * Keep the machine and pay for the supplier. * Return the equipment and negotiate the cancellation penalty * Go back to the supplier and use the quotations to negotiate a lower price * Improve the purchasing process to avoid unauthorized purchases * Obtain information from unapproved supplier via RFQ

Actions: * Evaluate unapproved supplier with RFQ * Accept the supplier * Acquire purchase information * Decide whether to add supplier to list of approved suppliers * Reject the supplier * Return the equipment * Negotiate the cancellation penalty. * Consider quotes from Heather’s three approved suppliers and determine which one to select * Keep the equipment and negotiate the price and service * Compare with other quotations to negotiate decrease in price * Decide whether to add supplier to list of approved suppliers * Purchasing Department should issue an adjusted purchasing process with violation penalty.

Results: * Accept the supplier * Use RFQ form to obtain information about the supplier and its goods * Accept as a new supplier * If terms appear reasonable, add to approved supplier list * Reject the supplier * Return the equipment * Negotiate cancelation penalty * Choose another supplier from the other three quotations * Renegotiate contract with original supplier * Use RFQ form to obtain information about the supplier and its goods * Use three quotations to negotiate a lower price for accepted goods * Negotiate service contract * If terms appear reasonable, add to approved supplier list

Priorities

1. All purchasing should follow the adjusted purchasing process. a. Avoid unauthorized purchase b. Consider instituting a penalty program in which individual departments pay 20% of purchase price for contracts negotiated outside of purchasing policies 2. Accept this supplier and negotiate the price and the service. 3. Not accept the supplier and negotiate the cancellation penalty.

Best Conclusion

We recommend accepting the supplier and keeping the equipment. We assumed the cancelation penalty would be very high and there is too much risk to cancel the equipment. As the price was already agreed upon by a representative of Southeastern University, we feel that attempting to renegotiate would taint the university’s reputation of treating its suppliers fairly and word would reach approved suppliers, who might be less inclined to work with the university. Should the new supplier be deemed acceptable to be added to the approved supplier list, this first contact with them would dampen further relations between the two entities. We also recommend enforcing an adjusted purchasing process so that the school can prevent the situation happened again. This would involve some sort of penalty for departments negotiating purchases outside the purview of the purchasing department.