Relational Contraction: Rewards and Downsides

This essay will be looking at the importance of relational depth and further more I will attempt to demonstrate my growing awareness of my relationship with my clients and how it has impacted on my client work.

A social contract between two parties is used to make an agreement. They reflect societal expectations from businesses, especially in the social aspect. The social contract theories in business grasp that businesses are all trying to improve the status of societies. To achieve this, businesses are required to be aware of employees’ interests without having to break the rules of any society. Social contract theories in business come from the traditional models of a social contract.

Zakheim and Kadish explain two decades ago, there were more than twenty prime contractors competing for defense contracts while today the government relies on just six contractors to build its defense systems. Zakheim and Kadish state, “The system largely forgoes competition on price, delivery and performance and replaces it with a kind of “design bureau” competition”. The report explains that firms such as Boeing and Lockheed Martin have operated in collaboration on several projects such as the Air Force’s next generation bomber (Zakheim & Kadish, 2008). Collaboration of this nature suggests cooperative equilibrium between the firms to enhance their mutual payoff of outbidding competitors. With the defense market on the downturn pending major budget cuts over the next several years, more collaboration strategies are possible for firms to remain competitive. The existing procurement system encourages bargaining among the government and bidding firms. When budgets are allocated generously, demand is high and firms can set their prices higher. Budget cuts decrease demand and increase bargaining between buyer and seller. Security Industry reports budget deficits subject contracts to greater

* Why organisations have the agency agreement in place and how this benefits both organisations and the customer.

The Business and Partnership Unit is client liaison team for of all existing and new partnerships with an ambition to deliver efficiencies and improve services. To evidence transparency of the Councils partnerships by implementing an approved monitoring regime. To provide

Contract theory - studies how economic actors can and do construct contractual arrangements, generally in the presence of asymmetric information

Relational returns (recognition and status, employment security, challenging work, learning opportunities) increase efficiency and engagement of employees.

It is quite challenging to discuss about procurement management without stating the importance of its strategies. There are four main basic procurement strategies that serve different functions within a procurement management. To begin with, a “Partnership” strategy focuses mainly on constructing mutual commitment in long term relationship with suppliers. While a “Secure Supply” strategy aims to secure short and long term supply while reducing risk from suppliers. In addition, a “Category Management and E-Procurement solutions” serves as a tool to reduce logistic complexity, improve operational efficiency, and attempts to reduce the number of suppliers. Lastly, a “Competive Bidding” strategy emphasizes on obtaining the “Best Deal” for short term transactions with suppliers.(van weele) Each of these four strategies involves a unique purchasing methodology, which implies that the complexity is embedded in an individual strategic implication. Therefore, it requires different tools to accomplish the specific strategical characteristics. A business entity may need to support and execute procurement decisions with other strategic apparatus with analytical methods, including market analysis, uncertainty analysis, price forecasting, supplier relationship and along with others.(Harvard)

Synergy should be encouraged between the two departments, as they are working towards the same corporate goal. In order to update Dynamic’s supply management policy, the company should start to standardize their processes. For the newly awarded contract, we should standardize the process of finding a supplier and standardize testing used for supplier evaluation. By putting all suppliers against the same standards, you should be able to determine which supplier can achieve all your requirements. The supplier should be able to produce a product that meets our company’s standards. In the end, after improving these processes, we should award a long-term contract to whoever we determine to be the best supplier because it is a brand new contract. The longevity of the contract should be determined by the supplier’s performance. There are several benefits to standardizing our processes, such as uniform quality, reduced transaction and purchase costs, and improved inventory management. All these reductions and improvements can be redistributed through the company, enabling us to continually improve. This testing had been done for all suppliers, but the Engineering department decided to solely consider Advanced Wires only, which goes against strategic management policies.

An employment relationship describes the dynamic, interlocking economic, legal, social and psychological relations that exist between individuals and their work organizations. Palgrave Macmillan (2013), Glossary [online] Available at: < http://www.palgrave.com/business/brattonandgold/glossary/glossary.htm> [Accessed 17th September 2013]. Factors that impact on this relationship both have a detrimental effect to the running of a business. I will focus on two internal and two external. These being:

Global business environment has become more unstable, supplier negotiations have taken important new role on helping improve corporate competitiveness. The goal of most supplier negotiations today is no longer just to get the lowest price. It is also to find new and innovative ways to meet a wide variety of business challenges, often by tapping into the knowledge and expertise of the supplier community and a good relationship.

Secondly, the narrowing of the field of candidates is a significant disadvantage of turnkey contract. Some of the contracts end up cancelled the contract in turnkey form due to the narrow of the candidates to bid on it. This is because turnkey contract is an agreement that the developer or contract fully handle on it and giving full services which including the provision of land, obtaining planning permission, design, construction, equipment, customer services and etc. The number of contractor willing to bid on this type of project is much lesser compare to the customer provide this type of

A relational contract is a fairly traditional working partnership between the employee and employer. It can often include a relationship that includes affective involvement or attachment that can commit the employer to providing more than ‘purely remunerative support to the individual with investments such as training, personal and career development, and provision of job security’ (Millward & Brewerton 2000)

In many cases such cooperation could go even beyond the contract and provide creative inspirational environment. Although dominance by the buyer will force supplier to cooperate, it won't even be by its own will and the feeling of pressure is not what should be in trusting relationships. So I think it is possible to maintain both at the same time, but it will be rather strained than collaborative which is not recommended for long-term interaction.

QI-TECH, a Chinese manufacturer of precision Coordinate Measurement Machines, is a joint venture established by Indiver BV, a Dutch aircraft engine manufacturer and a Chinese state-owned enterprise QQMF. Looking for a strategic exit, Indiver BV, which holds 50% of QI-TECH, must negotiate a sale with its Chinese partner and a potential buyer, Brown & Sharpe. For this purpose Roger Kollbrunner, the Business Development Manager at Indivers BV, has to develop a viable deal structure and negotiation strategy.