Dictionary of Procurement Terms

1. A supplier’s right to compel a purchaser to buy at a particular price and time. 2. On option granted to the supplier to make delivery within a specified, limited period.

A component to take into consideration when conducting a “make or buy” analysis and deciding whether a service should be done in-house or outsourced if the costs are almost equal. A sensitivity analysis can be performed to determine the consideration of the costs relative to the assumptions. This additional information and any intangible factors could influence the final make or buy decision.

A unit-by-unit approach to sampling in which the sample units are selected one at a time. After each unit is inspected, the decision is made to accept, reject, or continue inspection until the acceptance or rejection criteria are met.

The provision by the procurement department of any services common to departments throughout the entity, thereby relieving those departments of the need to perform those activities. See also: Line Function, Staff Function.

An agreement between a buyer and a seller or between departments within an entity that defines the level and quality of service that is to be provided.

1. An agreement calling for a contractor’s time and effort. 2. The furnishing of labor, time, or effort by a contractor or supplier, which may involve to a lesser degree, the delivery or supply of products.

A procurement exclusively or partially reserved for the participation of small or minority business concerns or a special class of contractors. See also: Goals, Contract Goals.

An agreement between two parties to balance one debt against another or a loss against a gain. May be used in construction contracting to minimize the cost of change orders or other unanticipated costs.

The cost incurred to change machine tooling or to change the production line to produce a different item or product.

A pre-trial conference conducted by a settlement judge or referee and attended by representatives of the opposing parties to reach a mutually acceptable settlement of the matter in dispute.