Dictionary of Procurement Terms

A business expense such as raw materials, utilities, or payment to hourly employees that changes in proportion to the level of output.

A pricing strategy in which a supplier is willing to sell a good or service to a buyer at a lower profit margin or even at a loss in the hope that the buyer will purchase other goods or services at a higher profit margin for the seller.

The minimization and control of new materials, parts, equipment, procedures, and methods used to produce a good or service through standardization, simplification, and specialization.

A seller of goods or services whereby the exchange is solely transactional. “Supplier” is the preferred term when a longer-term or strategic relationship is involved. See also: Supplier.

A form completed by the using agency to document unacceptable vendor performance.

An agreement that is oral and not in writing. Usually enforceable if under $500.