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Mo Casas
Mo Casas
Modesto Casas, has 28 years of worldwide market successes. He is multi-lingual and multi-cultural having lived in six countries. Mo has taken several start-ups to international regions and developed them into compelling local enterprises. His company, In Region, takes high technology companies … More »

The Contingent Purchase Order can play an important role in the negotiation

 
December 20th, 2010 by Mo Casas

An EDA buyer may need a product to be modified in order to fit a particular need. The EDA vendor is concerned with spending resources towards customization without a commitment. Impasse?

No! This is the perfect place to put the Contingent Purchase Order in play. The Contingent PO guarantees that if certain items are delivered, an invoice will be paid. It lays out a clear set of objectives to be met and focuses the buyer and the seller on solutions and deliverables.

Why would you want one?

The buyer’s uncertainty is often a reason for decision delays, which are detrimental to both parties. The vendor does not receive the revenue and the user waits for the tool’s benefits. The Contingent PO can break this cycle. The vendor commits to deliver to a well defined set of objectives in order to be paid. This reduces the buyer’s anxiety when purchasing a customized product or dealing with a new vendor.

A buyer who requires modifications to a product is an excellent candidate for the Contingent PO, which can be used to reaffirm the buyer’s commitment and budget availability. It gives the seller good visibility of the purchasing process and access to the people who control the budget. It commits the buyer to pay only if the seller delivers to their needs.

A well written Contingent PO forces both sides to write down a clear set of objectives and delivering against them. It encourages both parties to define and work together to solve a common problem.

Writing a good Contingent Purchase Order is important

A Contingent PO is not a hand-shake agreement. It is an actual purchase order. Like any other order, it is a buying document stating product, price, payment terms and delivery dates. It is different in that it includes a list of conditions to be met before payment can take place.

Contingencies must be clearly written to enable both sides to check-off completion without question. Anyone familiar with SMART goals can write a good set of contingencies for a purchase order. Each contingency must by specific, measurable, achievable, relevant and time bound. A very good refresher on writing SMART objectives can be found in George Ambler’s blog on the subject http://www.thepracticeofleadership.net/2006/10/15/10-steps-to-setting-smart-objectives/

The Contingent PO gets a bad rap with some who see it as business not properly closed, or an incomplete evaluation. In fact, when it is the only way to verify that a set of custom needs can be met, the Contingent PO is an excellent way to reduce the risk to both sides.

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