A procurement manager is considering negotiating variable pricing for a contract duration of 12 months. Would this be the right thing to do?

A procurement manager is considering negotiating variable pricing for a contract duration of 12 months. Would this be the right thing to do?
A . No, because this will not enhance the buyer-supplier relationship
B . No, because it will prove difficult to budget for the duration of the contract and provide financial uncertainty
C . Yes, because this method of pricing will always provide value for money
D . Yes, because it will build relationships with the supplier and provide a stronger platform for the next contract renewal

View Answer

Answer: B

Explanation:

Variable pricing can lead to budgeting challenges and financial uncertainty over a 12-month period. While variable pricing may allow flexibility, it complicates financial planning and forecasting. For predictable budgeting and reduced financial risk, fixed pricing is typically preferred in such contract durations, aligning with CIPS recommendations on pricing models in contract management.