What is a contract proposal?

A typical contract proposal will include several important types of information.

Contract proposals are documents prepared by a supplier or supplier in hopes of securing business for a specific customer. In many cases, these proposals are prepared in response to a potential customer inquiry. The ultimate objective of any proposed contract is to establish a contractual relationship between the supplier and the customer that will last for an extended period of time.

Sometimes companies of all sizes use their purchasing power to secure special rates from different vendors or vendors. While large corporations routinely use this approach, smaller companies sometimes join cooperatives or consortia in order to combine their purchasing power to obtain better rates. In either scenario, it is not uncommon for the company to issue what is known as an RFP, or Request for Proposal, to a selected number of potential suppliers. The supplier that responds with a contract proposal that provides the most general benefit to the customer will usually protect the business and hopefully establish what is a long-term relationship between the two.

A typical contract proposal will include several important types of information. First, the document will provide the prices, based on the customer’s needs. It is not uncommon for the price to be lower than the published standard price provided to customers who do not have the same level of purchasing power. Many vendors and sellers also include what is known as a tier price, which is simply a price list that provides the customer with additional discounts if consumption of their product in a certain period of time exceeds a certain amount.

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A suitable contract proposal will also detail the range of support the supplier will provide to the customer. This may include items such as order processing procedures, guarantees on timely delivery of goods or services, and procedures for processing returns. Along with pricing, addressing the scope of services can often make a big difference in the success or otherwise of trying to secure the business.

The duration of the contract proposal is also important. Identifying a specific start and end date allows the customer to understand how long the commitment will be in effect. Including situations that may allow each party to void the contract also helps protect the seller’s and supplier’s rights and responsibilities. Many contract proposal formats also include clauses that make it possible to automatically extend the contract if both parties agree to this option.

There is no one right way to prepare a contract proposal. The final format largely depends on determining what is likely to attract the customer and win the business. While using an RFP as a roadmap for preparing the proposal is always the best option, situations where no guidance for the proposal is provided makes it necessary for vendors to investigate the nature and needs of the customer in detail. Ideally, the research will allow the supplier to design and present a contract proposal that resonates with the customer and allows for the establishment of a long-term relationship that is mutually beneficial.

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