PM598 Negotiation Exercise Week 7
PM598 Negotiation Exercise Week 7
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Date Created: 11/09/15
SCS 1 Safety Council Solutions Contract and Procurement Management February 19 2011 SCS 2 Safety Council Solutions Safety Council Solutions SCS was founded by three safety councils Contractors Safety Council of Texas City CSCTC Southwest Louisiana Safety Council SWLA and Industrial Safety Technology Council lSTC The three safety councils bought out a previous auditing company that was providing safety audits for the petrochemical industry The three safety councils saw a need for safety audits in the petrochemical industry and buying out the auditing company was an easy transition to records and database for the start of their new business The safety councils needed to negotiate the take over and begin their relationship with the petrochemical industry with this new type of service The safety councils historically only provided safety training for the petrochemical industry The safety councils were established to help support the petrochemical industry to meet federal requirements at a low cost British Petroleum BP was the first supporter of the new auditing service The auditing company would provide auditing of safety plans for the petrochemical s contractors that would be working on site Petrochemical industries were obligated as a Process Safety Management PSM site to ensure that anyone working on their sites were meeting the federal guidelines and local facility policies Contractors were required to provide their safety plans or manuals to the petrochemical industry The new auditing services was going to be put in place as a requirement in the preaward stage of the negotiations between the petrochemical industry and the contractor The requirement stated that the contractor needed to meet the federal guidelines and local facility policies based on their scope of work SCS 3 The safety councils decided to move forward with the new auditing service The new auditing service would be reciprocal with any of the three safety councils A database was created that would be used by all three safety councils The database would be utilized to keep required documents which could be viewed by any of the participating petrochemical facilities in each of the safety council s local area The negotiation of the safety councils included SWLA could provide the technical support for the database Both CSCTC and ISTC agreed to pay SWLA an annual cost of 5000 for its technology support CSCTC and ISTC also agreed to pay SWLA for half of the cost of one of their required documents CSCTC is the leading safety council of the auditing service CSCTC negotiated with its biggest supported BP to have them pay for the auditing services for up to 450 contractors as well as cover the cost of their Administrator fees BP agreed to pay CSCTC 80000 annually to cover the costs of two audits per contractor and admin fees The negotiation seemed to be a good agreement It was decided that SOS would be set up to not charge the contractors for audits and the only money that would come into the business would be the money provided by BP SCS quickly discovered that the 80000 provided by BP would not cover the costs for audits administrative fees office space and office supplies for the business SCS has been in business now for seven years and has been losing money every year This year BP decided that they would not be able to fund the 80000 to SCS but still wanted the contractors to be required to go through the auditing process SCS 4 prior to entering their site SCS was never set up as a business to make money from any other avenue except from their one supporter SCS is now in a position to go out of business CSCTC is the lead contributor to the SCS business and if the SOS business is dissolved then CSCTC would have to provide that particular service At this point CSCTC would put itself in a conflict of interest if they were to provide this service CSCTC is a not for profit organization and risking their nonprofit status to take on the auditing service would not be an option for CSCTC or any of the other safety councils As the Administrator of SCS the business can be restructured to make a profit without the funding from BP SCS would need to set up a contractor pay process The contractor pay would consist of each contractor paying for their own audit Most contractors must go through minimally two audits before completing the audit with all sections at 100 status Contractors would pay a set fee for their first audit a different and higher rate for their second audit and an even higher rate for their third audit This would cover the cost for administration fees and auditor fees The renegotiation would also need to include the annual technology fees paid to SWLA The technology support provided by SWLA does not support the annual cost of 5000 CSCTC needs to renegotiate the cost to cover the support as the services are rendered This would provide an incentive to SWLA in providing the support needed to maintain the database The contractor pay process would help bring incentives to the contractors to complete their audits in the first or second audit to keep their own costs down The contractor pay would supplement some of the costs but would also provide the safety councils the SCS 5 motivation to provide the auditing service to more than one petrochemical industry s contractors The database is designed to support thousands of contractors The negotiations between the safety councils for the SOS business was established before my role as an Administrator but my growing knowledge of this business has provided an insight for the safety councils that they never previously considered The contractor pay process was a suggestion that was first considered over a year ago The negotiations between the safety councils are still in progress but progress is being made The contractor pay process has already been decided and is in the process of implementation The logistics are also in progress and the role out of the contractor pay should be completed by the summer of 2012 If the negotiation with the establishment of SOS could have been rewritten the contractor pay process along with the petrochemical facility funding should have worked hand in hand This would have helped to ensure that there was always an inflow of funds no matter which side of the industry was providing the funding The balance would have provided better support for the SOS business to grow and gain support in the petrochemical industry and possibly in other industries as well
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