Next our team estimates that it will cost 02 million

Next, our team estimates that it will cost $0.2 million to implement
the sourcing strategy as follows:
$0.11 million in exit fees; and
$0.09 million for new stationery.
Finally, we subtract the amount of investment ($0.2 million) from the
estimated TCO ($2.22 million), we get a net TCO savings of $2.02
million.
The following example shows how we might calculate TCO savings for
wireless services.
2.2.3 Phase II —Strategy Implementation
Having developed the commodity sourcing strategy, it will be important to
prepare for its implementation with a detailed acquisition strategy. This is a
four-step process. The last two steps are conducted in the same manner as a
typical acquisition. Therefore, this lesson addresses the first two steps.
1. Develop the commodity acquisition strategy, in which we define how we
will solicit, evaluate, and select suppliers.
2. Develop the implementation/transition plan, in which we define the
changes required in terms of people, process, technology, and policy.
3. Prepare and issue the solicitation through an RFP or other appropriate
solicitation method.
4. Evaluate, negotiate, and award the contract.
2.2.3.1 Develop the Acquisition Strategy
The commodity acquisition strategy defines how we want to structure the
relationship with suppliers and approach the market to solicit offers. In cases
where the acquisition scope is relatively narrow, a single acquisition strategy
may be all you need. However, a broader acquisition scope or more complex
CON 200: BUSINESS DECISIONS FOR CONTRACTING
2-18
© Management Concepts. See inside front cover for additional information.

sourcing strategies may require multiple acquisition strategies, each with its
own scope and timing.
In addition to the acquisition planning requirements in FAR Part 7, we also
want to address four key questions in the commodity acquisition strategy:
1. What kind of supplier relationship do we want to establish? The
commodity strategy drives the nature of the supplier relationship. Supplier
relationships fall along a continuum ranging from a purely transactional
relationship to a fully integrated strategic partnership — and all
combinations in between.
2. What type of contract is best suited to this type of relationship? In
selecting a contract type, FAR Part 16 provides a number of different
options from which to choose, each with its own cost, risk, and supplier
relationship implications. FAR 16.104 states that the contracting officer
should consider the following factors:
price competition, price analysis, and/or cost analysis;
type and complexity of the requirement;
combining contract types;
urgency of the requirement;
period of performance;
contractor’s technical capability and financial responsibility;
adequacy of the contractor’s accounting system;
concurrent contracts;
extent and nature of proposed subcontracting; and
acquisition history.