Scenario:

You have just been named the purchasing and supply manager for a large West Coast city. One of the larger departments, Environmental Services (ES), has requested approval for a contract extension to an existing supply contract with Composite Specialties, Inc. (CSI) for composite bins. The annual spend has been close to the $40,000 estimated for the first two years of the contract (the initial contract term). The bins are priced at $37 each, which are delivered price to the ES warehouse.

The contract has provisions that allow for additional one-year extensions not to exceed five years in total. Such extensions will be handled through written amendment issued by the city and signed by both parties. The contract called for pricing to remain firm for the initial contract term, and then consideration would be given to price adjustments during renewal. The contract states, "All modifications to the contract price must be submitted at least 60 days prior to the contract termination date, and include documentation justifying any cost increases. "Additionally, it states that "all price increases must be approved by the city and may not exceed the consumer price index for the most current year." The local CPI for the region is 2.5 percent.

The program manager for ES has asked that the extension be processed as a rush, as the supply is getting very low for the bins. The contract expiration date is only a couple of weeks off, and the manager knows it takes a while to get things approved through the organization. The supplier has done a good job at supplying the city's needs and has gone above and beyond the call of duty, according to the program manager. The supplier is requesting a price increase to $39 per bin, which apparently is within the market range. The letter requesting the price increase says it is due to "increased labor and material costs, as well as the rising cost of fuel."

Given the above scenario, answer the following questions and (your answer should be at least 100 words in length for each question). Thank you.

1. What is the first step you take as purchasing manager? Do you talk with the program manager, supplier, or somebody else first? Please explain your rationale.

2. Would you allow the price increase? Why or Why not? What factors would you consider, and who would you consult with to make this decision?

3. Would you request additional information from the supplier? If so, what specifically would your request be and why?

4. How do you go about handling this situation so you can ensure a good deal for the city, as well as maintaining good relations with this department?

5. What are the lessons to be learned from this situation? Would it impact how you might craft a future bid or RFP for this commodity? Is there anything you would do differently in the future?

Give detail answers with details explanation and details calculation also includes conclusion.....