The following is the Northern Michigan University Purchasing Department's glossary of terms. Click on the appropriate letter link to find the term you are seeking.
Acknowledgment: A communication (written or electronic) used to inform the buyer that the supplier has accepted the purchase order. An acknowledgment creates a bilateral contact, as long as the terms of the acknowledgment are not substantively different from those on the purchase order.
Award: Purchasing acceptance of a bid or proposal from a vendor resulting in a purchase order or contract to the vendor.
Back Order: Items ordered but not shipped due to a stock-out or some other reason. The vendor will ship these items at a later date.
Bid: A legally binding offer to sell or to buy. This document includes pricing and delivery information that is submitted to the Purchasing Department, usually in reply to a Request for Quotation (RFQ) or Request for Proposal (RFP).
Bidder: The vendor submitting the reply to an RFQ or RFP.
Bid Evaluation: An analysis of the responses to a RFQ to determine the vendor whose response meets the necessary criteria to be the successful supplier.
B2B: Business-to-Business commerce over the Internet.
B2C: Business-to-Consumer commerce over the Internet.
B2G: Business-to-Government commerce over the Internet.
Bond: A written instrument executed by a bidder or contractor (the principal) and a second party (the surety) to assure fulfillment of the principal's obligation to a third party. A performance bond normally is accompanied by a payment bond (particularly in a construction contract) and is provided after the submission of a bid bond. The performance bond secures the performance and fulfillment of all the undertakings, covenants, terms, conditions and agreements contained in the contract. A bid bond assures that the bidder will honor its obligations under the contract
Cash Discount: A discount designed to encourage prompt payment of an account by reducing the invoice price if payment is made within a stated time period. Those who do not pay within the specified time limit must pay the gross (undiscounted) price.
Change Order: A purchaser’s written authorization to the supplier to modify or change an existing purchase order.
Competitive Bidding: A common method of selecting sources for contract awards. Suppliers interested in participating in the process are asked to submit information on prices and other specified elements of performance. NMU requires competitive bidding on all items over $10,000, with the exception of construction projects where bidding is required over $20,000.
Confirming Order: A statement used to communicate to the vendor that this order has been phoned or faxed. A requestor needs to type this statement on a requisition when it has been called into a vendor to help ensure the order is not "duplicated."
Contract: A legally binding agreement between two or more competent parties that defines a job or service to be performed. Example: A purchase order.
Damage, concealed: Contents of a container are damaged while no damage is visible on the container.
Damage, visible: Container is damaged and is noted on the freight bill when the merchandise is offered for delivery.
Discount: A deduction from the normal price of an item(s) given by the vendor to the purchaser.
F.O.B.: A delivery term meaning "free on board" at a named placed. The named place is where merchandise title passes from the seller to the purchaser. Whoever holds title in transit is responsible for damages and losses and the filing of claims.
F.O.B. Destination: The most desirable for the purchaser. Under this shipping term the seller bears risk until the goods are transported to the buyer’s dock, after which the risk will pass to the buyer. The vendor is responsible for damages and losses and the filing of claims up to the time of delivery. A separate freight bill will be submitted for payment.
F.O.B. Destination, Freight Prepaid: Title of merchandise passes to the purchaser at the time of delivery and the supplier pays freight charges.
F.O.B. Destination, Freight Prepaid and Add: Title of merchandise passes to the purchaser at the time of delivery; however, transportation and freight chargers are prepaid by the vendor and added to the invoice. (The supplier pays the freight charges, owns the goods in transit, and files claims for overcharges, loss and damages. The purchaser ultimately bears the freight charges).
F.O.B. Origin: A shipping term under which the seller bears risk until it loads the goods onto an appropriate carrier, after which the buyer assumes the risk of loss and must claim against the carrier for damages or loss in transit. Title of the merchandise passes from the vendor to the purchaser at the moment of delivery to the freight carrier.
F.O.B. Origin, Freight Allowed: Purchaser obtains title where the shipment originates and is responsible for all claims against the carrier, but the supplier pays the freight charges.
F.O.B. Origin, Freight Prepaid: A delivery term that places liability with the purchaser once the freight leaves the dock, but the vendor is going to pay the shipping cost.
F.O.B. Origin, Freight Prepaid and Add: Title passes to the buyer at the point of origin; freight charges are paid by the supplier and then collected from the purchaser by adding them to the invoice. (The supplier pays the freight charges and files claims for overcharges. The purchaser bears the freight charges, owns the good in transit, and files claims for loss and damage with the carrier).
Net 30 – payment due net 30 days from invoice date.
Net 10 – payment due net 10 days from invoice date.
2%10/Net 30 – A 2% discount is applied if the invoice is paid within 10 days of invoice date. After 10 days, Net 30 applies.
Personal Services Contract: A contract with an independent contractor to provide services to Northern Michigan University when regular employees within the scope of their regular employment cannot provide those services.
Pre-Bid Conference or Walk-thru: A meeting held to provide clarification as needed before submission of an RFQ or RFP.
Proforma Invoice: An invoice showing the cost of the item that is written prior to receipt of ordered material. Commonly used for prepayments.
Proof of Cost: A proforma invoice, order form, etc., which includes the price to be paid and the address where payment is to be sent.
Purchase Order (PO): A purchasing document consummating a purchase which acts as a contract when accepted by the vendor and that states the terms and conditions of the desired purchase. NMU Purchasing is the only department authorized to distribute purchase orders.
Request for Information (RFI): A solicitation document used to obtain general information about products, services or suppliers. It is an information request usually used as a "brainstorming" tool for a particular situation and relies on the expertise of the vendors to supply needed information.
Request for Proposal (RFP): Vendors are asked to meet a need or set of needs. Unlike the request for information, criteria are more developed and specifications are given which the proposed system must meet or exceed. Most, but not all, of the proposals will spell out the equipment, labor, or services needed to complete the project.
Request for Quotation (RFQ): A solicitation document used to obtain price and delivery offers for a specified product or service. Products needed are for exact quantities and are specified by make and model number, batch number, industry specification, etc. Substitutions are permitted but unlikely to be accepted at this point.
Requisition: A request to purchasing for the procurement of goods or services for suppliers. Requisitions should be used internally only and are not to be sent to vendors. NMU’s purchasing department is the only authorized group to approve a requisition.
Requisitioner: The person who initiates a Purchase Requisition.
Sealed Bid: A bid that is submitted in a sealed envelope in accordance with instructions stated in the RFQ or RFP. There is a date and time deadline for submission, envelopes are date and time stamped upon receipt and not opened until the bid opening date and time.
Scope of Work: A document used in contract administration that describes the nature and extent of the work to be performed and outlines the conditions under which the work is to be performed.
Sole Source: The only known vendor able to supply an item due to requirements, market conditions, or proprietary situations.
Specifications: A description of what the purchaser seeks to buy and consequently what the bidder must be responsive to in order to be considered for award of a contract. A specification may be a description of the physical or functional characteristics, or the nature of, a supply or service. It may include a description of any requirements of inspecting, testing or preparing a supply or service item for delivery.
Standardization: The process of examining characteristics and needs for items of similar end usage, and developing a single specification that will satisfy the need for most or all purchasing for that purpose.