# Adding New Terms and Cost Components in Price Breakdown Events

Objectives

After completing this lesson, you will be able to:

• Add New Terms and Cost Components in Price Breakdown Events

## Price Breakdown Key Characteristics

### What is Price Breakdown?

An event using Price Breakdown collects a value for the cost components of a good or service to itemize total cost values.

### Price Breakdown Event Key Attributes

• Suppliers bid on cost components of an item, rather than the item itself​
• Terms must be included in formula (include in cost field)
• System uses formulas to add all cost components to show the price for that item
• Cost Terms usually visible to the supplier in Total Cost

### When to use Price Breakdown

Price Breakdown helps to see how a supplier arrived at their prices, and prices can be compared more critically to help decide if the price is reasonable.

For example, computers. Rather than having a line item to collect a price for the computer, you may want to collect prices on the components of a computer. You may want to know how much one supplier charges for monitors versus a different supplier. This could explain the difference between supplier prices you wouldn’t be able to collect without a Price Breakdown type of event. Supplier A may have a price of \$1,000.00 while Supplier B has a price of \$1,500.00. By using a Price Breakdown event, you would be able to see where that additional \$500 is coming from for Supplier B.

## Bid Transformation Key Characteristics

### What is Bid Transformation?

Bid Transformationauctions are used to collect additional cost components to more accurately compare awarding one vendor over another. Bid Transformation allows project owners to transform suppliers’ bids by adding cost terms and values to compare bids more accurately.

### Bid Transformation Event Key Attributes

• Bid Transformation is enabled by a Bidding Rule
• Project owners transform suppliers’ bids by adding cost terms and values to compare bids more accurately
• The terms can be different for each supplier
• Each supplier sees "a bid to beat" that is adjusted based on how their own bid is being transformed

### When to use Bid Transformation

Bid transformation allows Project Owners to transform a participant’s bid by adding cost terms you define, and can be unique for each supplier, such as adding an import duty for one supplier and a switching cost for another. Yet, it enables each bidder to see a "bid to beat" that is adjusted for them and brings suppliers into competition with one another and creates a unified market where none existed before.

For example, companies will likely invite a mix of your incumbent suppliers as well as new suppliers to an event, and may want to consider using a Bid Transformation event to add a switching cost to new vendors. This will allow Project Owners to more accurately compare a bid from the incumbent with a bid from a new supplier, without informing the supplier about the cost factor. These types of events serve to allow the buyer to include various costs and charges for different suppliers using Participant Specific Initial values.

### How are Total Cost and Bid Transformation Different?

Total CostBid Transformation
Suppliers bid on price and cost components.Suppliers bid only one price for each item.
Cost components are the same for all suppliers.Cost components can vary for each supplier.
Cost components are visible and bid on by suppliers.Cost components are not usually visible to the supplier.
The suppliers submit values for cost components as part of their bids.The project owner sets values of the cost components for each supplier.
All suppliers see the same Bid to Beat, Bid Decrement and Ceiling Price.Suppliers may have unique values for Bid to Beat, Bid Decrement and Ceiling Price.