Purchasing Economics, Negotiation and Contract Management

Introduction

Purchasing is not merely the administrative act of placing orders. It is an economic, commercial and governance activity through which an organisation converts requirements into assured value. A purchasing decision determines not only the price paid, but also quality, delivery reliability, working capital, operational continuity, legal exposure, sustainability performance and the total cost of ownership.

In modern materials management, the purchasing professional must therefore integrate three forms of judgement. First, economic judgement is required to understand cost structures, market conditions and value. Second, negotiation judgement is required to reconcile the interests of buyers and suppliers while preserving long-term relationships. Third, contractual judgement is required to convert commercial agreements into enforceable obligations, measurable performance standards and effective remedies.

This chapter develops these capabilities. It explains price and cost analysis, value analysis, pricing mechanisms, negotiation strategy, Incoterms, purchase orders, warranties, service levels, claims, contract risk and dispute resolution. The emphasis is on postgraduate-level application: analysing alternatives, identifying assumptions, balancing risk and designing commercially robust outcomes.

Learning Objectives

By the end of this chapter, the learner should be able to:

1. Distinguish price, cost, value and total cost of ownership.
2. Conduct price, cost and value analysis using appropriate quantitative and qualitative evidence.
3. Select suitable pricing mechanisms and understand their risk allocation.
4. Prepare and execute an ethical, evidence-based negotiation strategy.
5. Interpret Incoterms® rules and allocate logistics responsibilities appropriately.
6. Design and administer purchase orders and contracts.
7. Specify warranties, service levels, claims procedures and remedies.
8. Identify contractual risks and select proportionate controls.
9. Evaluate dispute-resolution mechanisms and contract-governance practices.

1. Purchasing Economics: From Price to Value

1.1 Price, cost and value

Price is the amount paid to a supplier under a transaction. Cost is the economic sacrifice incurred by the buyer, supplier or supply chain. Value is the relationship between the benefits obtained and the resources committed to obtain them.

A low quoted price may create a high economic cost if it produces frequent defects, emergency freight, production stoppages or premature replacement. Conversely, a higher purchase price may be economically justified when it provides longer life, lower energy consumption, superior safety or greater availability.

A useful decision concept is total cost of ownership (TCO):

Where:

• P = purchase price;
• C_log = logistics and import cost;
• C_ins = inspection and receiving cost;
• C_qual = quality and failure cost;
• C_hold = inventory holding cost;
• C_oper = operating cost;
• C_maint = maintenance and support cost;
• C_dis = disposal cost; and
• V_res = residual or recovery value.

All terms should be expressed in the same currency and over the same evaluation period. The formula is a managerial model rather than an accounting standard. It is applicable when the buyer can estimate relevant life-cycle cash flows and non-price effects. Double counting must be avoided; for example, a warranty recovery should not be included both as a reduction in failure cost and as a separate benefit unless the two effects are genuinely distinct.

For alternatives with different timing of cash flows, present value analysis is more appropriate:

Here, CF_t is the net cash flow in period t, r is the periodic discount rate, and n is the number of periods. The method assumes that cash flows, timing and a defensible discount rate can be estimated. The discount rate must be consistent with whether cash flows are nominal or real and pre-tax or post-tax.

1.2 Cost structure and cost-driver analysis

A supplier’s price normally reflects material, labour, manufacturing overhead, tooling, packaging, logistics, financing, warranty provision, profit and risk. The purchaser should not assume that every quoted price can be reconstructed precisely. Instead, cost analysis should focus on material cost drivers and their sensitivity.

A simplified unit-cost model is:

Where C_u is unit cost, M direct material, L direct labour, O variable and allocated overhead, F freight and other fulfilment cost, Q quality-related cost, and R risk and profit allowance. The model is useful for analysis, benchmarking and negotiation preparation, but it is not a substitute for a supplier’s audited cost data.

Important cost drivers include:

• commodity prices and foreign exchange;
• labour rates and productivity;
• batch size and capacity utilisation;
• tooling and engineering-change requirements;
• energy intensity;
• transport distance and mode;
• regulatory and testing requirements;
• payment terms and financing cost; and
• supplier-specific risk premiums.

The buyer should distinguish should-cost analysis, which estimates what a product ought to cost under reasonable assumptions, from open-book costing, in which the supplier discloses actual or budgeted cost elements. Should-cost analysis can be used without demanding confidential supplier information; open-book arrangements require clear confidentiality, audit and permitted-use provisions.

1.3 Price analysis and benchmarking

Price analysis evaluates the reasonableness of a price without necessarily examining the supplier’s internal cost structure. Techniques include:

1. comparison with competitive quotations;
2. comparison with historical prices, adjusted for relevant changes;
3. market-index benchmarking;
4. comparison with published catalogues or databases;
5. comparison with similar products after normalising specifications; and
6. analysis of quantity, payment, delivery and warranty differences.

A comparison is meaningful only when the basis is comparable. A delivered price under DDP cannot be directly compared with an ex works price unless freight, insurance, import clearance and duties are adjusted. Similarly, a five-year warranty and high service level may explain a higher price.

A useful percentage-variance measure is:

The result is dimensionless. It should be accompanied by an explanation of the reference price, date, currency, volume and specification.

1.4 Value analysis and value engineering

Value analysis examines an existing product or process to eliminate unnecessary cost while preserving required function. Value engineering applies the same logic during design or development, before the cost structure is fixed.

A conventional expression is:

This is a conceptual ratio, not a universal financial metric. Function must be defined in terms meaningful to the user, while cost must be measured on a consistent basis. Increasing value may involve improving function at constant cost, maintaining function while reducing cost, or reducing life-cycle cost without impairing essential performance.

The process normally involves:

1. identifying required and secondary functions;
2. determining the cost of each function;
3. generating alternative materials, designs, processes or suppliers;
4. evaluating technical, commercial and risk consequences; and
5. implementing and validating the selected alternative.

A critical control is the distinction between essential requirements and historically inherited specifications. Removing an unnecessary tolerance may reduce cost; removing a safety-critical characteristic may create unacceptable risk.

Worked Example: TCO comparison

A buyer is comparing two pumps for a five-year period. Pump A costs $42,000, freight and installation are $3,000, expected maintenance is $12,000, energy cost is $38,000 and expected failure cost is $6,000. Pump B costs $47,000, freight and installation are $3,500, maintenance is $8,000, energy cost is $29,000 and expected failure cost is $2,000. Disposal values are negligible.

Although Pump B has a purchase price $5,000 higher, its estimated TCO is $11,500 lower. The decision remains conditional on the reliability and energy assumptions. Sensitivity analysis should test what happens if energy prices, utilisation or failure rates differ from the estimates.

2. Pricing Mechanisms and Commercial Economics

The pricing mechanism determines how changes in cost, volume, time and risk affect the price paid. It should be selected according to specification maturity, market uncertainty, measurability of cost and the buyer’s ability to manage change.

An escalation formula should identify the base date, index, weights, source, publication delay, currency treatment and exceptional events. For example:

The weights w_M, w_L, w_F and w_R represent material, labour, freight and residual components. Their sum should equal 1. P₀ is the base price, P_t the adjusted price, and I values are agreed indices. The formula is applicable only when the indices reasonably represent the cost drivers and the contract defines how negative movements, discontinued indices and extraordinary changes are treated.

A common governance failure is to permit upward adjustment but not downward adjustment. A balanced formula should normally operate symmetrically unless a transparent policy justifies otherwise.

3. Negotiation Strategy

3.1 Negotiation as structured problem solving

Negotiation is a process through which parties seek agreement despite partially conflicting interests. A professional negotiation is not simply distributive bargaining over price. It may create value through volume commitments, delivery flexibility, payment terms, standardisation, technical cooperation, warranty scope and information sharing.

The interests of the parties should be separated from their stated positions. A supplier may demand a price increase because of a labour-index movement, but its underlying interest may be protection against margin erosion. The buyer may seek a lower price because of a budget limit, but the underlying interest may be cash-flow stability. Understanding interests allows more options to be developed.

3.2 Preparation framework

Before negotiation, the buyer should document:

• objectives and minimum acceptable outcomes;
• the best alternative to a negotiated agreement (BATNA);
• reservation point or walk-away limit;
• supplier’s likely interests and constraints;
• cost, market and capacity evidence;
• issues that can be traded;
• authority limits and approval requirements;
• legal, ethical and competition constraints; and
• implementation and governance requirements.

The zone of possible agreement exists where the buyer’s maximum acceptable outcome overlaps with the supplier’s minimum acceptable outcome. It may be unknown, and estimates should be treated as hypotheses rather than facts.

A negotiation issue matrix helps identify trade-offs:

3.3 Conduct and ethics

Effective negotiators use objective standards, ask diagnostic questions, listen actively and record commitments. They avoid misrepresentation, undisclosed conflicts of interest, coercion, improper gifts and promises outside their authority. Competition law may restrict collusion, market allocation and exchange of competitively sensitive information. Public-sector and regulated buyers may face additional transparency, equal-treatment and tendering obligations.

A negotiation concession should be conditional rather than unilateral: “If the supplier provides a 48-hour response commitment, the buyer can consider a two-year forecast.” Every concession should be valued, documented and linked to a reciprocal benefit.

4. Incoterms® and Allocation of Logistics Risk

Incoterms® rules, published by the International Chamber of Commerce, allocate selected responsibilities between seller and buyer, including delivery, transport arrangements, export and import formalities, costs and risk transfer. They do not by themselves determine ownership transfer, payment, product quality, warranty, liability or dispute resolution. Those matters must be addressed separately.

The chosen rule must be stated with the named place and version, for example, “FCA Supplier Facility, [city], Incoterms® 2020.” Ambiguous references create uncertainty.

Broadly, rules differ in the point at which risk transfers and who arranges carriage. EXW places substantial responsibility on the buyer. FCA is often more practical for international shipments because the seller can complete export formalities. CPT and CIP involve seller-arranged carriage, with CIP also requiring a specified higher level of insurance under Incoterms® 2020. DAP places delivery responsibility on the seller up to the named destination, while DDP places extensive import responsibility on the seller. For maritime cargo, FAS, FOB, CFR and CIF have specific port and vessel-related applications and should not be used automatically for containerised shipments.

The purchaser should create a responsibility matrix covering:

• export clearance;
• loading and transport;
• insurance;
• import clearance and duties;
• unloading;
• documentation;
• risk transfer;
• claims against carriers; and
• title and payment conditions.

Incoterms® selection is a risk decision, not merely a freight quotation decision. The cheapest freight term may be inappropriate if the buyer lacks customs capability or cargo-insurance arrangements.

5. Purchase Orders and Contract Architecture

A purchase order (PO) is both an operational instruction and, depending on governing law and the parties’ conduct, a contractual instrument. A robust procurement system distinguishes between a framework agreement, a release or call-off, and an individual PO. Their relationship should be explicit.

A complete purchasing document normally addresses:

1. parties and legal authority;
2. goods or services, specifications and drawings;
3. quantity, unit of measure and price;
4. delivery date, location and Incoterms® rule;
5. inspection, acceptance and title/risk provisions;
6. packaging, labelling and documentation;
7. payment and invoicing requirements;
8. change control and cancellation;
9. warranty and remedies;
10. service levels and reporting;
11. confidentiality, intellectual property and data protection;
12. compliance, safety, labour and environmental obligations;
13. insurance, indemnity and limitation of liability;
14. subcontracting and assignment;
15. records, audit and business continuity;
16. termination and suspension;
17. governing law and dispute resolution; and
18. order of precedence among documents.

The order-of-precedence clause is particularly important where specifications, quotations, standard terms and the PO contain inconsistent provisions. Contract administrators should also control revisions: an approved engineering change should identify its effect on price, delivery, inventory, testing and warranty.

Contract lifecycle management

Contract management extends beyond signature. It includes mobilisation, performance monitoring, change control, invoice verification, claims administration, renewal decisions and close-out. A contract repository should preserve the executed agreement, amendments, approvals, correspondence, certificates, performance data and unresolved claims.

6. Warranties, Service Levels and Claims

A warranty is a contractual assurance about conformity, performance, durability or remedy. It should define the start date, duration, covered defects, exclusions, notice requirements, response time, repair or replacement obligations, freight responsibility and consequences of repeated failure.

A warranty should not be drafted as an aspirational statement. It should be linked to measurable acceptance criteria and evidence. For example, “fit for purpose” may be commercially important but legally uncertain unless the purpose and performance criteria are documented.

Service-level agreements (SLAs) convert service expectations into measurable commitments. A useful SLA identifies:

• service metric and formula;
• measurement source and reporting frequency;
• target and permitted tolerance;
• response and resolution time;
• exclusions and agreed service windows;
• service credits or other remedies;
• escalation procedure; and
• review and improvement process.

For availability, a basic measure is:

The parties must define whether planned maintenance, force majeure, buyer-caused delay and partial degradation are included. Otherwise, an apparently precise metric can generate disputes.

A claim is a formal assertion that the other party has failed to perform or that an entitlement has arisen. Effective claims management requires contemporaneous records: PO, specification, delivery note, inspection report, photographs, communications, cost evidence and mitigation actions. The claimant should identify the contractual basis, facts, relief sought and calculation of the amount.

A buyer must mitigate loss rather than allow damage to accumulate when reasonable mitigation is possible. A supplier must also notify foreseeable delay or nonconformity promptly. Notice clauses should specify method, recipient, timing and whether failure to notify limits entitlement.

7. Contract Risk Management

Contract risk is the possibility that uncertainty about performance, cost, law or relationships will create loss. Risk analysis should consider both probability and consequence, but a simple numerical score should not disguise uncertainty or low-frequency catastrophic events.

A risk register may include:

Risk should be allocated to the party best able to control or economically bear it. Allocating all risks to the supplier may increase price, encourage defensive behaviour or prove ineffective if the supplier lacks financial capacity. Risk allocation should also be consistent with insurance, indemnity and liability provisions.

Common contractual controls include performance security, parent guarantees, retention, liquidated damages, step-in rights, alternative-source rights, business-continuity plans and termination rights. Liquidated damages should be a genuine pre-estimate or otherwise legally permissible under the applicable law; they should not be used as disguised punishment.

8. Dispute Resolution

Disputes can be prevented or reduced through clear specifications, disciplined change control, early-warning procedures and accurate records. When disputes arise, escalation should normally proceed proportionately:

1. operational discussion between contract managers;
2. written notice and senior-management review;
3. mediation or facilitated settlement;
4. expert determination for technical or valuation questions;
5. arbitration or litigation as provided by the contract.

Mediation is confidential and consensual, but it does not impose a decision unless settlement is reached. Arbitration is private and produces a decision by an appointed tribunal, subject to the applicable arbitration framework. Litigation provides access to courts but may be slower, public and jurisdictionally complex. The appropriate mechanism depends on technical complexity, urgency, enforceability, cost and the locations of the parties and assets.

The clause should specify governing law, forum or seat, language, number and appointment of arbitrators, emergency relief where relevant, and escalation requirements. “Good-faith negotiation” alone is often too vague unless time limits and authority are defined.

9. Applied Case: Industrial Valve Procurement

Background

The following is an illustrative case. A chemical-processing company must purchase 240 control valves for a plant expansion. The initial lowest quotation is $1.18 million, while a technically stronger supplier quotes $1.27 million. The project team initially recommends the lower quotation because the budget is constrained.

Problem

Past experience indicates that the lower-cost supplier has longer response times and higher defect rates. The valves are safety-relevant, and late delivery would delay commissioning. The quotations also use different delivery terms and warranty periods.

Analysis

The procurement team normalises the quotations to the same delivery point and specification. It estimates the following five-year incremental costs:

The higher quotation has an estimated TCO advantage of $119,000. However, the team tests the assumptions, obtains reference data and conducts a technical clarification. It also identifies that Supplier H’s price includes a stronger warranty but excludes a minor commissioning activity.

Approach and solution

The buyer negotiates with Supplier H using objective evidence rather than simply demanding a price reduction. The final package includes:

• a price of $1.24 million;
• staged delivery tied to approved manufacturing milestones;
• factory acceptance testing;
• a 24-month warranty from commissioning, subject to defined exclusions;
• critical-spares availability for five years;
• a four-hour technical response commitment;
• a capped index adjustment for documented steel-cost movement; and
• a senior-management escalation procedure.

The buyer also negotiates with Supplier L, but its revised offer remains less attractive after normalisation. The contract uses FCA at the supplier’s facility, with the buyer arranging international carriage through its established freight programme. Export responsibilities, packing standards and risk-transfer documentation are stated expressly.

Outcome

Supplier H is selected because its negotiated TCO and operational risk are superior, not because it has the lowest initial price. Milestone reporting identifies a potential delay early enough to adjust the installation sequence. Two minor defects are corrected under warranty without production impact.

Learning points

1. Quoted price is not equivalent to economic cost.
2. Normalisation is essential before comparing offers.
3. Risk allocation should reflect organisational capability.
4. Negotiation can trade price, service, schedule and assurance rather than focusing on one variable.
5. Contract performance data validates or challenges the original TCO model.

10. Technology, AI and Contemporary Practice

Digital procurement systems increasingly connect sourcing, contract repositories, supplier portals, transport data and invoice processing. Contract-lifecycle-management tools can identify expiry dates, missing approvals, inconsistent clauses and unclaimed service credits. Spend analytics can reveal price variance, maverick buying and supplier concentration.

Artificial intelligence can assist with clause comparison, classification, anomaly detection, demand and price analysis, and extraction of obligations from large contract portfolios. However, AI outputs require human review because models may misread definitions, overlook jurisdiction-specific language, reproduce biased historical decisions or expose confidential information. Organisations should establish access controls, audit trails, approved use cases, validation procedures and accountability for final decisions.

Contemporary procurement also gives greater attention to carbon emissions, modern slavery, responsible sourcing, cyber resilience and supply-chain due diligence. These requirements should be translated into measurable contractual obligations, evidence requirements and remedies rather than left as general statements of intent.

Challenges and Limitations

Purchasing analysis is constrained by imperfect information. Supplier cost data may be confidential, market indices may not match actual costs, and expected failure costs may be uncertain. TCO models can create false precision if unsupported estimates are presented as facts. Sensitivity and scenario analysis should therefore accompany major decisions.

Contractual detail cannot eliminate operational uncertainty. Excessively rigid contracts may inhibit innovation, while vague contracts create disputes. The appropriate balance depends on specification maturity, relationship importance, switching cost and risk. Finally, legal enforceability varies by jurisdiction; professional buyers must obtain legal advice where the transaction is material, novel or high risk.

Best-Practice Checklist

• Define the business requirement before seeking quotations.
• Compare offers on a common commercial and technical basis.
• Use TCO where life-cycle effects are material.
• Verify assumptions through market, technical and supplier evidence.
• Select a pricing mechanism consistent with uncertainty and controllability.
• Prepare BATNA, reservation limits and approval authorities.
• Record concessions and link them to reciprocal commitments.
• State Incoterms® with named place and version.
• Define acceptance, warranty, SLA, claims and change procedures.
• Allocate risk to the party best able to manage it.
• Maintain contemporaneous records and a controlled contract repository.
• Review supplier performance and lessons learned at contract close-out.

Chapter Summary

Purchasing economics requires analysis beyond the initial quotation. Price analysis benchmarks the amount requested, cost analysis examines drivers, and value analysis tests whether required functions are being achieved economically. Total cost of ownership combines acquisition, logistics, quality, operating, maintenance, risk and disposal effects, while present-value analysis is appropriate when cash flows occur at different times.

Pricing mechanisms allocate cost and market risk between buyer and supplier. Firm fixed prices suit stable requirements; escalation, cost-plus, time-and-materials and incentive arrangements suit varying degrees of uncertainty. Effective negotiation is evidence-based, ethical and prepared around interests, BATNA, reservation limits and reciprocal trades.

Incoterms® allocate selected delivery responsibilities and risk but do not replace provisions on title, payment, warranty or dispute resolution. Purchase orders and contracts should establish clear specifications, acceptance, changes, price, delivery, performance, remedies and governance. Warranties, SLAs and claims procedures must be measurable and supported by records.

Contract risk management combines allocation, monitoring, insurance, security, continuity planning and escalation. Disputes are best prevented through clarity and early communication, but contracts should provide proportionate negotiation, mediation, expert determination, arbitration or litigation routes. Digital tools and AI can improve visibility and analysis, provided that confidentiality, validation and human accountability are maintained.

Key Terms

Price: Amount paid or payable for a good or service.

Cost: Economic resources sacrificed to obtain or deliver an outcome.

Value: Relationship between required function or benefit and resources committed.

Total cost of ownership: Life-cycle cost of acquiring, using and disposing of an item.

Price analysis: Evaluation of price reasonableness without necessarily examining supplier costs.

Should-cost analysis: Estimate of expected cost based on technical and market assumptions.

Value analysis: Systematic examination of existing functions to reduce unnecessary cost.

Value engineering: Value improvement undertaken during design or development.

Pricing mechanism: Contract method for determining and adjusting price.

Escalation formula: Agreed mathematical method for adjusting price as cost drivers change.

BATNA: Best alternative to a negotiated agreement.

Reservation point: Least acceptable negotiated outcome for a party.

Incoterms®: ICC rules allocating specified delivery responsibilities, costs and risks.

Purchase order: Buyer’s documented instruction and, where applicable, contractual offer or agreement.

Warranty: Contractual assurance concerning conformity, performance or remedy.

Service-level agreement: Contractual statement of measurable service commitments.

Claim: Formal assertion of a contractual entitlement or breach.

Liquidated damages: Pre-agreed monetary consequence for specified delay or non-performance, subject to applicable law.

Contract lifecycle management: Administration of a contract from drafting through close-out.

Dispute resolution: Process for preventing, settling or adjudicating contractual disagreements.

Review Questions

Short Answer Questions

1. Distinguish price, cost and value in purchasing decisions.
2. What is the purpose of total cost of ownership analysis?
3. State two conditions under which an escalation formula is appropriate.
4. What information should an SLA define?
5. Why must an Incoterms® rule include a named place?

Long Answer Questions

1. Explain how a purchaser can combine price analysis, should-cost analysis and value analysis in a strategic sourcing exercise.
2. Compare firm fixed-price, cost-plus and target-cost contracts, including their risk implications.
3. Develop a negotiation preparation framework for a long-term supply contract.
4. Discuss the essential components of a robust purchase order and contract-governance system.
5. Explain how warranties, claims procedures and dispute-resolution clauses work together to control contractual risk.

Analytical / Application Questions

1. A supplier offers a lower unit price but has higher freight, defect and downtime costs. Design a TCO model and identify the evidence needed before recommending a supplier.
2. A buyer and supplier disagree about a 12% price increase caused by a volatile raw-material market. Propose a balanced pricing and negotiation structure.
3. A critical supplier is six weeks late and claims that the delay is caused by a subcontractor. Analyse the buyer’s immediate contractual, operational and relationship-management actions.

Multiple Choice Questions with Answers

Question 1

Which measure best captures acquisition, operating, maintenance and disposal effects over an item’s life?

A. Quoted price

B. Total cost of ownership

C. Gross margin

D. Order quantity

Correct Answer: B. Total cost of ownership

Question 2

In a price-escalation formula, the weights assigned to cost components should normally sum to:

A. 0

B. 0.5

C. 1

D. 100 only when prices are in dollars

Correct Answer: C. 1

Question 3

Which negotiation concept identifies the best option available if no agreement is reached?

A. BATNA

B. Incoterm

C. Service credit

D. Warranty reserve

Correct Answer: A. BATNA

Question 4

What does an Incoterms® rule primarily allocate?

A. Employee salaries

B. Product ownership in every jurisdiction

C. Selected delivery responsibilities, costs and risks

D. The supplier’s profit margin

Correct Answer: C. Selected delivery responsibilities, costs and risks

Question 5

A contract requiring payment of actual allowable cost plus an agreed fee is a:

A. Firm fixed-price contract

B. Cost-plus contract

C. Framework call-off

D. Spot purchase

Correct Answer: B. Cost-plus contract

Question 6

If agreed service time is 1,000 hours and unplanned downtime is 20 hours, availability is:

A. 2%

B. 20%

C. 80%

D. 98%

Correct Answer: D. 98%

Question 7

Which document normally defines measurable response and resolution commitments?

A. Service-level agreement

B. Packing list

C. Market index

D. Supplier brochure

Correct Answer: A. Service-level agreement

Question 8

What is the main purpose of a contract order-of-precedence clause?

A. To select the cheapest freight carrier

B. To resolve inconsistencies among contractual documents

C. To calculate inventory turnover

D. To replace all technical specifications

Correct Answer: B. To resolve inconsistencies among contractual documents

Question 9

Which is generally the strongest basis for a contractual claim?

A. An undocumented verbal expectation

B. A contemporaneous record linked to a contractual obligation

C. A competitor’s advertisement

D. An internal purchasing preference

Correct Answer: B. A contemporaneous record linked to a contractual obligation

Question 10

Which dispute-resolution method is consensual and does not impose a decision unless settlement is reached?

A. Mediation

B. Litigation

C. Arbitration

D. Expert determination

Correct Answer: A. Mediation