Honda of America Manufacturing is a well established automobile manufacturer. It purchases tens of thousands of materials and parts from suppliers…

With strategic suppliers, the aim should be to work co-operatively with them to find ways of reducing

costs to achieve a target cost. It is necessary to work with the suppliers in carrying out open book

costing by having first persuaded them of the need to do it. Open book can be used to establish a

Target Cost, a Compensation Event value and can eventually be used to ensure the payment of actual

costs to an organization. A number of forms of contract cater for this functionality of which only the

NEC goes to into any great depth of methodology.

If the suppliers worry about leak of confidential information, procurement team can suggest them to

sign a non-disclosure agreement. The buying organisation should also comply with data protection

regulations. The Employer / individual responsible for a project’s costs should ultimately take a

pragmatic and sensible approach with regard to commercially or personally sensitive data provided

by the contractor. The primary goal of all open book cost management is to provide Employer

comfort and security in the accuracy of commercial data; this effectively means striking a balance

between undertaking full audits and blind faith.

Reference: CIPS study guide page 32

LO 1, AC 1.2