You are Knight's Director of purchasing and it is your responsibility to negotiate a contract with Excalibur for their class "A" pistons, the Series 2.1 Intensaflux pistons. Since the price paid for the piston will raise the overall cost of the engine and therefore affect the bid submitted to the government, it is paramount that the lowest possible price be paid. In order to strike a good deal, you must pay attention to the following Points:

1) You have never before purchased Class "A" pistons. Your knowledge of the market for other pistons ( for instance, the class "C" pistons sell for $250 each) suggests that they should sell for $500 per piston. The absolute maximum that could be paid per piston and still enable the submission of a competitive bid would be $600 per piston.

2) There is a rumor that Excalibur has been trying to get its foot in the door with respect to government contracts. Many of your colleagues find it somewhat unreasonable that Excalibur should have a free ride on Knights coattails by having their company's name mentioned on all the 5% rush fee. Perhaps Excalibur should deduct 5% from the price in return for this advertising service. Still you do not want to press the issue too far because your Company president has told you that it might be in the interest of Knight to develop a good relationship with Excalibur's management since Knight may one day be in a position to acquire this smaller company.

3) A competitor of Excalibur's , Mordred Technologies Inc. has stated emphatically that it would in no way be able to fulfill such a rush order for a similar piston in 2 weeks. They did state that if knight was willing to wait 4 weeks for shipment , they would gladly supply all the pistons required for $470 per piston. Although a 4 week delivery date would certainly not allow enough time to meet the government deadline , Knight could use these pistons to upgrade some engines in stock and wait another government or private contract. The success during the negotiation process will be determined by: 1) the average price per piston agreed upon and 2) the type of quality-control guarantee obtained.