BU.610.730.xx–Supply and Service Contracting–Instructor’s Name – Page 1 of 6
/Supply and Service Contracting
2 CreditsBU.610.730.xx
Class Day/Time & Start/End date
Semester
Class Location
Instructor
Full Name
Contact Information
Phone Number: (###) ###-####
E-mail Address:
Office Hours
Day/s Times
Required Text and Learning Materials
The required materials for this course include a collection of book chapters, articles, and cases compiled by instructor, and selected lecture slides that will be provided on the Blackboard. There is no required textbook for this course.
Cases
- “The Farmer and the Landlord,” Steven Salop (Georgetown Law).
- “Optimizing Flu Vaccine Planning at NorthShore University HealthSystem,” Sarang Deo. Product number: KEL626 (Kellogg School of Management)
- “Boston University Medical Center Hospital,” Miriam G. Jost; David W. Young. Product number: TCG105-PDF-ENG (The Crimson Group)
- “Eurotunnel: Eyes Wide Shut,” Christoph H. Loch; Arnoud De Meyer. Product number: INS001-PDF-ENG (INSEAD)
The first case will be posted to Blackboard; the other three cases are distributed by Harvard Business School and can be purchased as a coursepack at:
Book Chapters
1.Chapter 2: “Overview of Agency Theory, Empirical Methods, and Institutional Contexts,” in the book Venture Capital and Private Equity Contracting: An International Perspective byCumming, Douglas J., and Sofia A. Johan. London, England: Elsevier. 2013. ISBN: 9780124095373. This chapter can be freely accessed through
2.Chapter 6: “Integrating to Make It Happen,” in the book The Innovator’s Prescription: A Disruptive Solution for Health Care by Christensen, Clayton M. et al.
3.Chapter 7: “Disrupting the Reimbursement System,” in the book The Innovator’s Prescription: A Disruptive Solution for Health Care by Christensen, Clayton M. et al.
Articles
1.Kraljic, Peter. "Purchasing must become supply management." Harvard Business Review 61, no. 5 (1983): 109-117.
2.Narayanan, V.G., Ananth Raman. “Aligning incentives in supply chains.” Harvard Business Review 82, no. 11 (2004): 94-102.
3.Kale, Prashant, and Phanish Puranam. Choosing equity stakes in technology sourcing relationships: An integrative framework. California Management Review46, no. 3 (2004).
4.Vacketta, Carl. “Federal Government Contract Overview.” Available at:
5.Arbogast, Tom, Craig Larman, and Bas Vodde. “Agile Contracts Primer.” Available at
All of the above articles will be available on Blackboard. The instructors will post also additional reading materials to the Blackboard from time to time.
Optional Readings
- Monczka, R., Robert Handfield, Larry Giunipero, and James Patterson. Purchasing and Supply Chain Management. Chicago, IL: Cengage Learning. (2008).
- Pierson, Margaret, and Willy Shih. “Operations Management Reading: Strategic Sourcing.” Product number: 8037-PDF-ENG. Harvard Business School Core Curriculum.
- Salanié, Bernard. The Economics of Contracts: A Primer. 2nd ed. Cambridge, MA: MIT Press (2005).
- Hall, Brian. “Incentive strategy within organizations.” Product number: 902131-PDF-ENG (Harvard Business School).
- Sullivan, Erin, Jarrod Goentzel, and Rebecca Weintraub. “Concept Note: The Global Health Supply Chain.” Product number: GHDC01-PDF-ENG. Harvard Business School.
Blackboard Site
A Blackboard course site is set up for this course. Each student is expected to check the site throughout the semester as Blackboard will be the primary venue for outside classroom communications between the instructors and the students. Students can access the course site at Support for Blackboard is available at 1-866-669-6138.
Course Evaluation
As a research and learning community, the Carey Business School is committed to continuous improvement. The faculty strongly encourages students to provide complete and honest feedback for this course. Please take this activity seriously because we depend on your feedback to help us improve so you and your colleagues will benefit. Information on how to complete the evaluation will be provided towards the end of the course.
Disability Services
Johns Hopkins University and the Carey Business School are committed to making all academic programs, support services, and facilities accessible. To determine eligibility for accommodations, please contact the Carey Disability Services Office at time of admission and allow at least four weeks prior to the beginning of the first class meeting. Students should contact Priscilla Mint in the Disability Services office by phone at 410-234-9243, by fax at 443-529-1552, or email: .
Important Academic Policies and Services
•Honor Code
•Statement of Diversity and Inclusion
•Student Success Center
•Inclement Weather Policy
Students are strongly encouraged to consult the Johns Hopkins Carey Business School Student Handbook and Academic Catalog and the School website for detailed information regarding the above items.
Course Description
This course explores fundamental drivers of human and system behavior embedded in business contracts. These drivers include alignment of incentives for performance and information sharing, provisions for recourse in the face of unsatisfactory performance, and the design of options to facilitate the pursuit of opportunities that arise after contract terms are set. All topics are viewed from both the supplier’s and the customer’s perspectives. Emphasis will be placed on using contracts to share or minimize risks in global networks.
Prerequisite(s):BU.680.620[C] OR BU.912.610[C]
Course Overview
Contracts are ubiquitous—this syllabus is essentially a contract between us. Contracts channel self-interests into mutual benefits necessary for acquisitions of products and services with non-trivial risks and uncertainties. It is fair to say that the practice of contracting serves as the foundation of today’s business world characterized by ever-increasingly complex exchanges.
Within organizations, contracts are used to motivate employees’ efforts, time, and creativity, to screen candidates considered for hiring, retention, and promotion, and to nurture a culture aligned with its core strategies. Between organizations, contracts are used to promote trust, to mitigate risks, and to avoid conflicts often due to divergent interests and values.
Over the past few decades, economists (aka contract scientists) have developed a subject called “contract theory” that focuses on designing incentive contracts in view of two fundamental ex ante issues: (1) moral hazard, which arises as people may choose hidden actions difficult for others to monitor; and (2) adverse selection, which arises because people may possess hidden information difficult for others to observe. Practitioners (aka contract engineers), drawing from operational and managerial understanding of ex postrisk and uncertainty, have traditionally focused on the rules and relations and contend that contracting needs to be contingent on both processes and outcomes.
This course bridges the divide between academics and practitioners. We will utilize the explanatory power of economic models to provide a sharp strategic focus, complemented by a tactical understanding of contracting practice in various industries of distinctive risk and uncertain characteristics.
Student Learning Objectives for This Course
All Carey graduates are expected to demonstrate competence on four Learning Goals, operationalized in eight Learning Objectives. These learning goals and objectives are supported by the courses Carey offers. For a complete list of Carey learning goals and objectives, please refer to the website
The learning objectives for this course are:
1.Understand the role of incentives within and between organizations.
2.Analyze equilibrium outcome under various forms of contracts.
3.Diagnose challenges of contracting for complex products and services, from both buyers’ and sellers’ perspectives, and proscribe strategies to mitigate such challenges.
4.Bring an analytical lens to applied contract management settings, including energy/commodity, financial service, healthcare, government, and software/construction
Attendance Policy
Attendance and class participation are part of each student’s course grade. Students are expected to attend all scheduled class sessions. Each class will include opportunities for teams to work together. Failure to attend class will result in an inability to achieve the objectives of the course. Excessive absence will result in loss of points for team participation. Regular attendance and active participation are required for students to successfully complete the course.
Assignments
All students are expected to view the Carey Business School Honor Code/Code of Conduct tutorial and submit their pledge online. Students who fail to complete and submit the pledge will have a registrar’s hold on their account. Please contact the student services office via email if you have any questions.
Students are not allowed to use any electronic devices during in-class tests. Calculators will be provided if the instructor requires them for test taking. Students must seek permission from the instructor to leave the classroom during an in-class test. Test scripts must not be removed from the classroom during the test.
GameMemos: We will play multiple hands-on simulation gamesthroughout the course. You are expected to participate in the games. In your memos please write down your (individual) observations from the simulation games. The templates for these memoswill be posted on Blackboard. The memos will not be closely graded for correctness – as there are no right answers – but for the seriousness of your efforts.
Case Assignments (groups of 2 or 3 students). Case assignments will cover materials that both help students prepare for class and consolidate their understanding of key contracting concepts. Assignments are due on Blackboard by 8:00am on the day of their discussion in class. Tardy submissions will not be accepted.
There are two graded case assignments:
Case Assignment #1: The Farmer and the Landlord
Case Assignment #2: Choose one from the following two cases: (a) BUMC Hospitalcase, and (b) Eurotunnel case. If more than one cases are submitted, the highest case grade will count toward the course grade. Regardless of your choice of case for this assignment, you are expected to read bothcases carefully and actively participate in their corresponding in-class discussions.
Group Project. Students will work in groups on projects. Each group will actas a client that is interested in outsourcing a manufacturing assignment to a second group. In addition, each group will also act as a contactor that will work on a manufacturing assignment for a third group. In other words, each group will havedual roles of client and contractor for two separate projects: as a client, youdesign a contract to motivate your contractor to work hard on one project and /or monitor their efforts if appropriate; as a contractor, you work on the other projectto deliver the results for your client. Detailed instructions will be announced later. Your performance will be evaluated both in terms of your ending cash (earned from both being a client and being a contractor) and the quality of your final presentation.
Evaluation and Grading
The student’s grade will be based on a combination of evaluation exercises consisting of two case assignments, two presentations and two reports of the course project, and class participation. The breakdown of weights of each of the above is shown below:
Assignment / Learning Objectives / WeightAttendance and participation in class discussion / na / 15%
Game Memos / 1, 2, 3 / 10%
Case Assignments / 1, 2, 3, 4 / 35%
GroupProject / 1, 2, 3, 4 / 40%
Important Notes about Grading Policy:
The grade of A is reserved for those who demonstrate extraordinarily excellent performance. The grade of A- is awarded only for excellent performance. The grade for good performance in this course is a B+/B. The grades of D+, D, and D- are not awarded at the graduate level.
Please refer to the Carey Business School Student Handbook for grade appeal information
Tentative Course Calendar**The instructors reserve the right to alter course content and/or adjust the pace to accommodate class progress. Students are responsible for keeping up with all adjustments to the course calendar.
Week / Content / Reading / Due1 / Introduction
Economic Foundations of Contracting / Chapter 2 “Overview of Agency Theory, Empirical Methods, and Institutional Contexts” in the book Venture Capital and Private Equity Contracting: An International Perspective byCumming, Douglas J., and Sofia A. Johan.
2 / Incentive Contracting within an Organization
Supply Management / Kraljic, Peter. "Purchasing must become supply management." Harvard Business Review 61 no. 5 (1983): 109-117. / The Farmer and the Landlord
3 / Supply Management (Continued)
NorthShore Case / Narayanan, V.G., Ananth Raman. “Aligning incentives in supply chains.” Harvard Business Review 82, no. 11 (2004): 94-102.
“Optimizing Flu Vaccine Planning at NorthShore University HealthSystem,” Sarang Deo. Product number: KEL626 (Kellogg School of Management)
4 / BUMC Hospital Case
Healthcare Contracting / Chapter 6: “Integrating to Make It Happen,” in the book The Innovator’s Prescription: A Disruptive Solution for Health Care by Christensen, Clayton M., Jerome H. Grossman, M.D., & Jason Hwang, M.D.
Chapter 7: “Disrupting the Reimbursement System,” in the book The Innovator’s Prescription: A Disruptive Solution for Health Care by Christensen, Clayton M., Jerome H. Grossman, M.D., & Jason Hwang, M.D. / BUMC Hospital Case
5 / Healthcare Contracting (Continued)
Eurotunnel Case
Government and Public Contracting / Vacketta, Carl. “Federal Government Contract Overview.” / Eurotunnel Case
Project Contract
6 / Government and Public Contracting (Continued)
Contracting in the Twenty-First Century (Technology, Finance, and Energy Sectors) / Kale, Prashant, and Phanish Puranam. Choosing equity stakes in technology sourcing relationships: An integrative framework. California Management Review 46no. 3 (2004).
7 / Agile Contracting / Arbogast, Tom, Craig Larman, and Bas Vodde. “Agile Contracts Primer.”
8 / Project Presentation / Project Presentation Slides
Copyright Statement
Unless explicitly allowed by the instructor, course materials, class discussions, and examinations are created for and expected to be used by class participants only.The recording and rebroadcasting of such material, by any means, is forbidden.Violations are subject to sanctions under the Honor Code.