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PMP (Rita's Hot Topics) > 11) Procurement Management > Flashcards

11) Procurement Management Flashcards

1
Q

What is the process of procurement management?

A
  • Plan Procurement Management
  • Conduct Procurements
  • Control Procurements
  • Close Procurements
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2
Q

What are the inputs to the Plan Procurement Management process?

A
  • Project management plan
  • Requirements documentation
  • Activity resource requirements
  • Enterprise environmental factors
  • Organizational process assets
  • Risk register
  • Stakeholder register
  • Any procurements already in place
  • Project schedule
  • Initial cost estimates for work to be procured
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3
Q

What are the key outputs of the Plan Procurement Management process?

A
  • Make-or-buy decisions
  • Procurement management plan
  • Procurement statements of work
  • Procurement documents
  • Source selection criteria
  • Change requests
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4
Q

What are the key outputs of the Conduct Procurements process?

A
  • Selected sellers
  • Signed contracts
  • Resource calendars
  • Change requests
  • Updates to project management plan and project documents
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5
Q

What are the key outputs of the Control Procurements process?

A
  • Substantial completion of contract requirements and deliverables
  • Work performance information
  • Change requests
  • Updates to project management plan and project documents
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6
Q

What are the key outputs of the Close Procurements process?

A
  • Formed acceptance
  • Closed procurements
  • Updates to lessons learned and records (part of organizational process assets)
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7
Q

What is an agreement?

A

Agreement: A document or communication that outlines internal or external relationships and their intentions

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8
Q

What is a contract?

A

Contract: A type of written or verbal agreement, typically created with an external entity, where there is some exchange of goods or services for some type of compensation (usually monetary); a contract forms the legal relationship between the entities

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9
Q

What is the difference between centralized and decentralized contracting?

A

Centralized: There is one procurement department, and the procurement manager handles procurements for many projects

Decentralized: A procurement manager is assigned to one project full-time and reports directly to the project manager

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10
Q

What are the advantages and disadvantages of centralized contracting:

A

Advantages:

  • Higher level of procurement expertise
  • Standardized practices provide efficiency
  • Clear career path in procurement management
  • Continuous improvement, training, and shared lessons learned

​Disadvantages:

  • Procurement manager’s attention is divided among many projects
  • More difficult for the project manager to obtain contracting help when needed
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11
Q

What are the advantages and disadvantages of decentralized contracting?

A

Advantages:

  • Project manager has easier access to contracting expertise
  • Procurement manager has more loyalty to the project
  • Procurement manager has a better understanding of the project needs

Disadvantages:

  • No home department for the contracts person after the project
  • Difficult to maintain a high level of contracting expertise
  • Duplication of expertise/inefficient use of procurement resources
  • Contracting processes aren’t standardized
  • No career path as a procurement manager in the company
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12
Q

What is required for a legal contract?

A
  • Offer
  • Acceptance
  • Consideration
  • Legal capacity
  • Legal purpose
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13
Q

What is included in a contract?

A
  • Legal terms
  • Business terms regarding payments
  • Reporting requirements
  • Marketing literature
  • Proposal
  • Procurement statement of work
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14
Q

Describe the project manager’s role in procurement.

A
  • Understand the procurement process
  • Make sure the contract contains all the scope of work and project management requirements
  • Incorporate mitigation and allocation of risks into the contract
  • Help tailor the contract to the project
  • Be involved during contract negotiations to protect the relationship with the seller
  • Make sure all the work in the contract is done, not just the technical scope
  • Work with the procurement manager to manage changes to the contract
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15
Q

What is a procurement management plan?

A

A plan that documents how procurements will be planned, executed, controlled, and closed.

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16
Q

What is make-or-buy analysis?

A

Deciding whether the performing organization should do the project work itself or outsource some or all of the work

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17
Q

What are the three broad categories of contracts?

A
  • Cost-reimbursable (CR)
  • Fixed price (FP)
  • Time and material (T&M)
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18
Q

What is a cost-reimbursable contract?

A

All the seller’s costs are reimbursed by the buyer

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19
Q

What is a fixed-price contract?

A

There is one set fee for accomplishing all the work

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20
Q

What is a time and material contract?

A

The buyer pays on a per-hour or per-item basis

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21
Q

What is a cost plus fixed fee (CPFF) contract?

A

All the seller’s costs are reimbursed by the buyer, and a fixed fee is negotiated for the seller’s profit

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22
Q

What is cost plus percentage of cost (CPPC) contract?

A

All the seller’s costs are reimbursed by the buyer, and the buyer also pays a specified percentage of those costs as a fee or profit.

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23
Q

What is a cost plus incentive fee (CPIF) contract?

A

The seller’s costs are reimbursed by the buyer, and the buyer and seller share any cost savings or overruns

24
Q

What is a cost plus award fee (CPAF) contract?

A

All the seller’s costs are reimbursed by the buyer, and the buyer pays a base fee plus an award amount (a bonus) based on performance

25
Q

What is a fixed price incentive fee (FPIF) contract?

A

The buyer pays a fixed price plus an additional fee if the seller exceeds performance criteria stated in the contract

26
Q

What is a fixed price award fee (FPAF) contract?

A

The buyer pays a fixed price plus an award (paid in full or in part) based on the seller’s performance level

27
Q

What is a fixed price economic price adjustment (FPEPA) contract?

A

A fixed-price contract with a built-in economic price adjustment to cover cost increases due to future economic conditions

28
Q

What is a purchase order?

A
  • A unilateral contract typically used for buying commodities
  • Purchase orders become contracts once they are “accepted” by the seller’s fulfillment of the contract
29
Q

What do incentives accomplish?

A

They align the seller’s motivations with the buyer’s objectives

30
Q

What might incentives be used for?

A
  • Time
  • Cost
  • Quality
  • Scope
31
Q

Who has the cost risk in a cost-reimbursable contract?

A

**Cost-reimbursable: **The risk is borne by the buyer

32
Q

Who has the cost risk in a fixed-price contract?

A

Fixed price: The risk is borne by the seller

33
Q

What is the ceiling price?

A
  • The highest price the buyer will pay
  • It’s a condition of the contract that must be agreed to by both parties before signing
34
Q

What is the point of total assumption?

A

For fixed price incentive fee contracts, the amount above which the seller bears all the loss of a cost overrun

35
Q

Describe the three different types of procurement statements of work.

A

Performance: Conveys what the final product should accomplish

Functional: Conveys the end purpose or result (the minimum essential characteristics of the product)

Design: Conveys exactly what work is to be done and how it should be completed

36
Q

What are the procurement documents?

A
  • Request for proposal (RFP)
  • Invitation for bid (IFB)
  • Request for quotation (RFQ)
  • A request for information (RFI) is sometimes considered a procurement document, though it does not really belong in this category
37
Q

What is a nondisclosure agreement?

A

An agreement between the buyer and prospective sellers identifying the information or documents they will hold confidential and control, and who in the organization will have access to the confidential information

38
Q

What are standard contract terms and conditions?

A

Standard contract terms and conditions:

Terms and conditions that are used for all contracts within the company

39
Q

What are special provisions to terms and conditions?

A

Special provisions: Terms and conditions created for the unique needs of the project

40
Q

Name common terms and conditions that may be in a contract.

A

Please review the long list of terms and conditions and what they mean in the Procurement Management chapter of the PMP Exam Prep guide

41
Q

What is a letter of intent?

A

A letter from the buyer, without legal binding, saying the buyer intends to hire the seller

42
Q

What does privity mean?

A

A contractual relationship between two or more companies

43
Q

What does noncompetitive procurement mean?

A

The work is awarded to a single source or a sole source without completion

44
Q

What are source selection criteria?

A

The factors the buyer will use to evaluate (weight and score) responses from the sellers

45
Q

When are these criteria created, and when are they used?

A

They are created during the Plan Procurement Management process, and are used during the Conduct Procurements process to pick a seller

46
Q

What is a bidder conference?

A

A meeting with prospective sellers to make sure they all understand the procurement and have a chance to ask questions

47
Q

What should a project manager watch out for during a bidder conference?

A

Watch for:

  • Collusion
  • Sellers not asking questions in front of the competition

Make sure all the questions and answers are documented and distributed to all the potential sellers.

48
Q

What is a qualified seller list?

A

A list of sellers that have been preapproved

49
Q

What are the objectives of negotiation?

A
  • Obtain a fair and reasonable price
  • Develop a good relationship with the seller
50
Q

What are some examples of negotiation tactics?

A
  • Attacks
  • Personal insults
  • Good guy/Bad guy
  • Deadline
  • Lying
  • Limited authority
  • Missing man
  • Fair and reasonable
  • Delay
  • Extreme demands
  • Withdrawal
  • Fait accompli
51
Q

Why might there be conflict between the contract administrator and the project manager?

A

The contract administrator is the only one with the power to change the contract

52
Q

What is a contract change control system?

A

A system created to control changes to the contract

53
Q

What is the purpose of a procurement performance review?

A
  • Verify that the seller is performing as they should
  • Identify what the buyer can do to help the seller do the work
  • Determine if any changes are needed to improve the buyer-seller relationship and the processes they are using
54
Q

Define claims administration.

A

Managing claims (requests by the seller for compensation from the buyer)

55
Q

What is the key function of a records management system?

A

Maintain an index of contract documentation and records so that they can be retrieved if necessary

56
Q

What occurs during the Close Procurements process?

A
  • Product validation
  • Procurement negotiation
  • Financial closure
  • Procurement audit
  • Updates to records
  • Final contract performance reporting
  • Documentation of lessons learned
  • Creation of procurement file
57
Q

What is a procurement audit?

A

A structured review of the procurement process and identification of lessons learned to help future procurements

PMP (Rita's Hot Topics) (13 decks)

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