12 - Project Procurement Management

Question 1

Alternative Dispute Resolution

Answer 1

When there is an issue or claim that must be settled before the contract can be closed, the parties involved in the issue or claim will try to reach a settlement through mediation or arbitration

Question 2

Bid

Answer 2

From seller to buyer.

Price is the determining factor in the decision-making process.

Question 3

Bidder conference

Answer 3

Meeting of all project’s potential vendors to clarify the contract statement of work (SOW) and the details of the contracted work.

Question 4

Claims

Answer 4

These are the disagreements between the buyer and the seller, usually centering on a change, who did the change, and even whether a change has occurred. Claims are also called disputes and appeals, and are monitored and controlled through the project in accordance with the contract terms.

Question 5

Contract

Answer 5

A contract is a formal agreement between the buyer and the seller.

Contracts can be oral or written - through written is preferred.

Question 6

Contract change control system

Answer 6

Defines the procedures for how the contract may be changed. The process for changing the contract includes the forms; documented communicaitons; tracking; conditions within the project, business, or marketplace that justify the needed change; dispute resolution procedures; and the procedures for getting the changes approved wihtin the performing organization.

Question 7

Contract statement of work (SOW, or CSOW)

Answer 7

This document requires the seller fully describe the work to be completed and/or the product to be supplied. The SOW becomes part of the contract between the buyer and the seller.

Question 8

Cost plus award fee contract

Answer 8

A contract that pays the vendor all costs for the project, but also includes a buyer-determined award fee for the project work.

Buyer assumes risk.

Question 9

Cost plus fixed fee contract

Answer 9

Contract that requires buyer to pay for the cost of the goods and services procured, plus a fixed fee for the contracted work.

Buyer assumes the risk of a cost overrun.

Question 10

Cost plus incentive fee

Answer 10

Buyer pays a cost for the procured work, plus an incentive fee or bonus if the T/Cs are met.

Question 11

Cost plus percentage of costs

Answer 11

Buyer pays for the cost of the good/services procured, plus a percentage of the costs.

Buyer assumes all risks of cost overruns.

Question 12

Direct costs

Answer 12

Cost incurred by the project in order for the project to exist.

e.g. equipment needed to complete work, salaries of the team, etc.

Question 13

Fixed price contract

Answer 13

AKA firm fixed-price and lump-sum contracts.

Agreements that define the total price for the product the seller is to provide.

Question 14

Fixed-price plus economic price adjustments

Answer 14

Fixed price with special allowance for price increases based on economic reasons such as infaltion or raw material prices

Question 15

Force majeure

Answer 15

act of god

Question 16

independent estimates

Answer 16

aka “should cost”

Bringing in an outside organization to predict what the cost should be. Sets a baseline.

Question 17

Indirect costs

Answer 17

These are costs attributed to the cost of doing business

e.g. utilities, office space, and other overhead.

Question 18

Invitation for Bid (IFB)

Answer 18

From buyer to seller. Requests the seller privide a price for the procured product or service

Question 19

Letter contract

Answer 19

Letter contract allows the vendor to begin working on the project immeidately. Often used as a stopgap solution.

Question 20

Letter of intent

Answer 20

Not a contract, but a letter stating that the buyer is intending to create a contractual relationship with teh seller.

Question 21

Make or buy decision

Answer 21

Process in which the project team determines the cost-effectiveness, benefits, and feasibiliy of making a product or buying it from a vendor

Question 22

Privity

Answer 22

The contractual relationship between the buyer and the seller is often considered confidential and secret

Question 23

Procurement management plan

Answer 23

PM subsidiary plan that documents the decisoins made in the procurement planning processes

Question 24

Procurement planning

Answer 24

Process to identify which parts of the project warrant procurement from a vendor by the buyer

Question 25

Proposal

Answer 25

Document the seller provides t othe buyer.

More than just a fee - includes ideas on how work can be completed

Question 26

Purchase order (PO)

Answer 26

PO is a form of unilateral contract that the buyer provides to the vendor showing the purchase has been approved by the buyers organization

Question 27

Quotation

Answer 27

From seller to buyer. Price is the determining factor in the decisoin-making process

Question 28

Request for Proposal (RFP)

Answer 28

From buyer to seller - requests the seller to provide a proposal to cmplete the procured work or provude the procured product

Question 29

Request for Quote (RFQ)

Answer 29

From buyer to seller - request the seller to provide a price on the product or service

Question 30

Risk-related contractual agreements

Answer 30

When a PM team decides to use transference to respond to a risk, a risk-related contractual agreement is created between the buyer and the seller.

Question 31

Screening system

Answer 31

A tool that filters or screens out vendors that don’t qualify for the contract

Question 32

Seller rating system

Answer 32

Used by organizations to rate prior experience with each vendor that they have worked with in the past.

Performance, quality, delivery time, etc.

Question 33

Terms of Reference

Answer 33

Defines the obligations for the seller, what the seller will provide, and all of the particulars of the contracted work. TOR is similar to statement of work

Question 34

Time and Materials Contract

Answer 34

Buyer pays for time and materials. Used on smaller job.

Requires a not-to-exceed clause

Question 35

Weighting system

Answer 35

Takes out the personal preferences of the decisoin maker in the organizaiton to ensure the best seller is awarded the contract.

Weights are assigned to the values of the proposals, and each proposal is scored.