12 Project Procurement Management Flashcards
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.
Alternative dispute resolution
From seller to buyer. Price is the
determining factor in the decision-making
process.
Bid
A meeting of all the project’s potential
vendors to clarify the contract statement
of work and the details of the contracted
work.
Bidder conference
These are disagreements between the buyer and the seller, usually centering on a change, who did the change, and even whether a change has occurred. They're also called disputes and appeals, and are monitored and controlled through the project in accordance with the contract terms.
Claims
It’s a formal agreement
between the buyer and the seller.
It can be oral or written—though
written is preferred.
Contract
This defines the procedures for how the contract may be changed. The process for changing the contract includes the forms; documented communications; tracking; conditions within the project, business, or marketplace that justify the needed change; dispute resolution procedures; and the procedures for getting the changes approved within the performing organization.
Contract change control system
This document requires that the seller fully describe the work to be completed and/or the product to be supplied. It becomes part of the contract between the buyer and the seller
Contract statement of work (SOW also
CSOW)
A contract that pays the vendor all costs
for the project, but also includes a buyer-
determined award fee for the project
work.
Cost plus award fee contract
A contract that requires the buyer to pay for the cost of the goods and services procured plus a fixed fee for the contracted work. The buyer assumes the risk of a cost overrun.
Cost plus fixed fee contract
A contract type that requires the buyer to
pay a cost for the procured work, plus an
incentive fee, or a bonus, for the work if
terms and conditions are met.
Cost plus incentive fee
A contract that requires the buyer to pay for the costs of the goods and services procured plus a percentage of the costs. The buyer assumes all of the risks for cost overruns.
Cost plus percentage of costs
These are costs incurred by the project in
order for the project to exist. Examples
include the equipment needed to
complete the project work, salaries of the
project team, and other expenses tied
directly to the project’s existence.
Direct costs
Also known as lump-sum contracts,
these are agreements that
define a total price for the product the
seller is to provide.
Fixed-price contracts
A fixed-price contract with opportunities
for bonuses for meeting goals on costs,
schedule, and other objectives. These
contracts usually have a price ceiling for
costs and associated bonuses.
Fixed-price incentive fee
A fixed-price contract with a special
allowance for price increases based on
economic reasons such as inflation or the
cost of raw materials.
Fixed-price with economic price
adjustments
An “act of God” that may have a negative
impact on the project. Examples include
fire, hurricanes, tornadoes, and
earthquakes.
Force majeure
These estimates are often referred to as
“should cost” estimates. They are created
by the performing organization or outside
experts to predict what the cost of the
procured product should be.
Independent estimates
These are costs attributed to the cost of
doing business. Examples include
utilities, office space, and other overhead
costs.
Indirect costs
From buyer to seller. Requests the seller
to provide a price for the procured
product or service.
Invitation for Bid (IFB)
It allows the vendor to
begin working on the project immediately.
It is often used as a stopgap solution.
Letter contract
It’s not a contract, but a
letter stating that the buyer is intending to
create a contractual relationship with the
seller.
Letter of intent
A process in which the project management team determines the cost- effectiveness, benefits, and feasibility of making a product or buying it from a vendor.
Make-or-buy decision
The contractual relationship between the
buyer and the seller is often considered
confidential and secret.
Privity
A project management subsidiary plan
that documents the decisions made in the
procurement planning processes.
Procurement management plan
A process to identify which parts of the
project warrant procurement from a
vendor by the buyer.
Procurement planning
A document the seller provides to the
buyer. It includes more than
just a fee for the proposed work. It also
includes information on the vendor’s
skills, the vendor’s reputation, and ideas
on how the vendor can complete the
contracted work for the buyer.
Proposal
It's a form of unilateral contract that the buyer provides to the vendor showing that the purchase has been approved by the buyer’s organization.
Purchase order (PO)
From seller to buyer. Price is the
determining factor in the decision-making
process.
Quotation
From buyer to seller. Requests the seller
to provide a proposal to complete the
procured work or to provide the procured
product.
Request for Proposal (RFP)
From buyer to seller. Requests the seller
to provide a price for the procured
product or service.
Request for Quote (RFQ)
When the project management team
decides to use transference to respond to
a risk. It’s created between the buyer
and the seller.
Risk-related contractual agreements
A tool that filters or screens out vendors
that don’t qualify for the contract.
Screening system
These are used by organizations to rate prior experience with each vendor that they have worked with in the past. It can track performance, quality ratings, delivery, and even contract compliance.
Seller rating systems
Defines the obligations for the seller,
what the seller will provide, and all of the
particulars of the contracted work. It’s
similar to the statement of work.
Terms of Reference
A contract type in which the buyer pays for the time and materials for the procured work. This is a simple contract, usually for smaller procurement conditions. These contract types require a not-to-exceed clause, or the buyer assumes the risk for cost overruns.
Time and materials contract
This takes out the personal preferences
of the decision maker in the organization
to ensure that the best seller is awarded
the contract. Weights are assigned to the
values of the proposals, and each
proposal is scored.
Weighting system
