12.1 Plan Procurement

Question 0

What is a fixed price contract

Answer 0

Setting a fixed total price for a defined product, service or result to be provided.
Risk to seller
Seller must deliver
Buyer wants well defined
Scope change = increase in contract price.

Question 1

Name contract types (3)

Answer 1

Fixed price
Cost reimbursable
Time & Material (T&M)

Question 2

Name fixed price contracts (3)

Answer 2

Firm fixed price (FFP)
Fixed price incentive fee (FPIF)
Fixed price with economic price adjustment (FP-EPA)

Question 3

FFP is
FPIF is
FP-EPA is

Answer 3

Firm fixed price
Fixed price incentive fee
Fixed price with economic price adjustment

Question 4

What is Firm Fixed Price contract

Answer 4

Most common
Price for goods set upfront, not subject to change unless scope of work changes
Cost increase = seller responsible
Buyer wants well defined.

Question 5

What is Fixed Price Incentive Fee contract?

Answer 5

Buyer & seller some flexibility
Allows deviation from performance
financial incentives = achieve agreed to metrics.
Incentives related to cost, schedule, or tech perf
Performance targets set upfront
Final price at completion
Price ceiling set, cost overage seller owns

Question 6

What is a Fixed Price with Economic Price Adjustment contract

Answer 6

Used for seller performance spanning years
Allow pre defined final adjustments due to changed conditions (ie inflation, cost increase/decrease)
EPA relates to reliable financial index
Protect both buyer and seller

Question 7

What is Cost reimbursable contract

Answer 7

Payments (cost reimbursement) to seller for costs incurred for completed work plus a fee representing seller profit.
May include financial incentive when seller exceeds or fall below defined objectives (ie cost, schedule, tech perf)
Flexibility to redirect seller when scope work cannot be precisely defined at start, needs to alter or high risks

Question 8

Name cost reimbursable contracts (3)

Answer 8

Cost Plus Fixed Fee (CPFF)
Cost Plus Incentive Fee (CPIF)
Cost Plus Award Fee (CPAF)

Question 9

CPFF is
CPIF is
CPAF is

Answer 9

Cost Plus Fixed Fee
Cost Plus Incentive Fee
Cost Plus Award Fee

Question 10

What is a cost plus fee contract

Answer 10

Seller reimbursed for allowable costs for performing contract work
Seller receives fixed fee payment calc as percentage of initial est proj cost
Fee paid only for completed work
Fee does not change based on seller performance
Fee amt not change unless scope chg

Question 11

What is a cost plus incentive fee contract

Answer 11

Seller reimburse for allowable costs for contract work
Seller receives predetermined incentive fee based on achieving perf objectives set at start.
Final cost less or greater then orig estimates, both buyer & seller share costs
Shared costs based on predetermined formula like 80/20.

Question 12

What is a Cost Plus Award Fee contract

Answer 12

Seller is reimbursed for all legitimate costs
Majority of fee earned based on satisfaction performance criteria defined
Fee based on buyer’s determination of seller’s performance.

Question 13

Name tools / techniques

Answer 13

Make-or-buy Analysis
Expert judgement
Market research
Meetings

Question 14

Make-or-buy analysis

Answer 14

Technique
Determine if work can be done by project team or purchased from outside source
Budget constraints influence
Available contracts types considered in buy

Question 15

Market Research

Answer 15

Examine industry and vendor capabilities

Question 16

Expert judgement

Answer 16

Purchasing - inputs for developing or modifying criteria used to eval seller proposals
Legal - assist with issues, terms and conditions.

Question 17

Meetings

Answer 17

Info exchange with potential bidders

Question 18

Procurement Mgmt Plan “how”

Answer 18

Describes how a project team will acquire goods and services form outside performing org
How processes will be managed from developing to closing.

Question 19

Procurement Mgmt plan guides what?

Answer 19

Contract types used
Risk mgmt issues
Use of independent estimates
Unilateral actions by proj mgmt team
Standardized procurement docs
Managing suppliers
Coordinating procurement with oth proj aspects
Constraints
Assumptions
Handling long lead times
Handling make-or-buy decisions, link to est activity resources & dev sched process
Setting sched dates
Identify reqs for perf bonds or ins contracts
Establish seller direction for WBS
Establish SOW form/format
Identify pre-qual sellers
Metrics to manage contracts & eval sellers

Question 20

Procurement SOW

Answer 20

Dev from project scope baseline
Defines portion of proj scope to be included within related contract
Describes procurement item sufficient detail for sellers to assess
Written clear, complete and concise
Can be revised and refined until signed.