13 | Executing the Procurement Plan Flashcards
In this lesson, you will: • Obtain responses from vendors. • Determine which vendors to use for the project.
Qualified Vendors?
Qualified vendors are vendors who are approved to deliver products, services, or results based on
the procurement requirements identified for a project. The list of qualified vendors can be obtained
from historical information about different vendors who delivered resources required for prior
projects executed in your organization.
The Qualified Vendors List?
A qualified vendors list contains details regarding vendors who meet the organization’s requirements and to whom requests can be sent. It is sometimes known as an approved vendor list. The RFI for each vendor is scrutinized and evaluated for qualifying the vendors. The term “qualified vendors” does not mean that the organization is bound to do business with them. It only indicates that when needed, the organization will interact with the vendors and RFPs, IFBs, or RFQs will be sent to the qualified vendors. Generally, vendor identification number or vendor registration number is assigned to the qualified vendors.
Bidder Conferences?
Bidder conferences are meetings conducted by the buyer after issuing an RFP but prior to submissions of a bid or proposal by the vendors. During this meeting, the buyer explains the requirements, proposed terms, and conditions, and the buyer clarifies the vendors’ queries. The buyer facilitates the conference to ensure that all prospective vendors have a clear and common understanding of the technical and contractual requirements of the procurement. Bidder conferences can also be called vendor conferences, pre-bid conferences, pre-proposal conferences, or contractor conferences.
Vendor Proposals?
Vendor proposals are responses submitted by potential vendors that are prepared in accordance with the requirements stated in the procurement documents. The proposal should demonstrate an understanding of the procurement need, describe the vendor’s ability to provide the service or product, propose methodology for providing the service, and detail the price for delivering the desired goods or services.
Short-Listing (Screening)?
Short-listing, or screening, is a technique used to reduce the number of proposals that have been received to a more concise number for further analysis. In this process, the buyer might use an abbreviated scoring system or internal discussions to remove some proposals from further consideration.
Proposal Evaluation Techniques?
Proposal evaluation techniques are a set of methods to evaluate, create a short-list, and select a vendor. The fundamental part of any evaluation technique is the set of evaluation criteria. The evaluation techniques may suggest subjective or objective criteria or a combination of both. Though a weighting system is the most commonly used evaluation technique, short-listing (screening) or independent estimating are also used in combination.
Weighting Systems?
A weighting system is a method for quantifying qualitative data to minimize the influence of personal bias on source selection. By assigning numerical weights to evaluation criteria, you can objectively prioritize the criteria that best meets the needs of your project.
Weighted scorecard?
A weighted scorecard is one type of weighting system. In a weighted scorecard, evaluation criteria are grouped in general categories and each category is given a numerical weight. A vendor is rated on a scale of zero to five for each of the technical criteria. These numbers are totaled and then multiplied by the weighting factor to determine the weighted score for that category.
Procurement Negotiation Stages?
Procurement negotiation is the process of coming to a mutual agreement regarding the terms and conditions of a contract. Before a contract is signed by both parties, a number of procurement negotiation stages are conducted between the concerned parties to arrive at a consensus on the terms and conditions of the contract.
What are the five different stages for contract negotiation?
- Introduction:
All parties become acquainted and the overall attitude of the negotiation is established; this tone is largely set by the buyer’s team leader—normally,
the person with authority to sign the contract will lead the contract negotiation team. - Probing:
Each side attempts to learn more about the other’s real position. - Bargaining:
Give-and-take discussions take place to arrive at the best possible agreement for all. - Closure:
The tentative agreement is revised and everyone has an opportunity to tweak the results. - Agreement:
The team tries to ensure that all parties clearly understand and agree to all
terms and conditions of the contract
What are the 5 types of agreements?
- Memorandum of understanding
- Letter of intent
- Service Level Agreement (SLA)
- Contract
- Fixed-price
- Cost-reimbursable
- Time & Material (T&M)
- Procurement Contract
- Term contract
- Completion contract
Memorandum of Understanding?
A Memorandum of Understanding is an agreement between two or more parties to form a business partnership. It is not legally binding, but is more formal than a “gentlemen’s agreement.” It is used where the parties do not wish to enter into a formal contract, or when a legally enforceable contract cannot be created.
Letter of intent?
Similar to a memorandum of understanding, a letter of intent is a non-binding document that outlines the agreement between parties before the official agreement documents are finalized and signed.
Service Level Agreement (SLA)?
A Service Level Agreement (SLA) is a contract between an organization that provides a service, and the user of the service. The contract specifies what the customer will receive and the performance standards the provider is obligated to meet. Performance standards can include, for
example, the percentage of time the service will be available; help desk response time; and performance benchmarks that the level of service will be compared to. In many instances, penalties and exclusions are included in the SLA. Information technology companies frequently use SLAs.
Contracts?
Contracts are mutually binding agreements that detail the obligations of both parties; in terms of procuring work, they relate to both the buyer and vendor. Although contracts are customized for each agreement, they tend to fall into a number of standard patterns, such as fixed-price, cost-reimbursable, or Time and Material (T&M) contracts.
Contract Components?
In general, any contract must include these elements, at a minimum:
- Description of the project, its deliverables, and scope.
- Delivery date or other schedule information.
- Identification of authority, where appropriate.
- Responsibilities of both parties.
- Management of technical and business aspects.
- Price and payment terms.
- Provisions for termination.
- Applicable guarantees and warranties.
- Limits of liabilities or damages.
- Indemnity or compensation paid for losses incurred.
- Insurance requirements.
- Nondisclosure, patent indemnification, non-compete, or other applicable legal statements.
- Other applicable terms and legal requirements.
What are the 3 common types of contracts?
- Fixed-price
- Cost-reimbursable
- Time and Material (T&M)
Fixed price contract?
Also called a lump sum contract, it establishes a total price for a product or service. The vendor agrees to perform the work at the negotiated contract value. This value is based on anticipated costs and profit, as well as a premium to cover unforeseen problems. The contract may include incentives for meeting requirements such as schedule milestones. Fixed-price contracts provide maximum protection to the buyer but require a long time for preparation and bid evaluation. Because this type of contract is tied to a fixed cost, it is most suited to
projects with a high degree of certainty about their parameters.
What are the 4 types of fixed price contracts?
- Firm Fixed Price Contracts (FFP)
- Fixed Price Incentive Fee Contracts (FPIF)
- Fixed Price with Economic Price Adjustable Contracts (FP-EPA)
- Purchase Order (PO)
Firm Fixed Price Contracts (FFP)?
This is a commonly used contract type favored by most buying organizations because the price for products or services is set at the outset and not subject to change unless the scope of work changes
Fixed Price Incentive Fee Contracts (FPIF)?
This fixed-price contract is flexible in that it allows for deviation from performance. Financial incentives are tied to achieving metrics that are agreed to earlier
Fixed Price with Economic Price Adjustment Contracts (FP-EPA)?
This is a fixed-price contract type with special provision to allow predefined final adjustments to the contract price due to changed conditions, such as inflation changes or cost increases or decreases for specific commodities such as fuel, and for currency fluctuations. An FP-EPA contract protects both buyer and vendor
from external conditions beyond their control. It is used whenever the vendor’s performance period spans a considerable time period. The Economic Price Adjustment (EPA) clause must relate to a reliable financial index, which is used to precisely adjust the final price.
Purchase Order (PO)?
This can be a type of fixed-price contract, or a separate document that is appended to a contract. It is sent from a
buyer to a vendor with a request for an order. When the vendor accepts the purchase order, a legally binding contract is formed. A purchase order is sometimes used for commodity items where the specifications are clear; for example, in a catalog.
Cost-reimbursable contract?
This contract provides vendors with a refund of the expenses incurred while providing a service, plus a fee representing vendor profit. Incurred costs are generally classified as direct costs (those incurred for the project), or indirect costs (costs allocated to the project by the organization as a cost of doing business). These contracts sometimes include incentives for meeting certain objectives, such as costs, schedule, or technical performance targets. This approach is tied to the actual cost to perform the contract, and therefore is most suitable if project parameters are uncertain.
What are the 3 types of cost-reimbursable contracts?
- Cost Plus Fixed Fee Contracts (CPFF)
- Cost Plus Incentive Fee Contracts (CPIF)
- Cost Plus Award Fee Contracts (CPAF)
Cost Plus Fixed Fee Contracts (CPFF)?
This contract ensures that the vendor is reimbursed for all allowable costs for performing the contract work. The vendor receives a fixed fee payment calculated based on the initial estimated project costs. This fixed fee
does not change due to vendor performance
Cost Plus Incentive Fee Contracts (CPIF)?
This contract ensures that the vendor is reimbursed for all allowable costs for performing the contract work. The vendor also receives a predetermined target fee. In addition to this, there is a provision of an incentive fee
payable to the vendor, which is based on achieving certain performance objectives as set forth in the contract. In case the final costs are lesser or greater than the original estimated costs, then both the buyer and vendor share the costs from the difference based on the pre-negotiated cost sharing formula; for example, an 80/20 split over or under target costs based on actual performance of the vendor
Cost Plus Award Fee Contracts (CPAF)?
This contract ensures that the vendor is reimbursed for all legitimate costs. The majority of the fee is earned based on the satisfaction of certain broad subjective
performance criteria defined and incorporated into the contract. The determination of the fee is based on the buyer’s subjective determination of vendor performance and is generally not subject to appeals
Time and Material
(T&M)?
This type of contract includes aspects of both fixed-price and cost-reimbursable contracts. The buyer pays the vendor a negotiated hourly rate and full reimbursement for materials used to complete the project. This contract is used for staff augmentation, acquisition of experts, and
any outside support when a precise SOW cannot be quickly prescribed. Many organizations include not-to-exceed values and time limits in T&M contracts to prevent unlimited cost growth.
Procurement Contract?
A procurement contract is a mutually binding agreement that details the obligations of the buyer and vendor. The procurement contract, which can be a complex document or in the form of a simple purchase order, is given to each selected vendor. Some of the major components in the
contract include: the SOW, the schedule baseline, the period of performance, performance reporting, roles and responsibilities, pricing, payment terms, penalties, acceptance criteria, warranty, liability limitations, change request handling, insurance and performance bonds, termination clauses, and other applicable terms and legal requirements.
Term Contracts?
A term contract engages the vendor to deliver a set amount of service—measured in staff-hours or a similar unit—over a set period of time.
Completion Contract?
A completion contract stipulates that work will not be
considered complete until the vendor delivers the product to the buyer and the buyer accepts the product
