All-in-One Chapter 12 - Managing Project Procurements

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

a meeting of all the project’s potential vendors to clarify the contract statement of work and the details of the contracted work

Question 4

Claims

Answer 4

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. 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 - though written is preferred.

Question 6

Contract change control system

Answer 6

this defines the procedures for how the contract may be changed. The process of changing the contract includes the forms; documented communications; tracking; conditions within the project; etc

Question 7

Contract statement of work (SOW)

Answer 7

this document requires that 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

Question 9

Cost plus fixed fee contract

Answer 9

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.

Question 10

Cost plus incentive fee

Answer 10

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.

Question 11

Cost plus percentage of costs

Answer 11

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 of cost overruns

Question 12

Direct costs

Answer 12

these are costs incurred by the project in order for the project to exist.

Question 13

Fixed-price contracts

Answer 13

also known as firm fixed-price and lump-sum contracts, these are agreements that define a total price for the product the seller is to provide

Question 14

Fixed-price incentive fee

Answer 14

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.

Question 15

Fixed-price and economic price adjustments

Answer 15

a fixed-price contract with a special allowance for price increases based on economic reasons such as inflation or the cost of raw materials

Question 16

Force majeure

Answer 16

an “act of god” that may have a negative impact on the project

Question 17

Independent estimates

Answer 17

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

Question 18

Indirect costs

Answer 18

these are costs attributed to the cost of doing business.

Question 19

Invitation for Bid (IFB)

Answer 19

from buyer to seller. requests the seller to provide a price for the procured product or service

Question 20

Letter contract

Answer 20

a letter contract allows the vendor to begin working on the project immediately. It is often used as a stopgap solution.

Question 21

Letter of intent

Answer 21

a letter of intent is not a contract, but a letter stating that the buyer is intending to create a contractual relationship with the seller

Question 22

Make-or-buy decision

Answer 22

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

Question 23

Privity

Answer 23

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

Question 24

Procurement management plan

Answer 24

a project management subsidiary plan that documents the decisions made in the procurement planning processes

Question 25

Procurement planning

Answer 25

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

Question 26

Proposal

Answer 26

a document the seller provides to the buyer. The proposal 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

Question 27

Purchase Order (PO)

Answer 27

a purchase order is a form of unilateral contract that the buyer provides to the vendor showing that the purchase has been approved by the buyer’s organization

Question 28

Quotation

Answer 28

from seller to buyer. price is the determining factor in the decision-making process

Question 29

Request for Proposal (RFP)

Answer 29

from buyer to seller. requests the seller to provide a proposal to complete the procured work or to provide the procured product

Question 30

Request for Quote (RFQ)

Answer 30

from buyer to seller. requests the seller to provide a price for the procured product or service

Question 31

Risk-related contractual agreements

Answer 31

when the project management team decides to use transference to respond to a risk, a risk-related contractual agreement is created between the buyer and the seller

Question 32

Screening system

Answer 32

a tool that filters or screens out vendors that don’t qualify for the contact

Question 33

Seller rating system

Answer 33

these are used by organizations to rate prior experience with each vendor that they have worked with in the past. the seller rating system can track performance, quality ratings, delivery, and even contract compliance

Question 34

Time and materials contract

Answer 34

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.

Question 35

Weighting system

Answer 35

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.