Ch. 12: Project Procurement

Question 1

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

Answer 1

Bid

Question 2

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

Answer 2

Bidder conference

Question 3

These are disagreements between the buyer and the seller, usually centering on a change, who did the change, and even if 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.

Answer 3

Claims

Question 4

A contract is a formal agreement between the buyer and the seller. Contracts can be oral or written—though written is preferred.

Answer 4

Contract

Question 5

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.

Answer 5

Contract change control system

Question 6

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.

Answer 6

Contract statement of work (SOW)

Question 7

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.

Answer 7

Cost plus fixed fee contract

Question 8

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.

Answer 8

Cost plus incentive fee

Question 9

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.

Answer 9

Cost plus percentage of costs

Question 10

These are costs incurred by the project in order for the project to exist. Examples include equipment needed to complete the project work, salaries of the project team, and other expenses tied directly to the project’s existence.

Answer 10

Direct costs

Question 11

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.

Answer 11

Fixed-price contracts

Question 12

An “act of God” that may have a negative impact on the project; consider fire, hurricanes, tornados, and
earthquakes.

Answer 12

Force majeure

Question 13

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.

Answer 13

Independent estimates

Question 14

These are costs attributed to the cost of doing business. Examples include utilities, office space, and other overhead costs.

Answer 14

Indirect costs

Question 15

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

Answer 15

Invitation for bid (IFB)

Question 16

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

Answer 16

Letter contract

Question 17

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.

Answer 17

Letter of intent

Question 18

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.

Answer 18

Make-or-buy decision

Question 19

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

Answer 19

Privity

Question 20

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

Answer 20

Procurement management plan

Question 21

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

Answer 21

Procurement planning

Question 22

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 reputations, and ideas on how the vendor can complete the contracted work for the buyer.

Answer 22

Proposal

Question 23

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

Answer 23

Purchase order (PO)

Question 24

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

Answer 24

Quotation

Question 25

From buyer to seller. Requests the seller to provide a proposal to complete the procured work or to provide the procured product.

Answer 25

Request for proposal (RFP)

Question 26

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

Answer 26

Request for quote (RFQ)

Question 27

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.

Answer 27

Risk-related contractual agreements

Question 28

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

Answer 28

Screening system

Question 29

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

Answer 29

Seller rating systems

Question 30

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.

Answer 30

Time and materials contract

Question 31

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.

Answer 31

Weighting system