Chapter 12

Question 1

SOW

Answer 1

Statement of Work

Question 2

TOR

Answer 2

Terms of Reference

Question 3

Project Communications Management Processes

Answer 3

Plan Communications Management
Manage Communications
Monitor Communications

Question 4

Project Procurement Management Processes

Answer 4

Plan Procurement Management
Conduct Procurement
Control Procurements

Question 5

Plan Procurement Management

Answer 5

It is the process of documenting project procurement decisions, specifying the approach and identifying potential sellers.

Question 6

Firm Fixed Price

Answer 6

The most commonly used contract type
It is favored by most buying organizations because the price of the goods is set at the outset and not subject to change unless the scope of work changes

Question 7

Cost-reimbursable Contracts

Answer 7

This category of contract involves payments (Cost reimbursements) to the seller for all legitimate actual costs for completed worj plus a fee representing seller profit.

Question 8

Procurement Management plan

Answer 8

It contains activities to be undertaken during the procurement process.

Question 9

Procurement Strategy

Answer 9

The object of the procurement strategy is to determine the project delivery model, the type of legally binding agreements and how the procurement will advance through the procurement phases.

Question 10

Bid Documents

Answer 10

They are used to solicit proposals from prospective sellers

Question 11

Request for Information

Answer 11

It is used when more information on the goods and services to be acquired is needed from the sellers

Question 12

Conduct Procurements

Answer 12

It is the process of obtaining seller responses, selecting a seller and awarding a contract

Question 13

Control Procurements

Answer 13

It is the process of managing procurement relationships; monitoring contract performance, and making changes and corrections as appropriate; and closing out contracts

Question 14

Alternative dispute resolution

Answer 14

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 15

Bid

Answer 15

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

Question 16

Bidder conference

Answer 16

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

Question 17

Claims

Answer 17

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 18

Contract

Answer 18

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

Question 19

Contract change control system

Answer 19

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.

Question 20

Contract statement of work (SOW also CSOW)

Answer 20

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 21

Cost plus award fee contract

Answer 21

A contract that pays the vendor all costs for the project, but also includes a buyer-determined award fee for the project work.

Question 22

Cost plus fixed fee contract

Answer 22

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 23

Cost plus incentive fee

Answer 23

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 24

Cost plus percentage of costs

Answer 24

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.

Question 25

Direct costs

Answer 25

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.

Question 26

Fixed-price contracts

Answer 26

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 27

Fixed-price incentive fee

Answer 27

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 28

Fixed-price with economic price adjustments

Answer 28

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 29

Force majeure

Answer 29

An “act of God” that may have a negative impact on the project. Examples include fire, hurricanes, tornadoes, and earthquakes.

Question 30

Independent estimates

Answer 30

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 31

Invitation for Bid (IFB)

Answer 31

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

Question 32

Letter contract

Answer 32

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

Question 33

Letter of intent

Answer 33

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 34

Make-or-buy decision

Answer 34

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 35

Privity

Answer 35

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

Question 36

Procurement management plan

Answer 36

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

Question 37

Procurement planning

Answer 37

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

Question 38

Proposal

Answer 38

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 39

Purchase order (PO)

Answer 39

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 40

Quotation

Answer 40

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

Question 41

Request for Proposal (RFP)

Answer 41

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

Question 42

Request for Quote (RFQ)

Answer 42

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

Question 43

Risk-related contractual agreements

Answer 43

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 44

Screening system

Answer 44

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

Question 45

Seller rating systems

Answer 45

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 46

Terms of Reference

Answer 46

Defines the obligations for the seller, what the seller will provide, and all of the particulars of the contracted work. Terms of reference is similar to the statement of work.

Question 47

Time and materials contract

Answer 47

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 48

Weighting system

Answer 48

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.