Chapter 12

Question 1

bid

Answer 1

A document from the seller to the buyer. Used when price is the determining factor in the decision-making process.

Question 2

bidder conference

Answer 2

A meeting with prospective sellers to ensure that all sellers have a clear understanding of the product or service to be procured. Bidder conferences allow sellers to query the buyer on the details of the product to help ensure that the proposal the seller creates is adequate and appropriate for the proposed agreement.

Question 3

centralized contracting

Answer 3

All contracts for all projects need to be approved through a central contracting unit within the performing organization.

Question 4

contract

Answer 4

A legal, binding agreement, preferably written, between a buyer and the seller detailing the requirements and obligations of both parties. Must include an offer, an acceptance, and a consideration.

Question 5

contract administration

Answer 5

The process of ensuring that the buyer and the seller both perform to the specifications within the contract.

Question 6

contract change control system

Answer 6

Defines the procedures for how contracts may be changed. Includes the paperwork, tracking, conditions, dispute resolution procedures, and procedures for getting the changes approved within the performing organization.

Question 7

contract closeout

Answer 7

A process for confirming that the obligations of the contract were met as expected. The project manager, the customer, the key stakeholder, and, in some instances, the seller complete the product verification together to confirm the contract has been completed.

Question 8

contract file

Answer 8

A complete indexed set of records of the procurement process incorpo- rated into the administrative closure process. These records include financial informa- tion as well as information on the performance and acceptance of the procured work.

Question 9

cost plus award fee

Answer 9

This contract requires the buyer to pay for all the project costs and give the seller an award fee based on the project performance, meeting certain proj- ect criteria, or meeting other goals established by the buyer. The award fee can be tied to any factor the buyer determines, and the factor doesn’t have to be exact.

Question 10

cost-reimbursable contracts

Answer 10

A contract that pays the seller for the product. In the payment to the seller, there is a profit margin of the difference between the actual costs of the product and the sales amount.

Question 11

direct costs

Answer 11

Costs incurred by the project in order for it 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.

Question 12

evaluation criteria

Answer 12

Used to rate and score proposals from sellers. In some instanc- es, such as a bid or quote, the evaluation criterion is focused just on the price the seller offers. In other instances, such as a proposal, the evaluation criteria can be multiple values: experience, references, certifications, and more.

Question 13

fixed price with economic price adjustment contract

Answer 13

A contract for long- term projects that may span years to complete the project work. The contract does define a fixed price, with caveats for special categories of price fluctuation.

Question 14

fixed-price contracts

Answer 14

Fixed-price contracts are also known as firm-fixed-price and lump-sum contracts. These contracts have a preset price that the vendor is obligated to perform the work for or to provide materials for the agreed-upon price.

Question 15

force majeure

Answer 15

A powerful and unexpected event, such as a hurricane or other disaster.

Question 16

invitation for bid

Answer 16

A document from the buyer to the seller. Requests the seller to provide a price for the procured product or service.

Question 17

letter of intent

Answer 17

Expresses the intent of the buyer to procure products or services from the seller. Not equivalent to a contract.

Question 18

make-or-buy analysis

Answer 18

Used in determining what part of the project scope to make and what part to purchase.

Question 19

oligopoly

Answer 19

A market condition where the actions of one competitor affect the actions of all the other competitors.

Question 20

procurement

Answer 20

The process of a seller soliciting, selecting, and paying for products or services from a buyer.

Question 21

procurement audits

Answer 21

The successes and failures within the procurement process are reviewed from procurement planning through contract administration. The intent of the audit is to learn from what worked and what did not work during the procurement processes.

Question 22

procurement management plan

Answer 22

This subsidiary project plan documents the decisions made in the procurement planning processes. It specifies how the remaining procurement activities will be managed.

Question 23

proposal

Answer 23

A document from the seller to the buyer, responding to a request for proposal or other procurement document.

Question 24

qualified sellers list

Answer 24

The performing organization may have lists of qualified sellers, preferred sellers, or approved sellers. The qualified sellers list generally has contact information, history of past experience with the seller, and other pertinent information.

Question 25

quote

Answer 25

A document from the seller to the buyer; used when price is the determining factor in the decision-making process.

Question 26

request for proposal

Answer 26

A document from the buyer to the seller that asks the seller to provide a proposal for completing the procured work or for providing the procured product.

Question 27

request for quote

Answer 27

A document from the buyer to the seller asking the seller to provide a price for the procured product or service.

Question 28

should-cost estimates

Answer 28

These estimates are created by the performing organization to predict what the cost of the procured product should be. If there is a significant difference between what the organization has predicted and what the sellers have proposed, the statement of work was inadequate or the sellers have misunderstood the requirements or the price is too high.

Question 29

single source

Answer 29

A specific seller that the performing organization prefers to contract with.

Question 30

sole source

Answer 30

The only qualified seller that exists in the marketplace.

Question 31

statement of work

Answer 31

This fully describes the work to be completed, the product to be supplied, or both. The SOW becomes part of the contract between the buyer and the seller. It is typically created as part of the procurement planning process and is used by the seller to determine whether it can meet the project’s requirements.

Question 32

time and materials

Answer 32

A contract type where the seller charges the buyer for the time and materials for the work completed. T&M contracts should have a not-to-exceed clause (NTE) to contain costs.