Chapter 12 Flashcards
The processes necessary to purchase or acquire products, services, or results needed from outside the project team.
Project procurement management
This includes the management and control processes required to develop and administer agreements such as contracts, purchase orders, memoranda of agreements (MOA), or internal service level agreements (SLAs)
Project procurement management
Who might procure items for a project?
Members of the project team, management, members of the organizations purchasing department
What are the project procurement processes?
Plan procurement management
Conduct procurements
Control procurements
More than most project management processes the procurement process has significant….. obligations and penalties?
Legal
Who are the two parties in procurement processes?
Buyer and seller
A contract should clearly state what…?
The deliverables and results expected, including any knowledge transfer from the seller to the buyer
What forms can an agreement be in?
Contract SLA Understanding MOA Purchase Order
What are some names organizations might use for procurement departments?
Procurement Purchasing Contracting Procurement Acquisitions
What is the primary focus of the review and approval process of the procurement process?
To ensure that the contract adequately describes the products, services, or results that the seller is agreeing to provide, while being in compliance with the laws and regulations regarding procurements
How might a seller be identified?
Contractor
Vendor
Service provider
Supplier
How might a buyer de described ?
Owner of the final product Subcontractor Acquiring organization Service requestor Purchaser
During the contract lifecycle what does a seller become (in order)?
Bidder
Selected source
Contracted supplier or vendor
What does SOW stand for?
Statement of work
What is it called when the project manager assumes the purchasing authority role to negotiate and sign contracts?
Decentralized purchasing
If purchasing is done by another department outside the project what is that type of purchasing called?
Centralized
What is BIM?
A building information model
An online procurement tool that gives buyers a single source to find and complete procurement docs . This saves a lot of $ and time.
What are some trends and emerging practices in procurement management?
Page-463
Advance in tools- Building information models
More advanced risk management -risk ownership identified in the contract
Changing contracting procedures-use of internationally recognized contracts
Logistics and supply chain management - plan for lead time
Technology and stakeholder relations- use of webcams
Trial engagements-see if seller works well with the org. By initially having several candidate sellers
What are tailoring considerations for the project procurement management processes?
Complexity of procurement
Physical location
Governance and regulatory environment
Availability of contractors
What are some considerations for agile/adaptive environments?
Buyer and sellers share risk and rewards
For larger projects, Using a master service agreement(MSA) for overall engagement and adaptive work in an appendix or supplement
The process of documenting project procurement decisions, specifying the approach and identifying potential sellers.
Plan procurement management
What personnel might be included in the procurement process?
Personnel from the Purchasing or procurement department
Personnel from the buying organizations legal department
What’s TOR stand for?
Terms of reference
What responsibilities should be documented in the procurement management plan?
See page 468
Where might you find information on which resources will be purchased or leased?
Resource management plan
What are the OPAs are inputs to the plan procurement management process?
Various types of contractual agreements I.e.
Pre-approved seller lists
Formal procurement policies, procedures, and guidelines
Contract types
Cost -reimbursable contracts
What are the contract families?
Fixed-price
Cost-reimbursable
Time-and materials contract
(This is a hybrid type of contract)
What are the types of fixed-price contracts?
Firm fixed price (FFP)
Fixed price incentive fee (FPIF)
Fixed price with economic adjustments (FPEPA)
Describe a fixed price contract.
In these contracts there is a set fixed total price for a defined product, service, or result to be provided.
When should a fixed price contract be used?
The requirements are well defined and no significant changes to the scope are expected.
Describe a firm fixed price (ffp) contract?
This is when the price for goods is set at the outset and not subject to change unless the scope of work changes.
What is the most commonly used contract type?
FFP
Describe a fixed price incentive fee (FPIF) contract.
This contract allows for deviation from performance, with financial incentives tied to achieving agreed-upon metrics. A price ceiling is set and all costs above the price ceiling are the responsibility of the seller.
Describe fixed price with economic price adjustments (FPEPA) contracts.
Allows for special provisions allowing for predefined final adjustments to the contract price due to changed conditions, such as inflation changes or cost increases (or decreases) for specific commodities.
When might a FPEPA contract be used?
When the sellers performance period spans a considerable period of years, or if the payments are made in different currency.
Describe a cost-reimbursable contracts.
These contracts involve payments (cost reimbursements) to the seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit.
When should cost-reimbursable contracts be used?
If the scope of work is expected to change significantly during the execution of the contract
What are the types of cost-reimbursable contracts?
Cost plus fixed fee (CPFF)
Cost plus incentive fee (CPIF)
Cost plus award fee (CPAF)
Describe a cost plus fixed fee (CPFF) contract.
The seller is reimbursed for all allowable costs for performing the contract work and receives a fixed -fee payment calculated as a percentage of the initial estimated project costs.
Fee amounts do not change unless the project scope changes.
Describe a cost plus incentive (CPIF) contract?
The seller is reimbursed for for all allowable costs for performing the contract work and receives a predetermined incentive fee based on achieving certain performance objectives as set forth in the contract.
What happens if I’m a CPIF contract the final costs are less or greater than the original estimated costs.
The buyer and seller share costs from the departures based upon pre-negotiated Cost-sharing formulas.
Describe the cost plus award fee (CPAF).
The seller is reimbursed for all legitimate costs, but the majority of the fee is earned based on the satisfaction of certain broad subjective performance criteria that are defined and incorporated into the contract.
The determination of the fee is based solely on the subjective determination of the seller performance by the buyer and is generally not subject to appeals.
This type of contract is often used for staff augmentation, acquisition of experts, and outside support when a precise statement of work cannot be quickly prescribed.
Time and material contracts (T&M)
Aka (time and means contracts)
What is a data gathering technique that can be used for procurement management process?
Market research
This includes examination of industry and specific seller capabilities through conferences, online reviews etc.
Market research
What data analysis techniques is used for procurement management?
Make-or-buy analysis
What techniques might be used in the make-or-buy analysis?
Payback period Return on investment (ROI) Internal rate of return (IRR) Discounted cash flow Net present value (NPV) Benefit/cost analysis (BCA)
What is nice to include in procurement documents so bidders know how they will be evaluated?
The evaluation method
What are common selection methods?
Least cost Qualifications only Quality-based/highest technical proposal score Quality and cost-based Sole source Fixed budget
This source selection method is appropriate for procurements of a standard or routine nature where well-established practices and standards exist and from which a specific and well-defined outcome is expected, which can be executed at different costs.
Least cost
When would you use the qualifications only source selection method?
When the value of the procurement is relatively small.
This method is cost and time efficient.
Describe the quality based/highest technical proposal score source selection method.
The sellers submit proposals with technical and cost details to buyers. The seller who submitted the highest-ranked technical proposal is selected if their financial proposal can be negotiated and accepted.
Describe the quality and cost-based source selection method.
Quality and cost are considered during the evaluation with quality being the key element when compared to cost if risk and uncertainty are greater for the project.
In what source selection method does a buyer ask a specific seller to prepare technical and financial proposals to be negotiated. There is no competition. It is only acceptable when properly justified and should be viewed as an exception.
Sole source
Describe the fixed budget source selection method.
It requires disclosing the available budget to invited sellers in the RFP and selecting the highest-ranking technical proposal within the budget.
With what source selection method I’d it best to only use it when the SOW is precisely defined, no changes are anticipated, and the budget is fixed and cannot be exceeded.
Fixed budget
Where can you find information on the activities to be undertaken during the procurement process?
I.e. what type of bidding will occurs (local, international competitive, etc.)
Timetable of procurement activities,
Risk mgmt. issues,
Prequalified sellers,
Stakeholder roles and responsibilities etc.
Procurement management plan
What is the objective of the procurement strategy?
To determine the project delivery method,The type of legally binding agreement(s), and how the procurement will advance through the procurement phases
What are some cost payment types?
Lump sum Firm fixed price Cost plus incentive fees Time and materials Target cost
These are used to solicit proposals from prospective sellers.
Bid documents
What terms are generally used when the seller selection decision is based on price?
Bid
Tender
Quotation
What term is used when seller selection is based on factors or more important than price. I.e. technical capability or approach.
Proposal
What is the most formal of the “request for” documents and has strict procurement rules?
Request for proposal
Describe and RFI.
A request for information is used when more info on the goods and services to be acquired is needed from the sellers. It is typically followed by an RFQ or RFP
Describe an RFQ.
An RFQ is commonly used when more information is needed on how vendors would satisfy the requirements and/or how much it will cost.
Describe and RFP and it when it is used.
An RFP is used when there is a problem in the project and the solution is not easy to determine
Describe how the SOW for each procurement relates to the project scope.
It is developed from the project scope baseline and defines only that portion of the project scope that is to be included within the related contract.
What information might be included in the SOW?
Specifications Quantity desired Quality levels Performance data Period of performance Work location
Can the SOW be revised as it moves through the procurement process.
Yes, it can be revised until inch into a signed agreement.
The term (TOR) is sometimes used when contracting for services. What does it mean?
Terms of reference
Buyers use a weighted system to select a seller, True or false?
True
How can a procurement team ensure they are getting a reasonable price?
Use independent cost estimates
What are some procurement strategy delivery methods used for construction projects?
Turnkey Design build (DB) Design bid build (DBB) Design build operate (DBO) Build own operate transfer (BOOT)
What are procurement strategy delivery methods for professional services?
Buyer/service provider w no subcontracting
Buyer/services provider with subcontracting allowed
Joint venture between buyer and service provider
Buyer/services provider acts as the representative
What is the process of obtaining seller responses, selecting a seller, and awarding a contract.
Conduct procurement
What are some examples of procurement documentation?
Bid documents
Procurement statement of work
Independent cost estimates
Source selection criteria
What is prepared in response to a procurement document package?
Seller proposals
Is it good practice for a project to require that sellers submit separate technical and price proposals?
Yes
What do you call it when you’re communicating with users or potential users of a product, service or result.
Advertising
What do you call meetings between the buyer and prospective sellers prior to proposal submittal?
Bidder conferences
Why are bidder conferences used?
To ensure that all prospective bidders have a clear and common understanding of the procurement and no bidders receive preferential treatment .
A discussion aimed at reaching an agreement.
Negotiation
How does negotiation conclude ?
With a signed contract document or other formal agreement that can be executed by both buyer and seller
What do you call sellers that have been judged to be in competitive range based on the outcome of the proposal or bid evaluation?
Selected sellers
Describe a contract.
It’s a mutually binding agreement that obligated the seller to provide the specified products, services, or results
Obligates the buyer to compensate the seller
Represents a legal relationship that is subject to remedy in the courts
Details on page :489
The process of managing procurement relationships, monitoring contract performance, and making changes and corrections as appropriate and closing out contracts.
Control procurements
True or false, due to the legal aspect many organizations treat contract administration as n organizational function that is separate from the project.
True
Which has better controls, a contract that requires payments linked to inputs such as labor hours or one that has inputs linked to project output and deliverables.
A contract that requires payments linked to project output and deliverables
What is a principal concern to consider when making payments?
To ensure there is a close relationship of payments made to the work accomplished
What does procurement documentation contain?
Complete supporting records for the administration of the procurement processes.
SOW payment info Contractor work performance info. Plans Drawings Etc.
True or false, all procurement-related changes are formally documented in writing and approved before being implemented through the control procurements process?
True
Potential constructive changes are those requested changes where the buyer and seller cannot reach an agreement on compensation for change or cannot agree that a change has occurred.
Claims
What happens to claims if they can’t be resolved?
They become disputes and finally appeals
If claims can’t be resolved by the parties themselves it might be handled with what…?
Alternative dispute resolution (ADR)
What data analysis techniques can be used to monitor and control procurements?
Performed reviews
Earned value analysis (EVA)
Trend Analysis
A structure review of the work being performed by the contractor.
An inspection
Structured review of the procurement process.
Audits
