Chapter 12 - Project Procurement Management 4%

Question 1

Includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team and the management and control processes required to develop and administer agreements such as contracts, purchase orders, memoranda of agreements (MOAs), or internal service level agreements (SLAs).

Answer 1

Project Procurement Management

Question 2

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

Answer 2

Plan Procurement Management

Question 3

The process of obtaining seller responses, selecting a seller, and awarding a contract.

Answer 3

Conduct Procurements

Question 4

The process of managing procurement relationships, monitoring contract performance, making changes and corrections as appropriate, and closing out contracts.

Answer 4

Control Procurements

Question 5

Category of contracts: Involves setting a fixed total price for a defined product, service, or result to be provided. These contracts should be used when the requirements are well-defined and no significant changes to the scope are expected.

Answer 5

Fixed-Price

Question 6

Category of contracts: Involves payments (cost reimbursements) to the seller for all legitimate actual costs incurred for the completed work, plus a fee representing seller profit. This type of contract should be used if the scope of work is expected to change significantly during the execution of the contract.

Answer 6

Cost-Reimbursable

Question 7

Category of contracts: Hybrid type of contractual agreement with aspects of both cost-reimbursable and fixed-price contracts. They are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed.

Answer 7

Time and Materials (T&M)

Question 8

Type of Fixed-Price contract: The price of goods is set at the outset and not subject to change unless the scope of work changes.

Most common of this category of contract.

Answer 8

Firm Fixed Price (FFP)

Question 9

Type of Fixed-Price contract: Gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed-upon metrics. Typically, such financial incentives are related to cost, schedule, or technical performance of the seller. Under these types of contracts, a price ceiling is set, and all costs above the price ceiling are the responsibility of the seller.

Answer 9

Fixed Price Incentive Fee (FPIF)

Question 10

Type of Fixed-Price contract: This type of contract is used whenever a seller’s performance period spans a considerable period of years, or if the payments are made in a different currency. It is a fixed-price contract, but with a special provision allowing for predefined final adjustments to the contract price due to changed conditions, such as inflation changes or cost increases/decreases for specific commodities.

Answer 10

Fixed Price with Economic Price Adjustments (FPEPA)

Question 11

Type of Cost-Reimbursable 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.

Answer 11

Cost Plus Fixed Fee (CPFF)

Question 12

Type of Cost-Reimbursable contract: The seller is reimbursed 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. In these types of contracts, if the final costs are less or greater than the original estimated costs, then both the buyer and seller share costs from the departures based on a prenegotiated cost-sharing formula. ie, an 80/20 split over/under target costs based on the actual performance of the seller.

Answer 12

Cost Plus Incentive Fee (CPIF)

Question 13

Type of Cost-Reimbursable contract: 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 fee is based solely on the subjective determination of seller performance by the buyer and is generally not subject to appeals.

Answer 13

Cost Plus Award Fee (CPAF)

Question 14

A set of attributes desired by the buyer which a seller is required to meet or exceed to be selected for a contract.

Answer 14

Source Selection Criteria

Question 15

Selection Method: 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.

Answer 15

Least Cost

Question 16

Selection Method: Applies when the time and cost of a full selection process would not make sense because the value of the procurement is relatively small. The buyer establishes a shortlist and selects the bidder with the best credibility, qualifications, experience, expertise, areas of specialization, and references.

Answer 16

Qualifications Only

Question 17

Selection Method: The selected firm is asked to submit a proposal with both technical and cost details and is then invited to negotiate the contract if the technical proposal proves acceptable. Using this method, technical proposals are first evaluated based on the quality of the technical solution offered. The seller who submitted the highest-ranked technical proposal is selected if their financial proposal can be negotiated and accepted.

Answer 17

Quality-based/Highest Technical Proposal Score

Question 18

Selection Method: Allows cost to be included as a factor in the seller selection process. In general, when risk and/or uncertainty are greater for the project, quality should be a key element when compared to cost.

Answer 18

Quality and Cost-based

Question 19

Selection Method: The buyer asks a specific seller to prepare technical and financial proposals, which are then negotiated. This method must be properly justified and viewed as an exception.

Answer 19

Sole Source

Question 20

Selection Method: Requires disclosing the available budget to invited sellers in the RFP and selecting the highest-ranking technical proposal within the budget. Because sellers are subject to a cost constraint, they will adapt the scope and quality of their offer to that budget. The buyer should therefore ensure that the budget is compatible with the SOW and that the seller will be able to perform the tasks within the budget. This method is appropriate only when the sOW is precisely defined, no changes are anticipated, and the budget cannot be exceeded.

Answer 20

Fixed Budget

Question 21

Contains the activities to be undertaken during the procurement process. It should document whether international competitive bidding, national competitive bidding, local bidding, etc, should be done.

Answer 21

Procurement Management Plan

Question 22

Used to solicit proposals from prospective buyers.

Answer 22

Bid Documents

Question 23

Used when more information on the goods and services to be acquired is needed from the sellers. Will typically be followed by a Request for Quotation (RFQ) or Request for Proposal (RFP).

Answer 23

Request for Information (RFI)

Question 24

Commonly used when more information is needed on how vendors would satisfy the requirements and/or how much it will cost.

Answer 24

Request for Quotation (RFQ)

Question 25

Used when there is a problem in the project and the solution is not easy to determine. This is the most formal of the “request for” documents and has strict procurement rules for content, timelines, and seller responses.

Answer 25

Request for Proposal (RFP)

Question 26

Provides sellers with a clearly stated set of goals, requirements, and outcomes from which they can provide a quantifiable response.

Answer 26

Procurement Statement of Work (SOW)

Question 27

Sometimes used when contracting for services. Provides a statement of the background, objectives, and purpose of a proposed project. Similar to the procurement SOW.

Answer 27

Terms of Reference (TOR)

Question 28

Prepared in response to a bid document package, and forms the basic information that will be used by an evaluation body to select one or more successful bidders (sellers).

Answer 28

Seller Proposal

Question 29

Meetings between the buyer and prospective sellers prior to proposal submittal. Used to ensure all prospective bidders have a clear and common understanding of the procurement and no bidders receive preferential treatment.

Answer 29

Bidder Conferences (AKA Contractor Conferences, Vendor Conferences, and Pre-Bid Conferences)

Question 30

Prepared by the buyer and documents the seller’s ability to continue to perform work on the current contract, indicates whether the seller can be allowed to perform work on future projects, or rates how well the seller is performing the project work or has performed in the past.

Answer 30

Seller Performance Evaluation Documentation

Question 31

Lists of potential sellers who are previously qualified (approved).

Answer 31

Prequalified Seller Lists

Question 32

A complete set of indexed contract documentation, including the closed contract, is prepared for inclusion with the final project files.

Answer 32

Procurement File