Chapter 13: Procurement

Question 1

C13 Procurement: Terms and terminology

Answer 1

• Agreement - договоренность (любого вида, в т.ч. устно). E.g.: SLA, letter. Contract - вид Agreement’a
• Audit / Inspection for Procurement - оба проводятся в Control Procurement. Но как обычно Audit - про процессы, Inspection - про deliverables
• Contract Change Control System (?) - EEF factor. Includes change procedures, forms, dispute resolution processes and tracking systems and is described in the contract.
• Constructive changes (один из результатов Control Procurement)- действие или бездействие B ограничивает возможность выполнения работ со стороны S и создает ему доп.расходы
• Contractor / subcontractor / supplier / designer - синонимы “Seller”
• Early termination - условие контракта (?) , которое позволяет buyer-у отменить контракт (обычно за cancellation fee), особенно применяется в agile
• Oligopoly . the market is so tight that the actions of one vendor affect the price/availability of all the others.
• Procurement document package - рассылается buyer’ом всем участникам тендера. Details the requirements for the work to ensure complete proposals from sellers.
• Risk-related contractual agreements - 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.
• Records management system (один из результатов Control Procurement) - система хранения всей информации кас. контракта (статистика включая сколько людей в какой день работало и пр.). Требуется в последующих legal разбирательствах в т.ч.
• Screening system - A tool that filters or screens out vendors that don’t qualify for the contract.
• Где проводятся суды - the US backs all contracts through the court system

Question 2

Contract Types

Answer 2

(см. картинку)

• Fixed-Price Contract (FP) - S takes on most of risks
  
  • Fixed-Price (FP) - чётко указана цена и SOW (E.g. Contract = $1,1m)
  • Fixed-Price Incentive Fee (FPIF) - то же что FFP, но для seller есть возможность получить доп. бонус за выполнение конкретно прописанного условия (например сроков, качества). The seller has the risk of cost overruns (E.g. Contract = $1,1m. For every month early the project is finished, an additional $10k is paid to the seller)
    
    • FPIF Successive Target contract - target for incentive is changed after the first target is reached
    • Fixed Price Award Fee (FPAF) - есть потолок для award (E.g. - Contract = $1,1m. For every month that performance exceeds the planned level by more than 15%, an additional $5k is awarded to the seller, with a maximum award of $50k) . В других источниках написано что это subjective bonus
  • Fixed Price with Economic Price Adjustments (FPEPA) - contract with a special allowance for price increases based on economic reasons such as inflation or the cost of raw materials. The seller has the risk of cost overruns, but the buyer could carry the risk for the cost increases based on what’s happening in the marketplace. E.g.
    
    • Contract = $1,1m, but a price increase will be allowed in year two based on the US Consumer Price Index report for year one
    • Contract = $1,1m, but a price increase will be allowed in year two to account for increases in specific material costs
  • Purchase Order - simplest type of FP. Обычно односторонне со стороны B подписывается (иногда B просит также подпись S). Становятся контрактами, когда B подписал т.е. согласился на условия. E.g. simple commodity req, like Contract = 30 linear meters of wood at $9 per meter
• Time and Materials (T&M) - используется когда невозможно определить level of effort. Buyer pays on a per-hour or per-item basis (plus the cost of materials to complete the work). Time limits for contract. The overruns risk is generally distributed and low as long as the contract carries a not-to-exceed clause. Risk is shared between B and S. Средний уровень риска в сравнении с FP и CR. E.g.:
  
  • Contract = $100 per hour PLUS expenses or materials at cost
  • Contract = $100 per hour PLUS materials at $5 per linear meter of wood
  • Хорошо подходит для augment your staff
• Cost reimbursable - используется когда exact scope of work is uncertain. Buyer платит за материалы и работу. Сумма может варироваться , если работа заняла больше времени. Всегда “COST plus”. B takes on most of risks.
  
  • Cost - NO FEE (appropriate for work performed by nonprofit ogra-s). (E.g. Contract = Cost for work and materials, no profit )
  • Cost Plus Fixed Fee (CPFF) - fee is fixed. The buyer carries risks of overruns. (E.g. Contract = Cost plus a fee of $100k)
  • Cost Plus Incentive Fee (CPIF) - provides for the seller to be paid for actual costs plus a fee that will be adjusted based on whether specifia perfromance objectives stated in the contract are met. An original estimate of the total cost is made (the target cost ) and a fee for the work is determined (a target fee). The seller gets % of the savings if the actual costs are less than the target costs, or shares the cost overrun with the buyer. The ratio is often 80% buyer / 20% seller . (E.g. Contract = $500k target cost PLUS $50k target fee. The buyer and seller share any cost savings or overruns at 80% to the buyer and 20% to the seller - и похоже вот эти 50kEUR корректируются на сумму savings от target costs)
    • Cost Plus Award Fee (CPAF) cost + base fee + bonus (based on performance, can be subjective). The B has the risk of cost overruns, but the S has the risk of receiving a small award (E.g. - Contract = Cost PLUS a base fee PLUS award for meeting buyer-specified performance criteria. Maximum award available is $50k)
  • Cost Plus Fee (CPF) / Cost Plus Percentage of Costs (CPPC) - самый рискованный т.к. seller заинтересован в разгоне стоимости! A contract that requires to pay for all costs plus a percentage of costs as a fee. Generally not allowed! The B assumes all of the risks for cost overruns (E.g. - Contract = Cost plus 10% of costs as fee)
• Indefinite Delivery, Indefinite Quantity (IDIQ) - indefinite number of goods and services within a fixed time frame and a certain cost range. Например, наняли архитектора на год, и всё что возникает в офисе, он делает. Risk is split - buyer ацептует риск, что ничего не потребуется делать в итоге, seller - что сделают больше, чем CAP (E.g. - Contract = One-year contract for a minimum of $10k and a maximum of $18k)
• Contracts tailored to agile
  • Graduated Fixed Price - an agile contract has a fixed price based on completion by a certain date. Completed before - higher fee, after - lower fee. E.g.
    
    • Finish early = $110/hour. Both parties are happy
    • Finish on time = $100/hour. Both parties are happy
    • Finish late = $90/hour. Both parties are unhappy
  • Fix-price work packages (increments?) - the contract can be paid in increments when work packages are delivered, rather than paid as one lump sum at the end of the contract
  • Not-to-exceed T&M - ceiling price for the work. Cannot go over this amount

—————— НЕТ У РИТЫ ———————–

• Fixed-Price Contract (FP)
  • Firm Fixed-Price (FFP, lump-sum contracts) - жестко прописаны условия, сумма не меняется. Изменения - через доп.соглашение. The seller has the risk of cost overruns

Исходник: https://rmcls.com/rmc-resources/pmp-english/types-of-contracts/ , или PMI Materials\Rita\Types-of-Contracts.pdf

Question 3

Procurement statement of work (SOW also CSOW)

Answer 3

• Describes complete scope of procurement. All the work, meetings, acceptance criteria, reports etc..
• The SOW becomes part of the contract between the buyer and the seller. Не подписывается (только сам договор)

Question 4

Contract Terms and Conditions

Answer 4

• Arbitration This method to resolve disputes uses private third parties to render a decision on the dispute. Arbitration is paid for by the parties and is used because it is usually faster and cheaper than the courts.
• Assignment This refers to the circumstances under which one party can assign its rights or obligations under the contract to another
• Bonds These are the payment or performance bonds, if any, that must be purchased. E.g., a payment bond would protect the buyer from claims of nonpayment by the seller.
• Breach/default This occurs when any obligation of the contract is not met. Watch out—a breach on the seller’s part cannot be fixed by a breach on the buyer’s part. For example, failure to complete an item in the procurement statement of work (seller’s breach) cannot be handled by the buyer stopping all payments (buyer’s breach). A breach is an extremely serious event. The exam may present situations in which seemingly little things in the contract are not done. The response to a breach must always be to issue a letter formally notifying the other party of the breach. The project manager must understand the legal implications of their actions. If they do not watch out for and send an official notice of breach, the project manager’s company could lose its right to claim breach later.
• Ceiling price - the highest price the B will pay. The way for the B to encourage the S to control costs
• Confidentiality / Nondisclosure agreement - договор о неразглашении
• Cost - for seller - расходы на создание услуги. Для B - расходы seller’a плюс seller’s fee
• Indemnification (liability) (возмещение) Who is liable for personal injury, damage, or accidents?
• Letter of Intent - intended to give the S confidence that the contract will be signed soon and to make them comfortable with taking the risk of ordering the equipment or hiring the staff that will eventually be needed.
• Liquidated damages These are estimated damages for specific Defaults (Breaches?), described in advance.
• Management requirements Examples of management requirements include attendance at meetings and approval of staff assigned to the project
• Material breach This breach is so large that it may not be possible to complete the work under the contract.
• Payments When will payments be made? What are the late payment fees? What are reasons for nonpayment? Watch out for questions regarding payment management. For example, as a response to inaccurate invoices, the buyer cannot stop all payments; this would be a breach. They can, however, stop payments on disputed amounts.
• Point of total assumption (PTA) - (ничего не понял). This only relates to fixed price incentive fee contracts, and it refers to the amount above which the seller bears all the loss of a cost overrun. Costs over the PTA are assumed to be due to mismanagement: a design statement of work should have been created to allow for fair and reasonable contract negotiations for the required work, suggesting the seller either did not estimate correctly or did not manage the work well. Sellers will sometimes monitor their actual costs against the PTA to make sure they are still receiving a profit for completing the project. PTA = (Ceiling price + Target price) / (Buyer’s share ratio + Target cost)
• Privity - контрактные отношения между компаниями
• Profit (fee) - The amount of money the seller has after costs are paid. In a fixed-price or time and materials contract, a seller builds a profit margin into the amount they charge the buyer. In cost-plus contracts, the “plus” represents the profit, and that amount is typically negotiated by the buyer and seller
• Retainage (удержание) This is an amount of money, usually 5 percent or 10 percent, withheld from each payment. This money is paid when the final work is complete. It helps ensure completion
• Sharing ratio - incentives are usually 80/20. Ratio describes how the cost SAVINGS or cost OVERRUN will be shared. First number -buyer portion.
• Standart contract - предсогласованный шаблон (обычно со стороны buyer)
• Special provisions (special conditions) - дополнение к Standart Contract, которые ПМ должен делать, чтобы убедиться в полноценности контракта
• Target price (target cost, target fee) - used to compare the end result (final price) with what was expected (the Target Price)
• Waivers (“отказ от прав”) These are statements saying that rights under the contract may not be waived or modified other than by express agreement of the parties.
• Warranties These are promises of quality for the goods or services delivered under the contract, usually restricted to a certain time period
• Work for hire - то, что будет создано исполнителем, будет принадлежать работодателю

Question 5

Bid Documents and Procurement Process

Answer 5

• From B to S:
  • SOW / Terms of Reference (TOR)
  • Request for Information (RFI) - before bid documents. Используется чтоб понять кто предварительно qualified для работы, а также чтоб понять какая работа в принципе возможна, чтоб потом построить RFPs or IFBs
  • Request for Proposal (RFP) (Request for Tender) - From buyer to seller. Максимум инфо: цена, кто и как будет выполнять работу и т.д. Решение о победителе в итоге будет приниматься по СЛОЖНОМУ НАБОРУ ФАКТОРОВ из Proposal
  • Request for Bid (RFB) / Invitation for Bid (IFB) Requests the seller to provide a price for the procured product or service. Форма RFP, где SOW достаточно детализирован, чтоб дать цену . Решение о победителе в итоге будет приниматься просто по ЦЕНЕ
  • Request for Quotation (RFQ) - requests a price quote per item, hour, meter etc. Похоже, неверное определение. Quotation - часть Bid (bid - на весь сервис)
• From S to B
  • Information
  • Proposal - больше деталей, описание скиллов, репутации и т.д.
  • Bid - Только price
  • Quote - Только price per item, hour, meter etc.

Question 6

Non-competitive forms of Procurement

Answer 6

(или “Market conditions” в терминологиях Udemy)

• Sole source. Only one vendor can provide what your project needs to purchase. Examples include a specific consultant, specialized service, or unique type of material.
• Single source. Many vendors can provide what your project needs to purchase, but you prefer to work with a specific vendor. Обычно из-за сроков/квалификации, или для небольшой суммы

Question 7

Methods for Conduct Procurement

Answer 7

• Bidder conference A meeting of all the project’s potential vendors to clarify the contract statement of work and the details of the contracted work.
• Seller Proposal / Bid / Quote
• Proposal Evaluation - data analysis technique. Committee внимательно изучает предложения, присланные вендорами. Позволяет quantitative analysis провести
• Weighting system - веса (сумма, срок и т.д.). В итоге будет итоговая оценка
• Past Performance History - рассматриваем опыт своей и других организаций
• Independent Cost estimates (“should cost” estimates) - Платим внешнему эксперту за независимую оценку стоимости работ (или проводим ее внутри компании), для того чтоб понять, корректны ли цены от поставщиков. Если сильно отличаются - возможно кривой SOW.
• Presentation
• Negotiations - win-win solution for B and S
• Screening systems - тебе нужно иметь какие-то спец навыки, спецов в штате
• Contract negotiation - обсуждение с вендорами
• Seller rating systems - на рынке/внутри компании на основании предыдущего опыта
• Expert judgment - спрашиваем консультантов

Question 8

Key Actions For Each Procurement

Answer 8

Question 9

Build vs Buy Decisions

Answer 9