Deck 4 Flashcards
What is source selection criteria?
Source selection criteria are often included in teh solicitation documents. How the winner will be picked. May be based on price, or other considerations, based on the complexity of the product, service or result sought.
What are possible selection criteria?
- Seller understanding of need, - Overall or life-cycle cost, - Technical capability, - Risk , - Management approach, - Technical approach, - Warranty, - Financial capacity of seller, - Production capacity and interest, - Business size and type, - Past performance of seller, - References, - Intellectual property rights, - Proprietary rights
Describe the process - Conduct Procurements
Involes obtaining responses (bids and proposals) from prospective sellers on how project needs can be met, selecting a seller, and awarding a contract. On major procurement items, the overall process of conducting procurements may be repeated, shortening the list of sellers asked to respond. This permits a more detailed evaluation with fewer sellers and less effort, spending less time on sellers who did not make the first cut.
What are the INPUTS of the process - Conduct Procurements?
- Project management paln, which contains the procurement management plan, which describes how the processes will be managed from beginning to end., 2. Procurement documents, as described in the Plan Procurements process outputs, 3. Source selection criteria, as described in Plan Procurements process outputs, 4. Qualified sellers list, a listing of sellers who have been pre-screened for their qualifications and pass experience, 5. Seller proposals, received in response to a procurement document package, which will be evaluated against the selection criteria to select a seller, 6. Project documents, including risk register and risk-related contract decisions, as output from Plan Risk Responses process., 7. Make-or-buy decisions, as described in Plan Procurements process, 8. Teaming agreements, as described in Plan Procurements process, 9. Organizational process assets, including listings of prospective and previously qualified sellers, and information on relevant past experience with sellers.
What are the TOOLS AND TECHNIQUES of the process - Conduct Procurements?
- Bidder conferences,, 2. Proposal evaluation techniques, 3. Independent estimates to serve as benchmark on proposed responses. Significant differences are a red flag., 4. Expert judgement , 5. Advertising, 6. Internet Search, 7. Procurement negotiations
What are bidder conferences?
Bidder conferences are meetings with all prospective sellers prior to preparation of a proposal. Ensures clear, common understanding of the procurement request (AKA contractor, vendor or pre-bid conferences). ALL potential sellers must remain on equal standing during the process. Electronic means are frequently used to achieve the same results as a conference.
What are proposal evaluation techniques?
On complex procurements, where source selection will be made based on seller responses to previously weighted criteria, a formal review process will be defined by the buyer’s policies for procurement. Evaluation committee will make the selection for approval by management prior to the award.
How can expert judgement be used in the process Conduct Procurement?
Expert judgement may be achieved by using an evaluation team with expertise in each of the areas involved, including functional disciples such as legal, finance, contracting,accounting, engineering, design, research, development, sales and manufacturing.
How is advertising used in the process Conduct Procurement?
Advertising of proposals can be done in general circulation publications such as newspapers or in specialty publications such as professional journals. Some types of procurement activities require public advertising/post (e.g., governmental bodies).
How are Internet Searches used in the process - Conduct Procurement?
Many commodities, components, and off-the-shelf items can be procurement via Internet searches, but not high-risk, high-complexity items.
How are Procurement negotiations used in the process - Conduct Procurement?
Procurement negotiations are used to clarify the structure, requirements, and other terms prior to signing the contract. Final language reflects all agreements reached. Negotiation concludes with a contract document to be executed by both buyer and seller. Project manager might not be the lead negotiator.
What are the OUTPUTS of the process - Conduct Procurement?
- Selected sellers, those sellers who have been judged too be in a competitive position based on the proposal evaluation, and who have negotiated a draft contract. Final approval may require senior management approval prior to award of the contract., 2. Procurement contract award, awarded to each selected seller. Could be in a number of forms, from a simple purchase order to a complex document., 3. Resource calendars showing when contract resources will be available, 4. Change requests to the project management plan, or subsidiary plans. Processed for approval through Perform Integrated Change Control Process, 5. Project management plan updates, including cost baseline, scope baseline, schedule baseline, and the procurement management, 6. Project documents updates, including requirements documentation, requirements traceability documentation, and the risk register
What are the components of a Contract?
- Statement of work or deliverables, - Schedule baseline, - Performance reporting, - Period of performance, - Roles and responsibilities, - Seller’s place of performance, - Pricing, - Payment terms, - Place of delivery, - Inspection and acceptance criteria, - Warranty, - Product support, - Limitation of liability, - Fees and retainage, - Penalties, - Incentives, - Insurance and performance bonds, - Subordinate subcontractor approvals, - Change request handling, - Termination and dispute resolution mechanisms
What is the formula for a Fixed Price Incentive Fee?
Price = [Cost + Target Profit + [Sharing Ratio * (Target Cost - Cost)]] max price
What is the formula for Cost Plus Incentive Fee?
Price = Cost + [Target Fee + [Sharing Ratio * (Target Cost - Cost)]] Max Fee and Min Fee
What is the sharing formula for Fixed Price Incentive Fee (FPIF) contracts?
Given Target Cost, Ceiling Price, Target Profit and Sharing Ratio, > Target Price = Target Cost + Target Profit, > Seller pays Sharing Ratio of costs above Target Cost, > Seller receives Target Profit plus Sharing Ratio of costs below Target Cost, > Final Price never exceeds Ceiling Price (Seller pays ALL costs above Ceiling Price)
What is the sharing formula for Cost Plus Incentive Fee (CPIF) contracts?
Given Target Cost, Target Feel, Maximum Fee, Minimum Fee and Sharing Ratio, > Seller reimbursed 100% of costs, > Seller fee varies between Maximum and Minimum Fee, > Seller part of Sharing Ratio is smaller
Describe the process - Administer Procurements?
The process of managing procurement relationships, monitoring contract performance, and making changes and and corrections as needed.Both the buyer and seller administer the procurement contract for similar purposes. Each must ensure that both parties meet their contractual obligations, and that their own legal rights are protected.Team members must e aware of the legal implications int eh management of contract.sOn larger projects with multiple providers, a key aspect of contracts administration is managing the interfaces among the various providers.Due to varying organizational structures, many organizations treat contract administration as an administrative function separate from the project team. While the team may include a procurement administrator, that individual typically reports to a supervisor from a different department.This process includes applying appropriate project management processes to the contractual relationship and integration of the outputs into the overall management of the project.Administer procurements includes a financial management component involving monitoring payments to the seller. One of the principal concerns is that payments correlate to work performed.Administer procurements includes managing any early termination of the contracted work (for cause, convenience, or default) in accordance with the termination clause of the contract.May also involve contract changes in accordance with the change control terms.
What Project Management processes are applied to Administering Procurements?
- Direct and manage project execution, to authorize seller’s work at the appropriate time.- Report performance to monitor scope, cost, schedule, and tehnical performance- Perform quality contract to inspect and verify the adequacy of the seller’s product- Perform integrated change control to assure changes are approved and made known- Monitor and control risks to ensure that risks are mitigated.
What are the INPUTS of the process - Administer Procurements?
- Procurement documents, including procurement contract awards and statements of work, 2. Project management plan, including the procurement management plan, 3. Contract, described in the Conduct Procurements process, 4. Performance reports related to the seller’s performance, including seller-developed documentation and performance reports provided for in the contract., 5. Approve change requests, which can include modifications to the terms and conditions of the contract and statement of work, pricing, and descriptions of products, 6. Work performance information from Direct and Manage Project Execution, including quality contract results, cost incurred, invoices paid, etc.
What are the Contract Change Types?
- Administrative: No effect on substantive rights, such as change of address, - Change order: Written order directing the Seller to make a change, - Contract modification: Any written change in the terms, - Undefinitized contractual action: Action that authorizes start of work prior to setting final definitive price, - Supplemental agreement: Modification accompanied by mutual action of parties, - Constructive change: Change caused by the action or inaction of personnel, or circumstances that cause Seller to perform work differently than required.
What are the causes of Constructive Changes?
- Defective specifications with impossibility of performance, - Erroneous interpretation of contract, - Over inspection of work, - Failure to disclose superior knowledge, - Acceleration of performance, - Late or unsuitable Buyer furnished property, - Failure to cooperate, - Improperly exercised options, - Misusing proprietary data
What are Warranties?
Seller assures Buyer that goods will meet industry standards for quality, reliability and performance.
What is an Express Warranty?
Invoked when goods do not comply with contract specifications.
What is an Implied Warranty?
Measured by “Merchantability” or “Fitness for a particular use.”
What is Implied Warranty of Merchantability?
It means goods must be fit for the ordinary purposes for which such goods are used.
What is a Waiver?
Under the doctrine of waiver a party can relinquish rights he otherwise has under the contract. The Buyer waives his right to strict performance if he knowingly accepts defective goods, or late performance without objection.
What is Breach of Contract?
Either party to the contract fails to perform a contractual obligation.
What is a Material Breach of Contract?
The offending party is deprived of benefits and discharged from further obligation under the contract.
What are the TOOLS AND TECHNIQUES of the process - Administer Procurements?
- Contract change control system, defines the process by which the procurement can be modified. Includes the paperwork, tracking systems, dispute resolution procedures, and approval levels necessary. Integrated with the integrated change control system., 2. Procurement performance reviews, a structured review of the seller’s progress. Includes review of seller-prepared documentation and buyer inspections, and quality audits conducted., 3. Inspections and audits, required by the buyer and supported by the seller, as specified in the contract. Verifies compliance in the seller’s work processes or deliverables, 4. Performance reporting, provides management with information about how effectively the seller is achieving contract objectives, 5. Payment systems, typically process payments to the seller by accounts payable, after certification of satisfactory work., 6. Claims Administration, 6. Record management system, used by project manager to manage contracts and procurement documentation and records. Consists of a set of processes, related control functions, and automation tools, consolidated and combined as part of the project management information system.
What is Claims Administration?
Claims are contested changes and potential constructive changes where the buyer and seller cannot reach agreement on compensation for the change, or even agree that a change has occurred. May be called disputes or appeals as well. Claims are documented, processed, monitored, and management throughout the contract life cycle, per the contract. this may lead to alternative dispute resolution following procedures specified int eh contract.
What are the OUTPUTS for the process - Administer Procurements?
- Procurement documentation, including procurement contract with all supporting schedules, requested changes with dispositions, seller-developed technical documentation and other work performance information and performance reports, warranties, invoices and payment records, and inspection results., 2. Organization process assets updates, including correspondence, payment schedules and requests, and seller performance evaluation documentation., 3. Chang erequests for the project management plan, its subsidiary plans, and other components such as the cost baseline, schedule, and procurement management plan. Processed through the Perform Integrated Change Control Process. Includes contested changes., 4. Project management plan updates. This includes the procurement management plan and the baseline schedule.
Describe the process - Close Procurements.
The process of completing each project procurement. Supports the Close Project or Phase process, since it involves verification that all work and deliveables were acceptable.This process also involves administrative activities such as finalizing open claims, updating records to reflect final results, and archiving for future use. Addresses each contract in the project. Contract terms and conditions can prescribe specific procedures for contract closure.
What are the reasons for Early Termination?
Mutual agreement Convenience of the buyer - Elimination of requirement, - Technological advances, - Budgetary changes, - Anticipated profits not allowed. Sellers Actions - Failure to deliver on scheduled date, - Failure to make progress and endanger contract performance and terms, - Failure to perform any other contract provisions
What are the OUTPUTS of the process - Close Procurements?
- Closed procurements, providing the seller with formal written notice that the contract has been completed. Requirements for closure are usually defined in terms and conditions, and included in the procurement management plan, 2. Organizational process assets, including:, - Procurement file, a complete set of indexed contract documentation., - Deliverable acceptance, a formal written notice of acceptance or rejection, - Lessons learned documentation
What is the goal of Project Risk Management?
To increase the probability and impact of positive events and decrease the probability and impact of negative events in the project.
What is risk?
- A risk is an uncertain event or condition that, if it occurs, has an effect on at least one project objective (scope, schedule, cost, quality), 2. A risk may have one or more causes, and one or more impacts, 3. Risk originates in the uncertainty that is present in all projects, 4. Known risk are those that we can identify and analyze, and therefore manage, 5. Unknown risks cannot be managed proactively, therefore we must perhaps handle them with contingency plans, 6. A risk that has occurred is an issue.
Why Risk Management?
- Required for successful business activity in today’s changing environment; risk versus reward, - Projects are launched in response to opportunities, - As opportunities increase, so do associated risks, - Planning tends to be based on the past, whereas risks are always in the future, - Uncertainty must be addressed proactively and consistently to improve the changes of project success
Describe process 11.1 Plan Risk Management
Defines how to conduct risk management activities for a project. Careful and explicit planning enhances the changes of success in the other risk management processes. It is important to ensure that:, - The level of risk management is commensurate with the risk and importance of the project, - We provide sufficient resources and time for risk management activities, - We have established an agreed-upon basis for evaluating risks.
What are the INPUTS of the process - Plan Risk Management?
- Project scope statement, provides information on the project and deliverables and helps establish the significance of the risk management effort, 2. Cost management plan, defines how risk budgets, contingencies, and management reserves will be reported and accessed, 3. Schedule management plan, defines how schedule contingencies will be reported and assessed., 4. Communications management plan, defines interactions and who can provide information on risks and responses, 5. Enterprise environmental factors, including risk attitudes and tolerances, 6. Organizational process assets, including risk categories, common definitions, risk statement formats, stand templates, roles and responsibilities, authority levels, lessons learned, and stakeholder register
What are the TOOLS AND TECHNIQUES of the process - Plan Risk Management?
- Planning meetings and analysis, held to develop the risk management plan. Attendees: PM, project team leaders, key stakeholders, organization risk managers, others as needed. Develop high-level plans covering:, - Risk cost elements, schedule activities, risk responsibilities, etc., - Templates for risk categories, levels of risk, probability by type of risk, impact by type of objectives, probability and impact matrix tailored to the project.
What are the OUTPUTS of the process - Plan Risk Management?
Risk management plan, including:, - Methodology, - Roles and responsibilities, - Budgeting for risk management resources, - Timing of risk management activities, - Risk categories, - Definition of risk probability and impact, - Probability and impact matrix, to assist in prioritizing , - Revised stakeholder tolerances, - Reporting formats for risk management process outputs, - Tracking. Documents how risk activities will be reported, monitored, and audited for the project.
What are some common categories of risk?
- Technical, quality, or performance risks - such as reliance on unproven or complex technology, unrealistic performance goals, changes to the technology used or to industry standards during the project., 2. Project management risks - Such as poor allocation of time and resources, inadequate quality of the project plan, poor use of project management disciplines, 3. Organizational risks - such as cost, time, and scope objectives that are internally inconsistent, lack of prioritization of projects, inadequacy or interruption of funding, and resource conflicts with other projects., 4. External risks - such as shifting legal or regulatory environment, labor issues, subcontractors and suppliers, country risk and weather.
What are some common sources of risk?
- External, but unpredictable (Regulatory, Natural hazards, side effects), - External predictable, but uncertain (Market risks, Operational, Currency changes, etc), - Internal, non-technical (Schedule, Cost, Cash flow, etc)., - Technical (Technology changes, Design, Complexity), - Legal (Licenses, Patent risks, Contractual, etc).
Describe the process - 11.2 Identify Risks.
Risk identification determines which risks might affect the project and documents their characteristics. Potentially done by all project stakeholders., - Risk identification is an iterative process as project risks evolve during the project, - Use a consistent format for all risks, - Usually leads to the Perform Qualitative Risk Analysis process, but can lead directly to the Perform Quantitative Risk Analysis process.
What are the TOOLS AND TECHNIQUES of the process - Identify Risks?
- Documentation reviews: a structured review of project documentation, including plans, assumptions, previous project files, contracts, etc. This is generally the initial step taken by the project team in identifying possible risks. The quality of the documents under review is itself an indication of project risk., 2. Information gathering techniques, including: brainstorming, the Delphi technique, interviewing, and root cause analysis. Goal is to respond to the cause of the risk, so we must determine the cause., 3. Checklist analysis: using checklists developed based on historical information. This can be quick and simple, but might act as a thinking box, so think outside the checklist., 4. Assumptions Analysis: Exploring the validity of assumptions, and consequences if the assumptions are false, 5. Diagramming techniques: Cause and effect diagrams, system or process flow charts, and influence diagrams. These techniques were covered earlier., 6. SWOT analysis, - strengths, weaknesses, opportunities, and threats, 7. Expert judgement: possibility from risk management departments within the organization.
What are the OUTPUTS of the process - Identify Risks?
Risk register. The results of Identify Risks are typically contained in a document called a risk register. It ultimately contains the outcomes of the other risk management processes as they are conducted. The register is often in the form of a spreadsheet, with columns containing details, - List of identified risks, with root causes, - List of potential responses
Describe the process - 11.3 Perform Qualitative Risk Analysis
Prioritizing the identified risks for further action by addressing and combining these probability of occurrence and impact., Assess the priority of identified risks using their probability of occurring, the impact on project objectives, factors such as time frame for response and risk tolerance of the project on constraints of cost, schedule, scope, and quality., A rapid and cost-effective means of establishing priorities for Risk Response Planning that also lays the foundation for Quantitative Risk Analysis.
What are the INPUTS for the process - Perform Qualitative Risk Analysis?
- Risk register, which has the identified risks, 2. Risk management plan, particularly roles and responsibilities, budgets, schedules, risk categories, definitions of probability and impact, probability and impact matrix and risk tolerances., 2. Project scope statement to determine whether this is a normal project for us, or a new type, 3. Organizational process assets, including information on prior similar projects, risk specialty studies, and risk databases available from industry or proprietary sources.
What are the TOOLS AND TECHNIQUES of the process - Perform Qualitative Risk Analysis?
- Risk probability and impact assessment, which investigates the likelihood that each specific risk will occur and the potential effects on a project objective such as time, cost, scope, or quality, including both negative effects for threats and positive effects for opportunities. Assessed in meetings, interviews, or facilitated discussions. Explanatory detail, including assumptions for the levels assigned, is recorded. Ratings are according to the levels defined in the risk management plan., 2. Probability and impact matrix. Risk probability is the likelihood that a risk will occur. Risk impact is the effect on project objectives if the risk event occurs. Using a combination of probability and impact scales, the probability and impact matrix assigns risk ratings to individual risk events. These ratings are typically qualitative in nature., 3. Risk data quality assessment, a technique used to evaluate the degree to which the data about the risk is actually useful in making risk management decisions., - The extent to which the source of the information understands the risk, - The accuracy, quality, reliability, and integrity of data regarding the risk, 4. Risk categorization by source, area of impact, or other category. Grouping by common root causes can lead to effective risk responses, 5. Risk urgency assessment, to determine how near-term the risk is to determine how soon we must deal with it., 6. Expert judgement, to assess probability and impact. Expert judgement can be secured using facilitated workshops.
What are the scales of probability and impact?
Probability scale - 0.0 to 1.0 (0% to 100%), or a more qualitative scale such as “very unlikely” to “almost certain” Impact scale - reflects the severity of the risk’s effects on the project objectives (can be an ordinal or cardinal scale) Determines one overall rating for each risk - the risk score. The risk score helps guide risk responses.
What is the risk probability scale?
- very low, 2. low, 3. medium, 4. high, 5. virtually certain
What is the risk impact scale?
- very little impact on critical factors of project (time, cost, etc.), 2. minor, 3. moderate (workaround solution apparent), 4. moderate (no apparent workaround solution), 5. severe (missions critical degradation)
What are the OUTPUTS of the process - Perform Qualitative Risk Analysis?
Risk register updates, with:, - Relative ranking or priority list of project risks, - Risks grouped by categories to reveal common root causes, - Causes of risk or project area requiring particular attention, - List of risk requiring response in the near-term (urgent risks), - List of risks for additional analysis and response, - Watch-lists of low priority risks, - Trends in qualitative analysis results, as risk analysis is repeated on the project, a trend may appear making risk response or additional analysis more or less important.
Describe the process 11.4 Perform Quantitative Risk Analysis
The process numerically analyzes the effect of identified risk events on overall project objectives. It is performed on risks that have been prioritized by the Qualitative Risk Analysis process as potentially and substantially impacting the project’s completing demands. Perform quantitative risk analysis may not be required on all projects, dependent on available time and budget. It should be performed again after Plan Risk Responses and during Monitor and Control Risks to determine if project risk has been satisfactorily addressed.
What are the INPUTS of the process - Perform Quantitative Risk Analysis?
- Risk register, 2. Risk management plan, 3. Cost management plan, which details with cost, 4. Schedule management plan, which deals with project schedule, 5. Organization process assets, including information on prior similar completed projects, studies of similar project by risk specialists, and risk databases available from industry of proprietary sources.
What are the TOOLS AND TECHNIQUES of the process - Perform Quantitative Risk Analysis?
- Data gathering and representation techniques, including:, - interviewing, including three point estimating to obtain ranges of values, - Probability distributions, such as beta distributions and triangular distributions of probability, 2. Quantitative risk analysis and modeling techniques, including:, - Sensitivity analysis to determine which risks have the most impact, - Expected monetary value analysis, which determines a value by multiplying each outcome by its probability and adding the results together. This is commonly used in decision tree analysis., - Modeling and simulation, using a model which translates the specified uncertainties into their potential impact on objectives, iterative simulations are performed using Monte Carlo technique, which is run many times using input values for project variables chosen at random from the probability distributions of the variables. Results will be probability distribution of results., 3. Expert Judgement used to identify potential cost and schedule impacts, to evaluate probability and define inputs to analysis tools. Expert judgement is also used in interpreting the results.
What is modeling and simulation?
Simulations uses a representation of model of a system to analyze the behavior or performance of the system., - For a cost risk analysis, a simulation may use the WBS as a model., - For a schedule risk analysis, the PDM schedule is used.
What is probabilistic analysis of the project?
Forecasts of potential project schedule and costs results listing the possible completion dates or project duration and costs with their associated confidence levels.
What is probability of achieving the cost and time objectives?
The probability of meeting the project objectives with the current plan. It takes into consideration all previous risk analysis and quantifies the probability of the current plan (cost and schedule)
Describe the process - Plan Risk Responses
Plan Risk Responses is the process of developing options and determining actions to enhance opportunities and reduce threats to the project’s objectives. Risk responses must be appropriate, cost effective, and realistic. Includes identification and assignment of one or more persons (the “risk response owner”) to take responsibility for each agreed-to and funded risk response. Project management plan is updated as necessary to implement responses.
What are the INPUTS of the process - Plan Risk Responses?
- Risk register, with all information developed so far, 2. Risk management plan, including roles and responsibilities, definitions, etc.
What are the TOOLS AND TECHNIQUES of the process - Plan Risk Responses?
Strategy or mix of strategies most likely to be effective should be selected for each risk. , Primary and backup strategies may be s elected., A fallback plan can be developed if the selection strategy turns out not to be effective, or if an accepted risk occurs., 1. Strategies for negative risks or threats (Avoid, Transfer, Mitigate, Accept), 2. Strategies for positive risks or opportunities (Exploit, Share, Enhance, Accept), 3. Contingent response strategies. Some responses are designed for use only if certain events occur. Involves defining actions to be executed under certain predefined conditions, if it is believed there will be sufficient warning to implement the plan. Events that trigger the contingency responses should be defined and tracked., 4. Expert judgement related ot the actions to be taken
Describe the negative risk strategy Avoid.
Risk avoidance is changing the project plan to eliminate the risk or condition or to protect project objectives from its impact., Although we can never eliminate all risk events, some specific risks may be avoided.
Describe the negative risk strategy Transfer.
Risk transfer si seeking to shift the consequence of a risk toa third party together with ownership of the response., Risk transfer does not eliminate the risk, it just transfers responsibility for its management., Insurance or an insurance-like arrangement such as bonding is often available to deal with some categories of risk., Procurement, acquiring goods an/or services from outside the immediate project organization, is often an appropriate response to some types of risk.
Describe the negative risk strategy Mitigate.
Mitigation seeks to reduce the probability and/or consequences of an adverse risk event to an acceptable threshold., Risk probabilities or impacts can often by reduced by changing the planned approach. The more flexibility the project team has, the more valuable mitigation is.
Describe the negative risk strategy Accept.
Indicates that the project management team will not modify the project management plan to deal with a risk, or is unable to come up with a viable response. Acceptance can be either passive (just wait for the risk to happen), or active (plan now for how to deal with the risk if it happens). These are what contingency reserves are used for.
What is Contingency Allowance?
Most common risk acceptance response is to establish a contingency allowance, or reserve, including amounts of time, money, or resources to account for known risks. The allowance should be determined by the impacts, computed at an acceptable level of risk exposure, for the risks that have been accepted.
