Hot Topics (12) Procurement Management Flashcards
What is the process of procurement management?
- Plan Procurement Management
- Conduct Procurements
- Control Procurements
- Close Procurements
What are the inputs to the Plan Procurement Management process?
- Project management plan
- Requirements documentation
- Activity resource requirements
- Enterprise environmental factors
- Organizational process assets
- Risk register
- Stakeholder register
- Any procurements already in place
- Project schedule
- Initial cost estimates for work to be procured
What are the key outputs of the Plan Procurement Management process
- Make-or-buy decisions
- Procurement management plan
- Procurement statements of work
- Procurement documents
- Source of criteria
- Change requests
What are the key outputs of the Conduct Procurements process?
- Selected sellers
- Signed contracts
- Resource calendars
- Change requests
- Updates to project management plan and project documents
What are the key outputs of the Control Procurements process?
- Substantial completion of contract requirements and deliverables
- Work performance information
- Change requests
- Updates to project management plan and project documents
What are the key outputs of the Close Procurements process?
- Formal acceptance
- Closed procurements
- Updates to lessons learned and records (part of organizational process assets)
What is an agreement?
What is a contract?
Agreement: A document or communication that outlines internal or external relationships and their intentions.
Contract: A type of written or verbal agreement, typically created with an external entity, where there is some exchange of goods or services for some type of compensation (usually monetary) ; a contract forms the legal relationship between the entities.
What is the difference between centralized and decentralized contracting?
Centralized: There is one procurement departement, and the procurement manager handles procurements for many projects.
Decentralized: A procurement manager is assigned to one project full-time and reports directly to the project manager
What are the advantages and disadvantages of centralized contracting?
Advantages:
- Higher level of procurement expertise
- Standardized practices provide efficiency
- Clear career path in procurement management
- Continuous improvement, training, and shared lessons learned
Disadvantages:
- Procurement manager’s attention is divided among many projects
- More difficult for the project manager to obtain contracting help when needed
What are the advantages and disadvantages of decentralized contracting?
Advantages:
- Project manager has easier access to contracting expertise
- Procurement manager has more loyalty to the project
- Procurement manager has a better understanding of the project needs
Disadvantages:
- No home department for the contracts person after the project
- Difficult to maintain a high level of contracting expertise
- Duplication of expertise/inefficient use of procurement resources
- Contracting processes aren’t standardized
- No career path as a procurement manager in the company
What is required for a legal contract?
- Offer
- Acceptance
- Consideration
- Legal capacity
- Legal purpose
What is included in a contract?
- Legal terms
- Business terms regarding payments
- Reporting requirements
- Marketing literature
- Proposal
- Procurement statement of work
Describe project manager’s role in procurement.
- Understand the procurement process
- Make sure the contract contains all the scope of work and project management requirements
- Incorporate mitigation and allocation of risks into the contract
6 Help tailor the contract to the project - Be involved during contract negotiations to protect the relationship with the seller
- Make sure all the work in the contract is done, not just the technical scope
- Work with the procurement manager to manage changes to the contract
What is a procurement management plan?
A plan that documents how procurements will be planned, executed, controlled, and closed
What is make-or-buy analysis?
Deciding whether the performing organization should do the project work itself or outsource some or all of the work
What are the three broad categories of contracts?
- Cost-reimbursable (CR)
- Fixed price (FP)
- Time and material (T&M)
What is a cost-reimbursable contract?
All the seller’s costs are reimbursed by the buyer
What is a fixed-price contract?
There is one set free for accomplishing all the work
What is a time and material contract?
The buyer pays on a per-hour or per-item basis
What is a cost plus fixed fee (CPFF) contract?
All the seller’s costs are reimbursed by the buyer, and a fixed fee is negotiated for the seller’s profit
What is a cost plus percentage of cost (CPPC) contract?
All the seller’s costs are reimbursed by the buyer, and the buyer also pays a specified percentage of those costs as a fee or profit
What is a cost plus incentive fee (CPIF) contract?
The seller’s costs are reimbursed by the buyer, and the buyer and seller share any cost savings orverruns
What is a cost plus award fee (CPAF) contract?
All the seller’s costs are reimbursed by the buyer, and the buyer pays a base fee plus an award amount (a bonus) based on performance
What is a fixed price incentive fee (FPIF) contract?
The buyer pays a fixed price plus an additional fee if the seller exceeds performance criteria stated in the contract
What is a fixed price award fee (FPAF) contract?
The buyer pays a fixed price plus an award (paid in full or in part) based on the seller’s performance level
What is a fixed price economic price adjustment (FPEPA) contract?
A fixed-price contract with a built-in economic price adjustment to cover cost increases due to future economic conditions
What is a purchase order?
A unilateral contract typically used for buying commodities.
Purchase orders become contracts once they are “accepted” by the seller’s fulfillment of the contract
What do incentives accomplish?
What might incentives be used for?
They align the sellers’s motivations with the buyer’s objectives
- Time
- Cost
- Quality
- Scope
Who has the cost risk in a cost-reimbursable contract?
Who as the cost risk in a fixed-price contract?
Cost-reimbursable: The risk is borne by the buyer
Fixed price : The risk is borne by the seller
What is the ceiling price?
The highest price the buyer will pay
It’s a condition of the contract that must be agreed to by both parties before signing
What is the point of total assumption?
For fixed price incentive fee contracts, the amount above which the seller bears all the loss of a cost overrun
Describe the three different types of procurement statements of work.
Performance: Conveys what the final product should accomplish
Functional: Conveys the end of purpose or result (the minimum essential characteristics of the product)
Design: Conveys exactly what works is to be done and how it should be completed
What are the procurement documents?
- Request for proposal (RFP)
- Invitation for bid (IFB)
- Request for quotation (RFQ)
- A request for information (RFI) is sometimes considered a procurement document, though it does not really belong in this category
What is a nondisclosure agreement?
An agreement between the buyer and prospective sellers identifying the information or documents they will hold confidential and control, and who in the organization will have access to the confidential information
What are standard contract terms and conditions?
What are special provisions?
Standard contract terms ans conditions: Terms and conditions that are used for all contracts within the company
Special provisions: Terms and conditions created for the unique needs of the project
Name common terms and conditions that may be in a contract.
Please review the long list of terms and conditions and what they mean in the Procurement Management Chapter of PMP Exam Prep
What is a letter of intent?
A letter from the buyer, without legal binding, saying the buyer intends to hire the seller
What does privity mean?
A contractual relationship between two or more companies
What does noncompetitive procurement mean?
The work is awarded to a single source or a sole source without competition
What are source selection criteria?
When are these criteria created, and when are they used?
The factors the buyer will use to evaluate (weight or score) responses from the sellers
They are created during the Plan Procurement Management process, and are used during the Conduct Procurements process to pick a seller
What is a bidder conference?
What should a project manager watch out for during a bidder conference?
A meeting with prospective sellers to make sure they all understand the procurement and have a chance to ask questions
Watch for:
- Collusion
- Sellers not asking questions in front of the competition
Make sure all the questions ans answers are documented and distributed to all the potential sellers
What is a qualified seller list?
A list of sellers that have been preapproved
What are the objectives of negotiation?
- Obtain a fair and reasonable price
- Develop a good relationship with the seller
What are some examples of negotiation tactics?
- Attacks
- Personal insults
- Good guy/Bad guy
- Deadline
- Lying
- Limited authority
- Missing man
- Fair and reasonable
- Delay
- Extreme demands
- Withdrawal
- Fait accompli
Why might there be conflict between the contract administrator and the project manager?
The contract administrator is the only one with the power to change the contract
What is a contract change control system?
A system created to control changes to the contract
What is the purpose of a procurement performance review?
- Verify that the seller is performing as they should
- Identify what the buyer can do to help the seller do the work
- Determine if any changes are needed to improve the buyer-seller relationship and the processes they are using
Define claims administration.
Managing claims (requests by the seller for compensation from the buyer)
What is the key function of a records management system?
Maintain an index of contract documentation and records so that they can be retrieved if necessary
What occurs during the Close Procurements process?
- Product validation
- Procurement negotiation
- Financial closure
- Procurement audit
- Updates to records
- Final contract performance reporting
- Documentation of lessons learned
- Creation of procurement file
What is a procurement audit?
A structured review of the procurement process and identification of lessons learned to help future procurements
