Implementing a Procurement Strategy Flashcards
Activities in Procurement
Review activity resource requirements to determine what is needed
What needs to be sourced externally
Examine schedule- when needed
Oversee creation of contracts
Ensuring all contractual obligations are met
Fixed Priced Contract
must describe precisely the product/service and at what price
Seller takes risk of increased cost of materials
Three types of Fixed Price Contracts
Firm fixed price
Fixed price plus incentive fee
Fixed price with economic price adjustment
Firm fixed price Contract
simplest, most common
When scope of project can be well defined
Seller offers at a price, buyer agrees
Seller vulnerable to expenses rising``
Fixed price plus incentive fee contract
For early delivering
Motivates seller to meet/surpass requirements
Fixed price with economic price adjustment contract
Over long period, when prices will change
Protect buyer and seller from changes in prices
Cost Reimbursable contract
works well when scope isn’t well known
Innovation or tech projects- don’t know what final product will look like
Allow for flexibility
Allow for project cost to be
Cost plus fixed fee, cost plus incentive fee, cost plus award fee, time and materials contract
Cost plus fixed fee contracts
Cost of seller, plus fee
Buyer agrees to pay sellers cost plus fee
Common in high level of risk
Cost plus incentive fee contract
Cost plus incentive
Can be challenging- hard to estimate fee to make it worthwhile, incentive reduced after missing target
Cost plus award fee contract
Cost and award based on achieving perf criteria
If costs can only be submitted as they occur, difficult to name cost
Can be problem for buyer because it doesn’t motivate cost savings
Time and Materials contract
If amount of work and duration is not known. Increasing risk for buyer
Not to exceed clause to protect buyer
Rates may be fixed of flexible
Fixed- seller owns risk of time due to materials
Tools and Techniques for Planning Procurement
Expert Judgement Data Gathering Data Analysis Source Selection Analysis Meetings
Data Gathering for Planning Procurement
MArket Research - gather info and reduce risk
Homework on suppliers you may use, bidders
Ensure supplier has capability
Sources: discussion at trade conferences, online reviews, meet face-to face
Make or Buy Analysis
Data Analysis technique for Planning Procurement
compare cost for internal vs external
Source Selection Analysis
Tool for Planning Procurement
Compare different sourcing options, based on cost, quality, tehcnical capabilities
Key Factors of Make or Buy Analysis
Budget and availability.
also- time, risk, bus strategy, control
How to Assess Make or Buy Analysis
Define product > Calculate cost in house >Calculate cost externally > Compare
Procurement Statement of Work (PSOW)
Enable prospective sellers to prepare offers, based on description of work, needs to be detailed enough for seller to determine what they need to do
Describes buyers requirements: Product/service specs, quality level, supply requirements, type of contract, reporting requirements
Bid Documents
doc used to get bidders. includes contract type, often public
types: Request for Information
Request for Quotation
Request for Proposal
Tools and Techniques for Conducting Procurements
three stages:
Invitation- Advertising & Bidder Conferences
Evaluation/Selection- Expert Judgement & Data Analysis (proposal evaluation)
Contract- Interpersonal and Team skills (negotiation)
Tools and Techniques for Controlling Procurements
Expert Judgement
Claims Administration (documenting claims, settle disbutes)
Data Analysis- Performance Reviews, Earned Value Analysis, Trend Analysis
Inspections- Review of work performed
Audits- check if meeting requirements
