Implementing a Procurement Strategy

Question 1

Activities in Procurement

Answer 1

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

Question 2

Fixed Priced Contract

Answer 2

must describe precisely the product/service and at what price
Seller takes risk of increased cost of materials

Question 3

Three types of Fixed Price Contracts

Answer 3

Firm fixed price
Fixed price plus incentive fee
Fixed price with economic price adjustment

Question 4

Firm fixed price Contract

Answer 4

simplest, most common
When scope of project can be well defined
Seller offers at a price, buyer agrees
Seller vulnerable to expenses rising``

Question 5

Fixed price plus incentive fee contract

Answer 5

For early delivering

Motivates seller to meet/surpass requirements

Question 6

Fixed price with economic price adjustment contract

Answer 6

Over long period, when prices will change

Protect buyer and seller from changes in prices

Question 7

Cost Reimbursable contract

Answer 7

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

Question 8

Cost plus fixed fee contracts

Answer 8

Cost of seller, plus fee
Buyer agrees to pay sellers cost plus fee
Common in high level of risk

Question 9

Cost plus incentive fee contract

Answer 9

Cost plus incentive

Can be challenging- hard to estimate fee to make it worthwhile, incentive reduced after missing target

Question 10

Cost plus award fee contract

Answer 10

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

Question 11

Time and Materials contract

Answer 11

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

Question 12

Tools and Techniques for Planning Procurement

Answer 12

Expert Judgement
Data Gathering
Data Analysis
Source Selection Analysis
Meetings

Question 13

Data Gathering for Planning Procurement

Answer 13

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

Question 14

Make or Buy Analysis

Answer 14

Data Analysis technique for Planning Procurement

compare cost for internal vs external

Question 15

Source Selection Analysis

Answer 15

Tool for Planning Procurement

Compare different sourcing options, based on cost, quality, tehcnical capabilities

Question 16

Key Factors of Make or Buy Analysis

Answer 16

Budget and availability.

also- time, risk, bus strategy, control

Question 17

How to Assess Make or Buy Analysis

Answer 17

Define product > Calculate cost in house >Calculate cost externally > Compare

Question 18

Procurement Statement of Work (PSOW)

Answer 18

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

Question 19

Bid Documents

Answer 19

doc used to get bidders. includes contract type, often public
types: Request for Information
Request for Quotation
Request for Proposal

Question 20

Tools and Techniques for Conducting Procurements

Answer 20

three stages:
Invitation- Advertising & Bidder Conferences
Evaluation/Selection- Expert Judgement & Data Analysis (proposal evaluation)
Contract- Interpersonal and Team skills (negotiation)

Question 21

Tools and Techniques for Controlling Procurements

Answer 21

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