Procurement Flashcards
A contract is when the buyer pays one flat price (lump sum) for all work in the contract. This would include all labor and materials. To use this contract you would have to ensure the scope is well-defined and understood.
Fixed Price (Lump Sum)
This contract is when the price is fixed and cannot be changed.
Firm Fixed Price (FFP)
This contract is when the fixed price includes an additional fee for meeting a target set forth in the contract
Fixed Price Incentive Fee (FPIF)
This contract is used to adjust the fixed cost over the life of the contract because of economic conditions.
Fixed Price Economic Price Adjustment (FP-EPA)
A contract is when the buyer pays for the work expenses and then pays the seller a fee for his profit.
Cost Reimbursable
This contract is when the buyer pays the work expense and then a fixed fee to the seller for profit.
Cost Plus Fixed Fee (CPFF)
This contract is when the buyer pays the work expense and an additional fee, if a target is met, such as, finishing two weeks earlier.
Cost Plus Incentive Fee (CPIF)
A contract is when the buyer pays for both labor and material
Time and Material
Select a seller and award the contract is a part of which process?
Conduct procurement - in executing process
To ensure the contractor is doing the work in the contract in a part of which process?
control procurement - Monitoring and Controlling
- You are working on a construction project and successfully completed all the work. Your stakeholders were very pleased and recently communicated their final acceptance of the project. You are now meeting with your team to update the organizational process
assets with a record of knowledge gained about the project to help future project
managers with their projects. Once the lessons learned are completed, what should you
do NEXT?
A. Release the team
B. Close the contract
C. Get formal acceptance
D. Write lessons learned
- A: You should release the team once the lessons learned are documented and added to the organizational process assets. Most contracts have payment terms that allow for some period of time before full payment is required; thus, the last thing you do on the project is close the contract. The order should be: get formal acceptance, write lessons learned, release the team, and close the contract.
2. You are in charge of the bidding process for a government railway project. You are trying to come up with a set of minimum criteria sellers must meet to be considered. Which of the following are you working on? A. Source selection analysis B. Proposal evaluation technique C. A weighting system D. An independent or in-house estimate
- A: A Source selection analysis is a set of minimum criteria a seller must meet to be
considered, such as proficiency with certain products or techniques, safety record,
number of years of relevant experience, etc. Prior to reviewing the detailed proposals,
a buyer may review the qualifications of sellers who have indicated an interest to bid. A
weighting system is generally utilized to score qualified sellers after proposals have been submitted. The procuring organization can prepare its own independent estimate to judge whether the statement of work was adequate in its description or that the seller
fully understood or responded fully to the statement of work. This estimate also helps
the organization check the reasonableness of the seller’s response and proposed pricing.
- You are working on a software development project to automate an accounting process. You, your team, and your senior manager all feel that the work is complete. However, one of your important clients disagrees and feels that one of the deliverables is not acceptable, as it does not meet the requirements specification. What is the BEST way to handle this conflict?
A. Issue a change order.
B. Renegotiate the contract.
C. File a lawsuit to force the stakeholder to accept the deliverable.
D. Meet with the responsible team member to review the WBS dictionary.
- D: The very first thing we should do is to find out the details of the issue by reviewing the requirements and meeting with the responsible team member to review the WBS dictionary. We need to find out if there is something wrong in the details of the work package or in how the team member completed the work. If needed, we can then issue a change order. When there’s a dispute between a buyer and a seller, it’s called a claim.
Most contracts have some language that explains exactly how claims should be resolved— and since it’s in the contract, it’s legally binding, and both the buyer and seller
need to follow it. Usually, it’s not an option to renegotiate a contract, especially at the
end of the project after the work is completed. Lawsuits should only be filed if there are
absolutely, positively no other options.
4. While in the Control Procurements process, you are meeting with your seller to check on the product itself and its conformance to specification. Which one of the following are you performing? A. Performance reporting B. Procurement performance reviews C. Inspections D. Claims administration
- C: Inspections are activities mainly focused on the product itself and its conformance to specification. Performance reporting is an excellent tool that provides management with information about how effectively the seller is meeting contractual objectives. This report can produce earned values, schedule and cost performance index, trend analysis, etc. Procurement performance review is a structured review that consists of seller-prepared documentation, buyer inspection, and a quality audit of the seller’s progress to deliver project scope and quality within cost and on schedule as compared to the contract. The objective is to identify performance progress or failures, non-compliances, and areas where performance is a problem. Claims handling is one of the most frequent activities in the Control Procurements process. Claims, disputes, or appeals are requested when the buyer and seller disagree on scope, the impact of changes, or the interpretation of some terms and conditions in the contract.
5. You requested your experts to prepare an independent estimate, or in-house estimate, for your contract to help judge whether the Statement of Work (SOW) was adequate in its description or that the seller understood or responded fully to it. You also want to check the reasonableness of the seller’s response and proposed pricing. Which of the following BEST describes what you are doing? A. Plan Procurement Management B. Conduct Procurements C. Control Procurements D. Close Project
- B: We use independent estimates as a tool & technique in the Conduct Procurements
process.
- You are asked by management to select a contract type that will obligate the seller
to accept all liability for poor workmanship, engineering errors, and consequential
damages in the project. Which of the following contract types will you select?
A. Fixed price
B. Time & material
C. Cost plus incentive fee
D. Purchase order
- A: The fixed price or lump sum contract, which usually pays a lump sum amount for all the work, places the risk on the seller. The seller may include a contingency in the contract to assist in minimizing the risk of reduced profits.
- After reviewing your project schedule and resource calendars, you realize that your
resources are 100 percent occupied and will have no time to work on a new component. So, you decide to outsource the component and start negotiating with a couple of potential vendors. While outsourcing, which of the following should you be MOST concerned about?
A. The technical background of the vendor
B. The financial capability of the vendor
C. The relevant experience of the vendor
D. Proprietary data of your organization
- D: The technical background, financial capability, and relevant experience of the vendor are all very important factors while outsourcing, but we should be very concerned about the sensitive and confidential proprietary data of our organization that we may need to turn over to the vendor.
- Sabrina, a project manager for ITPro Consultancy, LLC, is overseeing the design and development of an indoor room temperature and humidity controlling device. While working on the procurement plan, she compared the cost of an off-the-shelf product to the cost of her programmers’ design to develop the custom device. Sabrina is engaged in which of the following?
A. Using expert judgment
B. Coming up with source selection criteria
C. Performing a Make-or-buy analysis
D. Working on the procurement statement of work
- C: Make-or-buy analysis is concerned with determining whether a product can be cost effectively produced in-house or whether it should be purchased, leased, or rented. While performing this analysis, we must consider indirect as well as direct costs, availability in addition to related risk, schedule, etc. Source selection criteria is developed and used to selecting a contractor. Later on, it also helps to evaluate sellers by rating or scoring them. The procurement Statement of Work (SOW) describes the subject item in sufficient detail to allow prospective sellers to determine offerings (bids, proposals, etc.). It documents details of the work to be performed by the seller under a contract.
- While working on a data mining project, you realize that you need a data validation tool that was never thought of earlier. After reviewing your project schedule and resource calendars, you realize that your resources are 100 percent occupied and will have no time to work on this new component. So, you decide to outsource the component and start negotiating with a couple of potential vendors. You quickly realize that you do not have a clear definition of the scope, but the vendor agrees with you that the project will be relatively small and you have an urgent need. Which contract type is MOST appropriate in this kind of situation?
A. Cost Plus Fixed Fee (CPFF)
B. Cost Plus Award Fee (CPAF)
C. Fixed Price Economic Price Adjustment (FPEPA)
D. Time and Materials (T & M)
- D: This time-based fee plus cost of materials contract is used for smaller amounts and shorter times and requires little or no defined scope of work. In a T & M contract, the seller pays a rate for each of the people working on the team plus their material costs. The “time” part means that the buyer pays a fixed rate for labor, usually a certain number
of dollars per hour. And the “materials” part means that the buyer also pays for materials,
equipment, office space, administrative overhead costs, and anything else that has to be
paid for.
- You are in the Control Procurements process and are ensuring that the seller’s
performance meets contractual requirements by monitoring contract performance and
making appropriate changes and corrections. Which of the following will you most likely NOT use as an input in this process?
A. Procurement documents
B. Work performance information
C. Contract
D. Seller proposals
- D: Seller proposals are inputs to the Conduct Procurements process for obtaining seller responses, selecting a seller, and awarding the procurement, usually in the form of a contract. This is an official response to the buyer’s procurement document, including the details the buyer is looking for, how the work will be performed, and pricing. Procurement documents, work performance information, and contracts all are used as inputs for administering procurements in the monitoring & controlling process group.
- You are the project manager of a data center construction project. Your company made it mandatory to solicit quotes from three separate vendors before submitting the
purchase request to the finance department for buying switches, routers, firewalls, PCs, servers, etc., for the data center. What type of input is this policy to the procurement process?
A. Make-or-buy decision
B. Procurement document
C. Source selection criteria
D. Organizational process asset
- D: Any type of corporate policy or formal and official procurement procedure is an organizational process asset.
- Which of the following is the process of documenting project purchasing decisions,
specifying the approach, defining selection criteria to identify potential sellers, and
putting together a procurement management plan?
A. Conduct Procurements process
B. Plan Procurements process
C. Close Project process
D. Control Procurements process
- B: Plan Procurement Management is the process of documenting project purchasing decisions, specifying the approach, defining selection criteria to identify potential sellers, and putting together a procurement management plan.
- Steve is a program manager overseeing an ERP implementation project where the
team has already completed the finance, sales, and admin modules out of seven total
modules. Steve was informed that the client has terminated the project as they found a cheaper and faster off-the-shelf solution for their need and no longer want the project to continue. Which of the following is TRUE?
A. The team must keep working on the project to give senior management time to
discuss with the client.
B. Steve must stop all work and release the team immediately.
C. Steve must work with the team to document the lessons learned.
D. Steve must close the contract.
- C: A project can be terminated any time for a certain cause or simply for convenience of the buyer. If a project is terminated before the work is completed, you still need to document the lessons learned and add them to the organizational process assets. There are always important lessons that you can learn when a project goes seriously wrong even when you did nothing to contribute to the disaster.
- In which procurement management process will you ensure that the seller’s
performance meets contractual requirements, that both the buyer and seller meet
their contractual obligations, and that the legal rights of both the buyer and seller are
protected?
A. Procurement performance reviews
B. Inspections and audits
C. Performance reporting
D. Control Procurements.
- D: Control Procurements is the process of ensuring the seller’s performance meets
contractual requirements, ensuring that both seller and buyer meet their contractual
obligations, and ensuring that legal rights of both seller and buyer are protected. The
focus here is to manage the relationship between buyer and seller, monitor contract performance, and make appropriate changes and corrections. Procurement performance reviews, inspections and audits, and performance reporting are tools & techniques used in the Control Procurements process.