Procurement

Question 1

Cost plus fixed fee/ cost plus percentage of costs

Answer 1

Costs plus fixed fee (CPFF) or Cost Plus Percentage of Costs (CPPC) means buyer will pay the seller back for the costs involved in doing the project work, plus an agreed amount (or fixed fee) that buyer will pay on top of that.

Question 2

Fixed Price Contracts

Answer 2

A contract where the price is predetermined and fixed, regardless of the actual costs incurred during the project.

Question 3

Fixed price with economic price adjustment contracts (FP - EPA)

Answer 3

With this particular contract, both buyer and seller agree on pre-defined criteria for the price adjustment. This is possible because of the uncertainties present in the market. It is important to take note that the dynamics in the market changes over time and this is the reason why this particular contract is beneficial for long-term projects or those that span multiple years.

Question 4

Cost Plus Incentive Fee (CPIF)

Answer 4

a cost-reimbursement contract that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs.

Question 5

Producer Price Index (PPI)

Answer 5

measures the average change over time in the selling prices received by domestic producers for their output.

Question 6

Arbitration Clause

Answer 6

Arbitration is a form of dispute resolution in which the parties to a contract agree to have their dispute resolved by a third-party decision-maker, rather than through litigation, and agree that this third party’s ruling will be binding on them.

Question 7

Force Majeure

Answer 7

Contracts frequently include an act of God clause, also written as force majeure clause, to allow for non-performance in the event an act of God makes completing the contract impossible.

Question 8

Termination Clause

Answer 8

provides a pre-set agreement on what will happen when the employee is terminated in terms of how much notice they get and/or what sort of payment they will receive.

Question 9

SIPOC

Answer 9

(suppliers, inputs, process, outputs, customers) diagram is a visual tool for documenting a business process from beginning to end prior to implementation.

Question 10

Procurement Audit

Answer 10

reviewing procurement contracts, processes, and history with vendors to ensure accuracy, compliance with the terms stipulated in your contract, and improve efficiency

Question 11

Time and materials contract

Answer 11

commonly used in the construction industry. One party agrees to pay a contractor for the costs of all materials needed to finish a job as well as a predetermined hourly wage for the work performed.

Question 12

Cost plus award fee (CPAF)

Answer 12

A contract where the contractor recovers actual costs incurred for completed work and is awarded a fee based on performance. Actual costs include general administration, overhead, labor and fringe benefits, other direct costs, and materials, including mark-up.

Question 13

Seller rating system

Answer 13

A method that uses information such as the seller’s past performance, quality ratings, delivery performance and contractual compliance. These rating systems are used in addition to the proposal evaluations screening system to select sellers.

Question 14

Build or Buy

Answer 14

The process of gathering and organizing data about product requirements and analyzing them against available alternatives, including the purchase or internal manufacture of the product.

Question 15

Alternative dispute resolution

Answer 15

refers to the different ways people can resolve disputes without a trial.

Question 16

Target Cost

Answer 16

Estimated cost of the project without profit

Question 17

Target fee

Answer 17

Profits for the seller

Question 18

Target price

Answer 18

Cost + fee

Question 19

Buyer’s share ratio

Answer 19

Ratio of costs buyer payed (80/20)

Question 20

Ceiling price

Answer 20

Maximum price buyer pays

Question 21

Point of total assumption

Answer 21

The point of total assumption (PTA) is a point on the cost line of the profit-cost curve determined by the contract elements associated with a fixed price plus incentive-Firm Target (FPI) contract above which the seller effectively bears all the costs of a cost overrun.

Question 22

Request for proposal (RFP)

Answer 22

request for proposal. An RFP is a formal request sent from a buyer to potential vendors seeking a product, service or solution. The RFP document asks all vendors the same questions. Then, interested vendors submit their answers in a proposal document for consideration.

Question 23

Source selecting criteria

Answer 23

describes properties that are crucial for a purchaser when deciding on a supplier. Criteria can be subjective or objective. Individual judgment can be biased, which may require balancing with objective measures.

Question 24

Procurement strategy

Answer 24

documents how your organisation runs its procurement function. It provides an overview of your governance framework and a roadmap for the way your organisation conducts its procurement activity.

Question 25

Procurement statement of work

Answer 25

A document that describes the work and activities that the seller is required to complete. The activities also include meetings, reports and communications.