Procurement Flashcards
What is an agreement versus 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 a buyer and a seller?
The buyer is the company or person who purchases the goods or services
The seller is the company or person who provides the goods or services (may be called a contractor, subcontractor, supplier, designer, or seller)
According to the Process Groups model, what processes are involved in procurement management?
Plan Procurement Management
Conduct Procurement’s
Control Procurement’s
What is the difference between centralized and decentralized contracting?
Centralized: There is one procurement department, and the procurement manager handles procurement’s for many projects
Decentralized: There is no procurement department or procurement manager assigned, and the project manager may be responsible for the plan, as well as conducting all work on all procurement’s
Describe the project manager’s role in procurements.
Know the procurement process
Make sure the contract includes the scope of work and requirements
Be involved during contract negotiations
Define quality requirements
Investigate any issues and take corrective action
Understand contract terms and conditions
Ensure all work in the contract is done
Work with the procurement department to manage contract changes
What are the three broad categories of contracts?
Cost-reimbursable (CR)
Fixed-price (FP)
Time and material (T&M)
What is a purchase order?
A unilateral contract typically used for buying commodities
Purchase orders become contracts when the buyer accepts the terms
What is an indefinite delivery, indefinite quantity (IDIQ) contract?
Provides for an indefinite number of goods and services within a fixed time frame and within a certain cost range
Who has the cost risk in a fixed-price contract?
The risk is borne by the seller
Who has the cost risk in a cost-reimbursable contract?
The risk is borne by the buyer
Name some types of contracts that can be used on an agile project.
Graduated fixed-price
Fixed-price work packages
Not-to-exceed time and material
Early termination
What is a standard contract?
Contract drafted (or reviewed) by lawyers
Standard contracts generally do not require additional review if used for the purpose for which they were intended
What are some examples of special provisions?
May include additions, changes, or deletions to a standard contract
What is a privity?
A contractual relationship
When is a fixed-price contract used?
When acquiring goods, products, or services with well-defined requirements or specifications
Name the advantages and disadvantages of a fixed-price contract.
Advantages: Less work for the buyer to manage; seller has a strong incentive to control costs; companies have experience with this type of contract; the buyer knows the total price before the work begins
Disadvantages: Seller may try to make up profits by charging more; seller may try to not complete some of the procurement statement of work; requires more work for the buyer to write the procurement statement of work; can be more expensive than other types if the procurement statement of work is incomplete
What is a time and material contract?
The buyer pays on a per-hour or per-item basis
Name the advantages and disadvantages of a time and material contract.
Advantages: Can be created quickly; contract duration is brief
Disadvantages: Every hour or unit billed is profit for the seller; the seller has no incentive to control costs; appropriate only for small levels of effort on projects; requires a great deal of day-to-day oversight
Define cost-reimbursable contract.
A contract where all the seller’s costs are reimbursed by the buyer
Name the advantages and disadvantages of a cost-reimbursable contract.
Advantages: Allows for a simpler procurement statement of work; usually requires less work to define scope; generally less costly
Disadvantages: Requires auditing seller’s invoices; requires more work for the buyer; seller has only a moderate incentive to control costs; the total price is unknown
What is a fixed-price work package?
An agile contract that can be paid in increments when work packages are delivered, rather than paid as one lump sum at the end of the contract
What does a sharing ratio describe?
How the cost savings or cost overrun will be shared as apportioned by percentage (e.g., 80/20, 80 percent buyer/20 percent seller)
