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)
What is a nondisclosure agreement?
An agreement between the buyer and prospective sellers identifying the information or documents they will control and hold confidential, and who in the organization will have access to the confidential information
What is a force majeure?
A situation that can be considered an “act of nature” and is an allowable excuse for either party not meeting contract requirements
What is the purpose of an incentive in a contract?
Incentives are used to bring the seller’s objectives in line with the buyer’s and to motivate the seller towards efficiency. The buyer will provide an additional fee if the seller meets some cost, performance, or schedule objectives.
What happens during the Plan Procurement Management process?
Perform make-or-buy analysis
Create a procurement management plan
Create a procurement strategy for each procurement
Create a procurement statement of work for each procurement
Select the appropriate contract type for each procurement
Create the bid documents
Determine the source selection criteria
Name the methods for planning procurement management.
Make-or-buy analysis
Logistics and supply chain management
Economic measures
Source selection analysis
What is make-or-buy analysis?
Deciding whether the performing organization should do the project work itself or outsource some or all of the work
What artifacts result from the Plan Procurement Management process?
Procurement management plan
Procurement strategy
Procurement statement of work
Source selection criteria
Make-or-buy decisions
Selected types of bid documents
Independent cost estimates
Change requests
What is source selection analysis?
Determines the criteria that will be used to select sellers
What is a procurement management plan?
A plan that documents how procurements will be planned, executed, and controlled
What are the types of bid documents?
Request for proposal (RFP)
Request for quotation (RFQ)
Request for information (RFI)
Invitation for bid (IFB)
What are source selection criteria?
The factors the buyer will use to evaluate responses from the sellers
When are source selection criteria created, and when are they used?
Created during the Plan Procurement Management process
Used during the Conduct Procurements process to pick a seller
What does noncompetitive procurement mean?
The work is awarded to a single source or a sole source without competition
What should a project manager watch out for during a bidder conference?
Collusion
Sellers not asking questions in front of the competition
Making sure all the questions and answers are documented and distributed to all potential sellers
What is the purpose of proposal evaluation?
Provides a basis to quantitatively evaluate proposals and minimize the influence of personal prejudices
What does a weighting system do?
Enables the buyer’s evaluation committee to analyze seller responses using the weighted source selection criteria
What is an independent cost estimate?
The buyer compares the seller’s proposed cost with an estimate created in-house or with outside assistance during procurement planning efforts
This allows the buyer to discover significant differences between what the buyer and seller intend in the procurement statement of work
What are the objectives of negotiation?
Obtain a fair and reasonable price
Develop a good relationship between the buyer and the seller
What is required for a legal contract?
Offer
Acceptance
Consideration
Legal capacity
Legal purpose
What is a contract change control system?
A system that is described in the contract and includes change procedures, forms, dispute resolution processes, and tracking systems
Name methods that can be used during the Control Procurements process.
Performance reviews
Inspections and audits
Earned value analysis
Trend analysis
What is the purpose of a performance review during Control Procurements?
To verify that the seller is performing as they should by analyzing all available data
What is involved in an inspection regarding procurements?
Inspections may involve walkthroughs of the work site or deliverables reviews to verify compliance with the procurement statement of work
Variances or deviations may trigger change requests
What is involved in an audit regarding procurements?
An audit is to confirm that the seller’s activities comply with approved procurement policies and processes
Variances are identified, formal adjustments are made accordingly, and lessons learned are captured
What can trend analysis help determine?
Whether performance is getting better or worse
If preventive actions can prevent significant variances in the future
It can help to develop forecast estimates and estimate at completion
Why might there be conflict between the procurement manager and the project manager?
The procurement manager is the only one with the power to change the contract
What would be reasons for termination of a contract?
Cause: The buyer may terminate a contract for cause if the seller breaches the contract (does not perform according to the contract)
Convenience: The buyer can also terminate the contract before the work is complete because they no longer want the work done (termination for convenience)
What is a constructive change?
A change that occurs when the buyer, through actions or inactions, limits the seller’s ability to perform the work according to the contract
What does a records management system do?
Keeps procurement documentation complete, organized, and accessible
What is involved in closing a procurement?
Tying up all the loose ends
Verifying all work and deliverables are accepted
Finalizing open claims
Financial closure (ensuring payment)
What is the difference between procurement closure and project closure?
Project closure: closing out a project or phase
Procurement closure: completing only that particular part of scope that has been procured through a third party
When are procurements considered closed?
When a contract is completed
When a contract is terminated before the work is completed
What needs to be done for procurement closure?
Product validation
Procurement negotiation
Financial closure
Procurement process audit
Updates to records
Final contract performance reporting
Creation of procurement file
