Procurement Flashcards
what is the definition of procurement
Procurement is the process by which products and services are acquired from an external provider for incorporation into the project, programme or portfolio.
what is the definition of an external provider
An external provider represents anyone outside the project, such as suppliers or contractors, or it may also be another department or division within the host organisation.
what 3 things does procurement typically cover the acquisition of
- standard ‘off the shelf’ goods and services
- goods or services that are designed and provided specifically for the purchaser
- professional advice or consultancy.
what aspects of procurement are included in the resource management plan
the resource management plan describes how the goods and services are to be acquired and includes the development of a procurement strategy.
what is addressed within a procurement strategy
A procurement strategy addresses the needs of the project whilst respecting any organisational constraints and/or strategic objectives that may be relevant.
The strategy reflects a structured approach to securing the necessary resources for carrying out the work of the project.
what 6 factors of procurement are included in the resource management plan
- ‘make’ or ‘buy’ decision
- use of single, integrated or multiple providers
- required provider relationships
- provider selection
- conditions and forms of contract
- types of pricing and methods of reimbursement.
what 7 factors need to be considered when deciding whether to outsource
- cost
- availability of skilled resource
- capacity
- control (including quality and schedule)
- control of intellectual property
- reliability of supply
- core competence (strategic objectives).
Once a decision has been made to outsource, what does the strategy needs to consider
the strategy needs to consider:
- what form of contractual relationship is most appropriate
- how the supplier will be reimbursed (payment terms). - the organisation’s procurement policy and quality assurance arrangements will also have a bearing on the agreed procurement strategy. These arrangements may include the requirement to adopt ethical procurement procedures.
what 2 objectives are included in the (OJEU – Official Journal of the European Union)
- a more transparent and objective procurement process whilst encouraging competition amongst bidders
- Public Procurement Directives that are intended to ensure fair and non-discriminatory international competition for contracts greater than defined threshold values (different contract thresholds are defined for products and services)
what 6 factors need to be considered when selecting a reimbursement method
- the ability and/or requirement to start work as soon as possible
- how well defined do requirements need to be before a contract is agreed
- who owns the risk(s)
- what level of supplier management is required (effort/knowledge)
- how easy is it to manage/implement scope changes
- how might quality be impacted by specific payment terms
what are the 3 main types of supplier reimbursement
- fixed price
- cost plus
- per unit
what are the 3 different types of fixed price supplier reimbursement
Firm Fixed Price (FFP) - Price set at project start and not subject to change unless scope changes. Very common.
Fixed Price + Economic Price Adjustment
(FP-EPA) - Price set but may be adjusted if economic conditions change (e.g. inflation)
Fixed Price + Incentive Fee (FPIF) Fee - may be adjusted if supplier meets agreed performance metrics.
what are the 3 different types of cost plus supplier reimbursement
Cost Plus Award Fee
(CPAF) - Supplier is reimbursed for all allowable costs but the majority if the fee is only earned based on the satisfaction of certain broad subjective performance criteria.
Cost Plus Fixed Fee (CPFF) - Supplier is reimbursed for all allowable costs plus an agreed fixed fee payment.
Cost Plus Incentive Fee
(CPIF) - Supplier is reimbursed for all allowable costs plus a predetermined incentive fee for achieving certain targets (typically financial). For example, cost savings may be shared between the supplier and the customer.
what are the 2 different types of unit supplier reimbursement
Time and Materials (T&M) -Supplier is reimbursed for provision of services (e.g. daily labour rate)
Unit Rate - Supplier is reimbursed for provision of agreed deliverables (e.g. desktop PC installation)
what is the target cost supplier reimbursement method
Target cost (A form of CPIF) - Target Price Contracts are based on a cost reimbursable mechanism in which the contractor is reimbursed his costs (on an actual cost basis) subject to the application at the end of the project of a formula which allows the contractor to share any savings made and to contribute towards overspend.
The target cost will be made up of three elements, of which two are “visible”. These are, first, the base cost which will largely be made up of subcontractor costs as well as necessary items such as plant hire and utility bills.
Secondly, the target cost will also include the contractor’s overheads, profits and other head office elements which are referred to as his “Fee”.
The Fee may be a percentage of the actual cost or target cost or, in some cases, a fixed sum. The third element will be the contractor’s price for his risk, but this will be subsumed in the Fee
