Procurement Management Flashcards
What is the process of procurement management?
Plan Procurement Management
Conduct Procurements
Control Procurements
Close Procurements
What are the inputs to the Plan Procurement Management process?
Project management plan
Requirement documentation
Activity resource requirements
Enterprise environmental factos
Organizational process assets
Risk register
Stakeholder register
Any procurement already in place
Project schedule
Initial cost estimates for work to be procured
What are the key outputs of the Plan Procurement Management process?
Make-or-buy decision
Procurement management plan
Procurement statements of work
Procurement documents
Source selection criteria
Change requests
What are the key outputs of the Conduct Procurement process?
Selected sellers
Signed contracts
Resource calendars
Change requests
Updates to project management plan and project documents
What are the key outputs of the Control Procurement process
Subtantial completion of contract requirements and deliverables
Work performance information
Change requests
Updates to project management plan
and project documents
What are the key outputs of the Close Procurement process?
Formal acceptance
Closed procurements
Updates to lesson learned and records
(part of organizational process assets)
What is an agreements?
What is a contract?
Agreement: A document or communication that outlines
internal or external relationship and their intentions
Contract: A type of written or verbal agreement, typically created with an external entitiy, where there is some exchange of goods or service for some type of compensation (usually monetary); a contract forms a legal relationship between the entities
What is the difference between centralized and decentralized contracting?
Centralized: There is one procurement department, and the procurement manager handles procurements for many projects
Decentralized: A procurement manager is assigned to one project full-time and reports directly to the project manager
What are the advantages and disadvantages of centralized contracting?
Advantages:
-Higher level of procurement expertise
- Standardized practise provide efficiency
- Clear career path in procurement management
- Continuous improvement, training, and shared lessons learned
Disadvantages:
-Procurement manager’s attention is divided among many projects
-More difficult for the project manager to obtain contracting help when needed
What are the advantages and disadvantages of decentralized contracting?
Advantages:
-Project manager has easier access to contracting expertise
- Procurement manager has more loyalty to the project
- Procurement manager has a better understanding of the project needs
Disadvantages:
-No home department for the contracts person after the project
- Difficult to maintain a high level of contracting expertise
- Duplication of expertise/inefficient use of procurement resources
- Contracting processes aren’t standardized
- No career path as a procurement manager in the company
What is required for a legal contract?
Offer
Acceptance
Consideration
Legal capacity
Legal purpose
What is included in a contract?
Legal terms
Business terms regarding payments
Reporting requirements
Marketing literature
Proposal
Procurement statement of work
Describe the project manager’s role in procurement
Understand the procurement processe
Make sure the contract contains all the scope of the work and project management requirements
Incorporate mitigation and allocation of risks into the contract
Help tailor the contract to the project
Be involved during contract negociations to protect the relationship with the seller
Make sure all the work in the contract is done, not just the technical scope
Work with the procurement manager to manager changes to the contract
What is the procurement management plan?
A plan that documents how procurement will be planned, executed, controlled and closed
What is a make-or-buy analysis?
Deciding whether the performing organization should do the project work itself or outsource some or all the work
What are the three broad categories of contracts?
Cost-reimbursable (CR)
Fixed Prices (FP)
Time and Material (TM)
What is a cost-reimbursable contact?
All the seller’s costs are reimbursed by the buyer
What is a fixed-price contract?
There is one set fee for accomplishing all the work
What is a time and material contract?
The buyer pays on per-hour or per-item basis
What is a cost plus fixed price (CPFF) contract?
All the seller’s cost are reimbursed by the buyer, and a fixed fee is negociated for the seller’s profit
What is a cost plus percentage of cost (CPPC) contract?
All the seller’s cost are reimbursed by the buyer, and the buyer also pays a specified percentage of those costs as fee or profit
What is a cost plus incentive fee (CPIF) contract?
The seller’s costs are reimbursed by the buyer, and the buyer and seller share any cost saving or overruns
What is a cost plus award fee (CPAF) contract?
All the seller’s costs are reimbursed by the buyer, and the buyer pays a base fee plus an award amount (a bonus) base on performance
What is a fixed price incentive fee (FPIF) contract?
The buyer pays a fixed price plus an additional fee if the seller exceeds performance criteria stated in the contract
What is a fixed price award fee (FPAF) contract?
The buyer pays a fixed price plus an award (paid in full or in part) based on the seller’s performance level
What is a fixed price economic price adjustment (FPEPA) contract?
A fixed-price contract with a built-in economic price adjustment to cover cost increase due to future economic conditions
What is a purchase order?
A unilateral contact typically used fo buying commodities
Purchase orders become contracts once they are “accepted” by the seller’s fulfillments of the contract
What do incentives accomplish?
What might incentives be used for?
They align the seller’s motivation with the buyer’s objectives
Time
Cost
Quality
Scope
Who has the cost risk in a cost-reimbursable contract?
Who has the cost risk in fixed-price contract?
Cost-reimbursable: The risk is borne by the buyer
Fixed price: The risk is borne by the seller
What is the ceiling price?
The highest price the buyer will pay
It’s a condition of the contract that must be agreed to by both parties before signing
What is the point of total assumption?
For fixed price incentive fee contracts, the amount above which the seller bears all the loss of a cost overrun
Describe the 3 different type of procurement statement of work.
Performance: Conveys what the final product should accomplish
Functional: Convey the end purpose of result (the minimum essential characteristics of the product)
Design: Convey exactly what work is to be done and how it should be completed
What are the procurement documents?
Request for proposal (RFP)
Invitation for bid (IFB)
Request for quotation (RFQ)
A request for information (RFI) is sometimes considered a procurement document, thought it does not really belong in this category
What is a nondisclosure agreement?
An agreement between the buyer and the prospective sellers identifying the information or documents they will hold confidential and control, and who in the organization will have access to the confidential information
What are standard contract terms and conditions?
What are special provisions?
Standard contract terms and conditions: Terms and conditions that are used for all contracts within the company
Special provisions: Terms and conditions created for the unique needs of the project
Name common terms and conditions that may be in contract.
Please review the long lists of terms and conditions and what they mean in the Procurement Management chapter of CAPM.
What is a letter of intent?
A letter from the buyers, without legal binding, saying the buying intends to hire the seller
What does privity means?
A contractual relationship between two or more companies
What does noncompetitive procurement mean?
The work is awarded to a single source or a sole source without competition
What are source selection criteria?
When are these criteria created, and when are they used?
The factors the buyer will use to evaluate (weight or score) responses from the sellers
They are created during the Plan Procurement Management process, and are used during the Conduct Procurement process to pick a seller
What is a bidder conference?
What should a project manager watch out for during a bidder conference?
A meeting with prospective sellers to make sure they all understand the procurement and have a chance to ask questions
Watch for:
- Collusion
- Sellers not asking questions in from of the competition
Make sure all the question and answers are documented and distributed to all the potential sellers
What is a qualified seller list?
A list of sellers that have been preapproved
What are the objectives of negotiations?
Obtain a fair and reasonable price
Develop a good relationship with the seller
What are some examples of negotiation tactics?
Attack Personal insults Good guy/Bad guy Deadline Lying Limited authority Missing man Fair and reasonable Delay Extreme demands Withdrawal Fait accompli
Wy might there be conflict between the contract administrator and the project manager?
The potential administrator is the only one with the power to change contract
What is a contract change control system?
A system created to control changes to the contract
What is the purpose of a procurement performance review?
Verify that the seller is performing as they should
Identify what the buyer can do to help the seller do the work
Determine if any change are needed to improve the buyer-seller relationship and processes they are using
Define claims administration
Managing claims (request by the seller for compensation from the buyer)
What is the key function of a records management system?
Maintain an index of contract documentation and records so that they can be retrieved if necessary
What occurs during the Close Procurement process?
Product validation
Procurement negotiation
Financial closure
Procurement audit
Updates to records
Final contract performance reporting
Documentation of lessons learned
Creation of procurement file
What is a procurement audit?
A structured review of the procurement process and identification of lessons learned to help future procurements
