Procurement Management Flashcards
What is a contract?
requires formality, mutually binding
What are the processes for procurement management?
plan procurement management
conduct procurements
control procurements
What is the purpose of project procurement management?
provides the processes necessary to purchase or acquire products, services or results needed from outside the project team
What is a centralised environment?
A centralised environment is when there is a single procurement department that handles all procurements
Usually used in more mature (larger) organisations.
What is a decentralised environment?
A decentralised environment is when there is a full time procurement manager assigned to each project. Usually used in smaller organisations.
What is done at the plan procurement management stage?
The process of documenting project procurement decisions, specifying the approach and identifying potential sellers.
What is a bid?
a bid is an offer of a price, especially at an auction
When would a proposal be used?
a proposal would be used when other considerations such as technical capability or technical approach are the most important
What are the different contract types?
Fixed price, time and materials, cost reimbursable
What is the purpose of the conduct procurements stage?
to obtain sellers responses, select a seller and award a contract
What is the purpose of the control procurements stage?
to manage procurement relationships
monitor contract performance
make any necessary changes or corrections
closing out contracts
What are the trends or emerging practices that need to be taken into consideration before procuring?
Advances in tools More advanced risk management Changing contract processes Logistics and supply chain management Technology and stakeholder relations Trial engagements
What are the outputs of the plan procurement management process?
Procurement management plan Procurement strategy Bid documents Procurement statement of work Source selection criteria Make or buy decisions independent cost estimates Change requests Update to project docs such as lessons learnt/milestone list/risk register/stakeholder register/requirements documentation/requirements traceability matrix Operational Process Assets updates
What are the advantages of a T&M contract?
Quick to create the contract
Contract duration is brief
Best option when you hire resources to increase your staff for a short period of time
What are the disadvantages of a T&M contract?
Seller is making profit for every hour/resource
No incentive for the seller to control costs
Only suitable for small projects
Buyer needs resources to oversee work on a daily basis
What are the different types of Fixed Priced contracts?
Firm Fixed Price Contracts (FFP) - Price doesn’t change unless the scope changes
Fixed Price Incentive Fee Contracts (FPIF) - Financial incentive tied to achieving certain project objectives related to cost, schedule or technical performance of the seller. A price ceiling is set and all costs above the price ceiling are the responsibility of the seller. This is known as the ‘Point of Total Assumption’.
Fixed Price with Economic Price Adjustment Contracts (FP-EPA) For long-term contracts. Provision for pre-defined final adjustments to the contract price due to changed conditions, such as inflation changes, or cost increases / decreases for specific commodities.
What is the purpose of a bidder conference?
Ensuring all vendors have a clear understanding of the procurement
What is a cost reimbursable contract also known as?
A Cost Plus contract
What are the main points for cost reimbursable contracts?
Payment based on actual cost spent on the project, plus a fee representing the seller profit.
Flexibility for scope changes.
Financial incentives to the seller when the seller exceeds the performance targets on cost, schedule and technical performance; financial damages to the seller when the seller falls below performance targets.
What are the different types of cost reimbursable contracts?
Cost Plus Fixed Fee Contracts (CPFF) Seller receives actual cost + fixed fee (a % of the initial estimated project cost).
Cost Plus Incentive Fee Contracts (CPIF) Seller receives actual cost + incentive based on achieving performance objectives. If final costs are less or greater than original cost, both buyer and seller share costs based on a pre-negotiated cost sharing formula.
Cost Plus Award Fee Contracts (CPAF) Seller is reimbursed of legitimate cost but majority of the fee is earned based on performance criteria in the contract.
What are the advantages of a cost reimbursable contract?
Simpler procurement statement of work is required.
Less work is required to define scope than for an FP contract.
Lower cost than FP because the seller does not have to add as much for risk.
What are the disadvantages of a cost reimbursable contract?
Requires auditing the seller’s invoice.
More work for the buyer to manage.
No incentive to control the cost for the seller.
Total price is not known upfront.
What are the inputs for the plan procurement management process?
Project charter
Business documents - business case/benefits mgmt plan
Project management plan - scope baseline/quality mgmt plan/scope mgmt plan/resource mgmt plan
Project documents - milestone list/project team assignment/requirements documentation/requirements traceability matrix/resource requirements/risk register/stakeholder register
Enterprise environmental Factors
Operational process assets
What are the Tools and Techniques required for the plan procurement management process?
Expert Judgement Data gathering Data analysis Source selection analysis Meetings
What are the inputs for the conduct procurement phase?
Project management plan - scope management plan/requirements management plan/communications management plan/risk management plan/procurement management plan/configuration management plan/cost baseline
Project documents - lessons learned register/project schedule/requirements documentation/risk register/stakeholder register
Procurement documents
Seller responses
Operational Process Assets
Enterprise Environment Factors
What are the Tools and Techniques for the conduct procurement phase?
Expert judgement Data analysis - proposal evaluation Advertising Bidder Conferences Interpersonal and team skills - negotiation
What are the outputs for the conduct procurement phase?
Selected sellers
Agreements
Change Requests
Project management plan updates - requirements management plan/quality management plan/communication management plan/risk management plan/procurement management plan/scope baseline/schedule baseline/cost baseline
Project documents updates - lessons learned register/risk register/stakeholder register/requirements documentation/requirements traceability matrix/resource calendar
OPA updates
What are the inputs for the control procurement phase?
Project management plan - Requirements management plan/Risk management plan/Procurement management plan/Change management plan/Schedule baseline
Project documents - Assumptions log/Lessons learned register/milestone list/Quality reports/Requirements documentation/Requirements traceability matrix/Risk Register/Stakeholder Register
EEF OPA Agreements Procurement documents Approved change requests Work performance data
What are the Tools and Techniques for the control procurement phase?
Expert Judgement Data analysis - Performance reviews/Earned value analysis/Trend analysis Claims Administration Inspection Audits
What are the outputs for the control procurement phase?
Closed procurements
Work performance information
Change requests
Procurement documents updates
Updates to project documents - Lessons learned register/Resource requirements/Requirements traceability matrix/Risk register/Stakeholder register
Updates to project management plan - Risk management plan/Procurement management plan/Schedule baseline/Cost baseline
Updates to OPA
What is a MSA?
Master Services Agreement
Used in agile/adaptive environments
Larger projects may take an adaptive approach for some deliverables and a more stable approach for others, in this case a MSA may be used for the overall engagement. This allows for change to occur without impacting the overall contract.
Because each project is unique, tailoring considerations should include?
Complexity of procurement
Physical location
Governance and regulatory environment
Availability of contractors
When should defining roles and responsibilities be done related to procurement and who may this include?
Early on in the plan procurement management phase as these will be documented in the procurement management plan.
Could include personnel from the purchasing or procurement department as well as personnel from the buyers organisational legal department.
What is make-or-buy analysis?
It is used to determine if the work can be best accomplished by the project team or if it should be purchase from outside resources
What is an RFI?
Request For Information
A RFI is raised when more information on the goods or services is required from the sellers. This is usually followed by and RFP or an RFQ.
What is an RFQ?
Request For Quotation
A RFQ is raised when more information on the goods or services is required on how vendors would satisfy the requirements and/or how much it will cost.
What is an RFP?
Request For Proposal
A RFP is used when there is a problem in the project and the solution is not easy to determine. This is the most formal ‘request for’ documents and has strict procurement rules for content, timeline and seller responses.
What is the formula to identify seller/buyers fee in a FPIF contract?
Target cost - actual cost x ratio + target fee/profit
What is included in the Procurement Strategy?
Procurement delivery methods
Type of agreements
Procurement phases
What are the different types of bid documents?
RFI - Request for information
RFQ - Request for quotation
RFP - Request for proposal
What is included in the SOW?
Description of the procurement item Specification, quality requirements and performance metrics Acceptance methods and criteria Performance data and other reports required Quality Period and place of performance Currency: payment schedule Warranty
What is included in the procurement management plan?
How procurement work will be coordinated and integrated with other project work, particularly with resources, schedule and budget
Timetable for key procurement activities
Procurement metrics to manage the contract
Responsibilities of all stakeholders
Procurement assumptions and constraints
Legal jurisdiction and currency used for payment
Information on independent estimates
Risk management issues
Prequalified sellers (if applicable)
What are the major components in an agreement document?
Procurement SOW or major deliverables Schedule, milestone, or date by which a schedule is required Performance reporting Pricing and payment terms Inspection, quality and acceptance criteria Warranty and future product support Incentives and penalties Insurance and performance bonds Subordinate subcontractor approvals General terms and conditions Change request handling Termination clause and alternative dispute resolution mechanisms
