Procurement Mgmt Flashcards
Procurement Mgmt
Set of processes that are used to obtain goods, services or scope from outside the organization
Procurement mgmt processes
Initiating - none Planning - plan procurement mgmt Executing - conduct procurement s Monitor & control - control procurements Closing - none
Plan procurement mgmt outputs
Procurement mgmt plan, independent cost estimates, make or buy decisions, procurement strategy, bid documents, procurement statement of work, work selection criteria
Conduct procurement outputs
Selected sellers, agreements
Control procurement outputs
Closed procurements, work performance info, change requests
Buyer
The org or party purchasing the goods or services from the seller
Seller
The org or party providing or delivering the goods/services to the buyer
Fixed price contract
Seller bears the risk
Cost overruns may not be passed to the buyer and must be borne by the seller
Firm fixed price (FFP)
Price is fixed, no provisions for cost or performance overruns, risk is entirely shifted to the seller
Fixed price incentive fee (FPIF)
Price is fixed with an incentive fee for meeting a target specified in the contract
Both parties agree to a price ceiling and all costs above the price ceiling must be covered by the seller
Fixed price economic price adjustment (FP-EPA)
Popular in cases where fluctuation in the exchange rate or interest rate may impact the project
Economic stipulation may be added to protect the seller or the buyer
Cost plus fixed fee (CPFF)
Buyer bears risk
Since all costs must be reimbursed to the seller, the buyer bears the risk of cost overruns
Cost plus incentive fee (CPIF)
Buyer and seller bear risk
Buyer bears most of the risk, but incentive fee for the seller motivates the seller to keep costs down
Cost plus award fee (CPAF)
The seller passes the costs back to the buyer, but the sellers award/profit comes from a decision made from whether or not to grant it based on the sellers performance
Time and materials
Buyer bears risk
Buyer pays the seller for all time and materials the seller applies to the project
Point of total assumption (PTA)
Cost point in the contract where a subcontractor assumes responsibility for all additional costs
Target cost + (ceiling price - target price) / ABC’s % share of cost overruns
Helps identify the point in the contract where the seller has the most motivation to bring things to completion
Plan procurement mgmt
Involves looking at the project and determine which component or services of the project will be made or performed internally and which will be performed from an external source
Source selection analysis
Deciding how you are going to select a seller
Least cost, qualifications only, quality, quality and cost, sole source, fixed budget
Least cost
May work when quality is not in question
Qualifications only
Small enough that it doesn’t require an elaborate procurement process, make a short list and make a selection based on qualifications
Quality-based (technical score)
Value, best quality
Quality and cost based
Quality and cost based
Sole source
Unusual, buyer negotiates with one seller
Fixed budget
Buyer discloses the budget to seller and negotiate on scope, quality and schedule
Doesn’t work well with scope changes
Procurement mgmt plan
Defines what will be procured, how a seller will be selected, what type of contracts will be used, how risk will be managed, how sellers will be managed, including how their performance will be measured
Procurement strategy
Defines how procurements will be organized, how the contracts will be structured, and which procurement phases will be carried out
Bid documents
Written by the buyer and provided to the prospective sellers, provides a narrative description of work to be performed
Procurement statement of work
Helps explain an section fo the scope to potential sellers in enough detail so they can decide whether or not they want to pursue the work in question
Should focus on the outcome and not the steps
Source selection criteria
Determined before the seller is selected
Make or buy decisions
Made and documented with just enough info
Independent cost estimates
May be created by outside companies or internally
Conduct procurements
Carries out the procurement mgmt plan, selects one or more sellers, and awards the procurement, usually in the form of a contract
Issues bid, hold bidder conferences, evaluate proposals and select seller
Conduct procurement tools
Advertising, bidder conferences
Selected sellers
The RFP is generated, sellers have submitted proposals, negotiations have taken place and now a seller is chosen
Agreements
Often in the form of contracts, formal documents governing the relationship between the buyer and seller
Control procurements
Buyer and seller review the contract and the work to ensure that the results match the work
Claims administration
Defined in the contract itself, but disputes must be managed and ultimately resolved and that the process for doing so must be defined in advance of the claim
Litigation is least preferred, last resort…mediation or arbitration instead
Closed procurements
Closed contracts, formal notice that contract is complete
Work performance info
Actionable info about sellers performance
Procurement documentation updates
As change requests are reviewed, data is analyzed, inspection and audits are carried out, document will likely be updated
