Project Procurement Management

Question 1

Alternative dispute resolution

Answer 1

When there is an issue or claim that must be settled before the contract can be closed, the parties involved in the issue or claim will try to reach a settlement
through mediation or arbitration.

Question 2

Bid

Answer 2

From seller to buyer. Price is the determining factor in the decision-making
process.

Question 3

Bidder conference

Answer 3

udemy- A meeting of all the project’s potential vendors to clarify the contract statement of work and the details of the contracted work.

pmbok- a meeting between the buyer and prospective sellers prior to proposal submittal. They are used to ensure that all prospective bidders have a clear and common understanding of the procurement and no bidders receive preferential treatment,

Question 4

Claims

Answer 4

udemy- These are disagreements between the buyer and the seller, usually centering on a change, who did the change, and even whether a change has occurred. Claims are also called disputes and appeals, and are monitored and controlled through the project in accordance with the contract terms.

pmbok- Contented changes and potential constructive changes where the buyer and seller cannot reach an agreement on compensation for the change or cannot agree that a change has occurred.

Question 5

Contract

Answer 5

A contract is a formal agreement between the buyer and the seller. Contracts can be oral or written—though written is preferred.

Question 6

Contract change control system

Answer 6

udemy- This defines the procedures for how the contract may be changed. The process for changing the contract includes the forms; documented communications;
tracking; conditions within the project, business, or marketplace that justify the
needed change; dispute resolution procedures; and the procedures for getting the changes approved within the performing organization.

pmbok- the system used to collect, track, adjudicate, and communicate changes to a contract.

Question 7

Contract statement of work (SOW also
CSOW)

Answer 7

udemy- This document requires that the seller fully describe the work to be completed and/or the product to be supplied. The SOW becomes part of the contract between the buyer and the seller.

PMBOK- developed from the project scope baseline and defines only that the portion of the project scope that is to be included within the related contract.

Question 8

Cost plus award fee contract

Answer 8

udemy- A contract that pays the vendor all costs for the project, but also includes a buyer-determined award fee for the project work.

pmbok- a category of contract that involves payments to the seller for all legitimate actual costs incurred for completed work, plus an award fee representing seller profit.

Question 9

Cost plus fixed fee contract

Answer 9

udemy- A contract that requires the buyer to pay for the cost of the goods and services procured plus a fixed fee for the contracted work. The buyer assumes the
risk of a cost overrun.

pmbok- a type of cost-reimbursable contract where the buyer reimburses the seller for the seller’s allowable costs (allowable costs are defined by the contract) plus a fixed amount of profit (fee).

Question 10

Cost plus incentive fee

Answer 10

udemy- A contract type that requires the buyer to pay a cost for the procured work, plus an incentive fee, or a bonus, for the work if terms and conditions are met.

pmbok- a type of cost-reimbursable contract where the buyer reimburses the seller for the seller’s allowable costs (allowable costs are defined by the contract), and the seller earns its profit if it meets defined performance criteria.

Question 11

Cost plus percentage of costs

Answer 11

A contract that requires the buyer to pay for the costs of the goods and services procured plus a percentage of the costs. The buyer assumes all of the risks for cost overruns.

Question 12

Direct costs

Answer 12

These are costs incurred by the project in order for the project to exist. Examples include the equipment needed to complete the project work, salaries of the project team, and other expenses tied directly to the project’s existence.

Question 13

Fixed-price contracts

Answer 13

udemy- Also known as firm fixed-price and lump-sum contracts, these are agreements that define a total price for the product the seller is to provide.

pmbok- category of contracts involving setting a fixed total price for a defined product.

Question 14

Fixed-price incentive fee

Answer 14

udemy- A fixed-price contract with opportunities for bonuses for meeting goals on costs, schedule, and other objectives. These contracts usually have a price ceiling for
costs and associated bonuses.

pmbok- this fixed-price arrangement gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed-upon metrics.

Question 15

Fixed-price with economic price adjustments

Answer 15

A fixed-price contract with a special allowance for price increases based on
economic reasons such as inflation or the cost of raw materials.

Question 16

Force majeure

Answer 16

An “act of God” that may have a negative impact on the project. Examples include fire, hurricanes, tornadoes, and earthquakes.

Question 17

Independent estimates

Answer 17

These estimates are often referred to as “should cost” estimates. They are created by the performing organization or outside experts to predict what the cost of the procured product should be.

Question 18

Indirect costs

Answer 18

These are costs attributed to the cost of doing business. Examples include
utilities, office space, and other overhead costs.

Question 19

Invitation for Bid (IFB)

Answer 19

udemy- From buyer to seller. Requests the seller to provide a price for the procured
product or service.

pmbok- equivalent to request for proposal. However, in some application areas, it may have a narrower or more specific meaning.

Question 20

Letter contract

Answer 20

A letter contract allows the vendor to begin working on the project immediately. It is often used as a stopgap solution.

Question 21

Letter of intent

Answer 21

A letter of intent is not a contract, but a letter stating that the buyer is intending to create a contractual relationship with the seller.

Question 22

Make-or-buy decision

Answer 22

udemy- A process in which the project management team determines the cost-effectiveness, benefits, and feasibility of making a product or buying it from a
vendor.

pmbok- decisions made regarding the external purchase or internal manufacture of a product.

Question 23

Privity

Answer 23

udemy- The contractual relationship between the buyer and the seller is often considered confidential and secret.

Question 24

Procurement management plan

Answer 24

udemy- A project management subsidiary plan that documents the decisions made in the procurement planning processes.

pmbok- a component of the project or program management plan that describes how a project team will acquire goods and services from outside of the performing organization.

Question 25

Procurement planning

Answer 25

A process to identify which parts of the project warrant procurement from a
vendor by the buyer.

Question 26

Proposal

Answer 26

udemy- A document the seller provides to the buyer. The proposal includes more than just a fee for the proposed work. It also includes information on the vendor’s
skills, the vendor’s reputation, and ideas on how the vendor can complete the contracted work for the buyer.

pmbok- formal responses from sellers to a request for proposal or other procurement document specifying the price, commercial terms of sale, and technical specifications or capabilities the seller will do for the requesting organization that, if accepted, would bind the seller to perform the resulting agreement.

Question 27

Purchase order (PO)

Answer 27

A purchase order is a form of unilateral contract that the buyer provides to the vendor showing that the purchase has been approved by the buyer’s organization.

Question 28

Quotation

Answer 28

From seller to buyer. Price is the determining factor in the decision-making
process.

Question 29

Request for Proposal (RFP)

Answer 29

udemy- From buyer to seller. Requests the seller to provide a proposal to complete the procured work or to provide the procured product.

pmbok- used when there is a problem in the project and the solution is not easy to determine. This the most formal of the “request for” documents and has strict procurement rules for content, timeline, and seller response.

Question 30

Request for Quote (RFQ)

Answer 30

udemy- From buyer to seller. Requests the seller to provide a price for the procured product or service.

pmbok- commonly used when more information is needed on how vendors would satisfy the requirements and/or how much it will cost.

Question 31

Risk-related contractual agreements

Answer 31

When the project management team decides to use transference to respond to a risk, a risk-related contractual agreement is created between the buyer and the seller.

Question 32

Screening system

Answer 32

A tool that filters or screens out vendors that don’t qualify for the contract.

Question 33

Seller rating systems

Answer 33

These are used by organizations to rate prior experience with each vendor that they have worked with in the past. The seller rating system can track performance, quality ratings, delivery, and even contract compliance.

Question 34

Terms of Reference

Answer 34

Defines the obligations for the seller, what the seller will provide, and all of the particulars of the contracted work. Terms of reference is similar to the statement of work.

Question 35

Time and materials contract

Answer 35

udemy- A contract type in which the buyer pays for the time and materials for the procured work. This is a simple contract, usually for smaller procurement conditions. These contract types require a not-to-exceed clause, or the buyer assumes the risk for cost overruns.

pmbok- a hybrid type of contractual agreement with aspect of both cost-reimbursable and fixed-price contracts. They are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed.

Question 36

Weighting system

Answer 36

This takes out the personal preferences of the decision maker in the organization to ensure that the best seller is awarded the contract. Weights are assigned to the values of the proposals, and each proposal is scored.