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PMP > Project Procurement Management > Flashcards

Project Procurement Management Flashcards

1
Q

3 processes of procurement management

A
  1. plan procurement management
  2. conduct procurements
  3. control procurements
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2
Q

Alternative dispute resolution

A

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.

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3
Q

Bid

A

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

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4
Q

Bidder conference

A

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

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5
Q

Claims

A

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.

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6
Q

Contract

A

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

  • the US backs all contracts through the court system
  • contract state all requirements for product acceptance
  • changes to the contract must be formally approved, controlled, and documented
  • contracts can be used as a risk mitigation tool
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7
Q

Contract change control system

A

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.

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8
Q

Contract statement of work (SOW also CSOW)

A

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.

  • contract statement of work (CSOW), or
  • statement of work (SOW)
  • Terms of reference (TOR)
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9
Q

Cost plus award fee contract

A

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

  • all allowable costs
  • performance criteria for fee to seller
  • subjective review by the buyer
  • award is determined by the buyer
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10
Q

Cost-plus fixed fee contract

A

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.

  • all allowable costs
  • fixed fee of the initial estimated costs
  • fee paid for completed work
  • fee is constant unless cope changes
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11
Q

Cost plus incentive fee

A

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.

  • all allowable costs
  • fee-based on performance goals
  • incentive sharing (i.e. 80/20)
  • contract defines measurements
  • bonus but pay for waste
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12
Q

Cost plus percentage of costs

A

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.

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13
Q

Direct costs

A

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.

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14
Q

Fixed-price contracts

A

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

  • most common contract
  • seller carries the risk of cost overruns
  • buyer specifies what’s to be purchased
  • changes to the scope through addendum or new contract
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15
Q

Fixed-price incentive fee

A

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.

  • FPIF
  • financial incentives for performance (bonus)
  • cost, schedule, technical performance
  • price ceiling
  • seller carries risk of overruns
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16
Q

Fixed-price with economic price adjustments

A

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

  • FP-EPA
  • long-term contracts
  • pre-defined financial adjustments
  • inflation, cost increases, decreases
  • external conditions
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17
Q

Force majeure

A

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

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18
Q

Independent estimates

A

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.

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19
Q

Indirect costs

A

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

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20
Q

Invitation for Bid (IFB)

A

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

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21
Q

Letter contract

A

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

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22
Q

Letter of intent

A

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.

  • from the buyer to the seller
  • indicating that the seller will be awarded the contract
  • buyer intends to do business with the seller
  • not a legally-bing contract
23
Q

Make-or-buy decision/ buy or build

A

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.

  • difference buy v build (build-buy) / difference monthly fees (build-buy) = months
  • if maintaining products/services more than months in equation build
  • if maintaining products/services less than months in the equation buy
24
Q

Privity

A

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

25
Q

Procurement management plan

A

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

26
Q

Procurement planning

A

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

27
Q

Proposal

A

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.

28
Q

Purchase order (PO)

A

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.

29
Q

Quotation

A

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

30
Q

Request for Proposal (RFP)

A

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

31
Q

Request for Quote (RFQ)

A

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

32
Q

Risk-related contractual agreements

A

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.

33
Q

Screening system

A

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

34
Q

Seller rating systems

A

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.

35
Q

Terms of Reference (TOR)

A

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.

36
Q

Time and materials contract

A

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.

  • seller is paid an hourly fee
  • seller is paid for materials
  • not to exceed clause
  • time limits for contract
37
Q

Weighting system

A

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.

38
Q

Memoranda of agreements (MOA) / Service Level Agreement (SLA)

A

agreements and understanding in this contractual relationship

39
Q

ITTOs Plan Procurement Management

A
  • inputs: Project charter, Business docs, business case, benefits management plan, PM plan, scope management plan, quality management plan, resource management plan, scope baseline, Project docs, milestone list, project team assignments, requirements, documentation, requirements, traceability matrix, resource requirements, risk register, stakeholder register, EEFs and OPAs
  • tools and techniques: expert judgment, data gathering, market research, data analysis, make or buy analysis, source selection analysis, meetings
  • Outputs: procurements management plan, procurement strategy, bid docs, procurement statement of work, source selection criteria, independent cost estimates, change requests, project docs updates, lesson learned register, milestone list, requirements documentation, Requirements traceability matrix, risk register, stakeholder register, OPAs updates
40
Q

Procurement Actions/Processes

A
  • create procurement SOW or TOR
  • a high-level cost estimate to determine the budget
  • advertise the opportunity
  • identify qualified sellers
  • create and issue bid documents
  • seller creates submit proposal RFP
  • buyer does a technical evaluation of proposal
  • buyer does cost evaluation of the proposal
  • buyer examine combined quality and cost evaluation
  • buyer and seller negotiate sign contract
41
Q

Procurement EEFs

A
  • marketplace conditions
  • sellers’ reputation and/or past performance
  • terms and conditions for products or services
  • local requirements, regulatory requirements
  • legal advice
  • contract management systems
  • review of multi-tier supplier system
  • accounting and payments system
42
Q

evaluating market conditions

A
  • sole source: only one seller can meet the need
  • single source: lots of different sellers, but prefer to work with a certain one
  • oligopoly: market so tight, action of one seller affects price availability of the other, ex airfare one ticket goes up other goes up or oil price one goes up all goes up
43
Q

Terms of Reference (TOR) Specifics

A
  • tasks the contractor is required to complete
  • standards the contractor will fulfill
  • data that needs to be submitted for approval
  • list of all data and services that will be provided to the contractor by the buyer for use in performing the contract
  • schedule for initial submission and the review time required
44
Q

contract legalities

A
  • fixed price: a set amount
  • cost-reimbursable: cost can fluctuate
  • contain an offer
  • have been accepted
  • provide for a consideration (payment)
  • be for legal purpose
  • executed by someone with capacity and authority
45
Q

Cost Reimbursable Overview

A
  • cost plus a fee
  • scope of work can’t be defined early
  • high risks may exist in the project
  • buyer carries risk of overruns
46
Q

ITTOs Conducting Procurements

A
  • obtaining seller responses, selecting the seller, award a contract
  • inputs: PM plan, scope management plan, requirements management plan, communications management plan, risk management plan, procurement management plan, configuration management plan, cost baseline, Project docs, lessons learned register, project schedule, requirements documentation, risk register, stakeholder register, procurement documentation, seller proposals, EEFs and OPAs
  • tools and techniques: expert judgment, advertising, bidder conferences, data analysis, proposal evaluation, interpersonal and team skills, negotiation
  • outputs: selected sellers, agreements, change requests, PM plan updates, requirements management plan, quality management plan, communications management plan, risk management plan, procurement management plan, scope baseline, schedule baseline, cost baseline, Project docs updates, lessons learned register, requirements documentation, requirements traceability matrix, resource calendars, risk register, stakeholder register, OPAs updates
47
Q

Creating Procurement Management Plan

A
  • procurement forms, contracts, required to use
  • how multiple vendors will be managed
  • metrics to be used for vendor selection
  • vendors certificates, bonds, licenses, or risk-mitigation qualifications
  • EEFs for the bidding process, vendor selection
  • roles and responsibilities for PM, project team and procurement office
  • definition of the legal jurisdiction
  • vendor payment and currency
  • constraints, assumptions, risk management, and prequalified sellers
48
Q

From the Buyer

A
  • SOW / TOR
  • request for quote
  • invitation for bid: just want a price
  • request for proposal: ideas and solutions
  • request for information
49
Q

From the Seller

A
  • Quote
  • bid
  • information
  • proposal
50
Q

Seller selection

A
  • weighting system: cost, experience, schedule, staffing, certifications
  • independent estimates
  • screening systems
  • contract negotiation
  • seller rating systems
  • expert judgment
  • proposal evaluation
    *
51
Q

ITTOs Controlling Procurements

A
  • ensuring that the seller and buyer live up to the contract, if not:
  • legal remedies
  • inputs: PM plan, requirements management plan, risk management plan, procurement management plan, change management plan, schedule baseline, Project docs, assumption log, lessons learned register, milestone list, quality reports, requirements documentation, requirements traceability matrix, risk register, stakeholder register, agreements, Procurement documentation, approved change requests, work performance data, EEFs and OPAs
  • tools and techniques: expert judgment, claims administration, data analysis, performance reviews, Earned value analysis, trend analysis, inspection, audits
  • outputs: closed procurements, work performance information, procurement documentation updates, change requests, PM plan updates, risk management plan, procurement management plan, schedule baseline, cost baseline, Project docs updates, lessons learned register, resource requirements, requirements traceability matrix, risk register, stakeholder register, OPAs updates
52
Q

Contract Administration for Procurement

A
  • payments to the seller
  • seller compensation linked to progress
  • seller performance review
  • consideration for future contracts
  • in the red means vendor is losing money
  • in the black means vendor is making money
  • red and black are ledger entries for negative and positives
  • contract change control
  • buyer conducted performance review and audits
  • performance reporting
  • payment system
  • records management system
53
Q

Claims Administration for Procurement

A
  • cancelling the contract
  • quality or performance issue
  • no longer needed
  • terms of contract
  • claims, disputes, or appeals
  • contested changes
  • disagreements
  • alternative dispute resolution (ADR) arbitration or mediation
  • negotiation is the preferred method
54
Q

Performing Contract Closure

A
  • close according to contract
  • performance review
  • earned value analysis
  • trend analysis
  • sign off completed work and archive according to policies, procedures

PMP (19 decks)

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