Review - Chapter 12 Flashcards
Procurement
Acquiring goods / services from an outside source
Why outsource?
- To access skills and technologies
- To reduce both fixed and recurrent costs
- To allow the client organization to focus on its core business
- To provide flexibility
- To increase accountability
Contract
A mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them
Project Procurement Management
Acquiring goods and services for a project from outside the performing organization
Planning Procurement Management
Determining what to procure and when and how to do it
Conducting Procurements
Obtaining seller responses, selecting sellers, and awarding contracts
Controlling Procurements
Managing relationships with sellers, monitoring contract performance, and making changes as needed
Closing Procurements
Completing and settling each contract or agreement, including resolving of any open items
Fixed Price/Lump Sum Contracts
Involve a fixed total price for a well-defined product or service
Cost Reimbursable Contracts
Involve payment to the seller for direct and indirect costs
Time and Material Contracts
Hybrid of both fixed price and cost reimbursable contracts, often used by consultants
Unit Price Contracts
Require the buyer to pay the seller a predetermined amount per unit of service
Point of Total Assumption (PTA)
The cost at which the contractor assumes total responsibility for each additional dollar of contract cost
PTA Calculation
PTA = (ceiling price - target price) / government share + target cost
Cost Plus Incentive Fee (CPIF)
Buyer pays supplier for allowable performance costs plus a predetermined fee and incentive bonus
Cost Plus Fixed Fee (CPFF)
Buyer pays supplier for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs
Cost Plus Percentage of Costs (CPPC)
Buyer pays supplier for allowable performance costs plus a predetermined percentage based on total costs
Termination Clause
A contract clause that allows the buyer/supplier to end the contract
Make-or-Buy Analysis
Management technique used to determine whether an organization should make/perform a particular product/service inside the organization or buy from someone else
Procurement Management Plan
Describes how the procurement processes will be managed (developing documentation for making outside purchases/acquisitions to contract closure)
Statement of Work
- A description of the work required for the procurement
- A type of scope statement
Contract Statement of Work
If a SOW is used as a part of a contract to describe only the work required for that particular contract
Procurement Documents
- Request for Proposals
- Request for Quotes
Request for Proposals
Used to solicit proposals from prospective sellers
Proposal
A document prepared by a seller when there are different approached for meeting buyer needs
Requests for Quotes
Used to solicit quotes or bids from prospective suppliers
Bid
- AKA a tender/quote
- A document prepared by sellers providing pricing for standard items that have been clearly defined by the buyer
Approaches for Procurement
- Approach the preferred vendor
- Approaching several potential vendors
- Advertising to anyone interested
Seller Selection
Organizations do an initial evaluation of all proposals/bids and then develop a short list of sellers for further evaluation
BAFO
Best And Final Offer: often prepared by sellers on a short list
Controlling Procurements
Ensures that the seller’s performance meets contractual requirements
Constructive Change Orders
Oral/written acts or omissions by someone with actual/apparent authority that can be construed to have the same effect as a written change order
Closing Procurements
Involves completing and settling contracts and resolving any open items
Tools to Assist in Contract Closure
Procurement audits, negotiated settlements, record management system
