Sourcing Flashcards
Where should you include any incentives or disincentives?
In the scope of work
Define benchmarking
The act of measuring a: Process Service Product Against the characteristics of recognized leaders
You could use best practices and __________ when you want to provide a more cost-effective way to accomplish a task.
Benchmarking
What are two areas where an organization might want to use benchmarking?
When measuring Internal efficiencies Customer satisfaction
What three characteristics should good benchmarks have?
They should be attainable, quantifiable, and realistic
Who should be put in charge of changes in a process and the success and failure of these processes?
Management
Name two ways besides benchmarking that organizations can measure performance
Staff meetings Performance reviews Performance targets
What are the three phases of an audit?
Planning Collecting data Decision making based in the data collected
Name six types of data
Qualitative Quantitative Longitudinal (repeated observations over time) Cross sectional (many subjects observed at the same point in time) Primary Secondary
What ways should specifications be stated?
Functions Physical characteristics Performance required Combination of above
Name four categories of procurement
Lowest responsible and responsive bidder Best value Gathering information Special methods
Name the types of bids for lowest responsible and responsive bidder
Competitive bid/invitation for bid Quotes RFQ (usually small dollar value, do not have to advertise, predetermined date) Informal bid - quote based on letter, fax, email (low value)
Name types of bids for best value
RFP ITN RFQu
Give examples of procurement methods OTHER than competitive, best value or information gathering.
Notice of Intent - no formal competitive sourcing Small dollar or pcard - this reduces administrative burden, buy directly from contract Emergency procurement Sole source procurement - only one supplier, inability to obtain competition
Who should exercise control and direction for any cross functional team who is developing the scope of work?
The procurement staff
What is the definition of best value
Return on total cost of ownership or life cycle cost
Name three things you consider when determining total cost of ownership
Licensing fees Site prep. Costs Training costs
What does life cycle costing consider?
Operating, time value of money, residual value, disposal.
What is Value Procurement
When total cost to the environment is included in the value formula during the planning phase
Should you calculate TCO/LCC for all proposals?
Only those that make the short list.
Name the principles for Make or Buy Analysis
- Consider all costs… Eg. Contract management. 2. Only consider costs that will differ - if the costs will be the same regardless if make or buy, don’t consider them 3. Ensure you consider costs for the same level of service and quality
What are the four steps to make or buy analysis
- Define the outputs you are considering 2. Determine the costs SAVED if outsourced 3. Determine the costs you will PAY if outsourced 4. Compare the costs and make decision
How do operating and finance leases differ in terms of reporting them on financial statements?
Operating is an expense on the income statement Financial is a liability on the balance sheet
If obsolescence is an issue and you just have short term requirements, what kind of lease is best?
An operating lease
What are the steps for lease or buy decision making?
- Capture up front costs 2. Determine the sum of all lease payments and other costs (eg. Insurance) discounted to present value 3. Calculate purchase price 4. Compute these costs over the planned period of time
What is a financial advantage of leasing?
The burden of the investment is shifted to the lessor.
Define market research
Collecting and analyzing the capabilities of the marketplace to satisfy needs
What is the four step process to market research?
Market surveillance - high level review, reading journals etc. Investigation - collecting and analyzing data, narrowed to the commodity you’re researching Identification - reaching out to suppliers, determining availability Procurement
What is the best way for Procurement to determine how competitive the supply market is?
Market research into various areas
For mission critical items, when should you perform market research?
It should be ongoing
What type of solicitation would be best for conducting market research?
The request for information
What systems does demand analysis use?
ABC principle of material classification, and Pareto principal
What analysis should a buying plan have?
Demand Supplier Market Value
What is a service function?
A designated unit does a function that is common to all units in the organization
What is a staff function?
To advise. Eg. New products, trends, new materials, legislation
What is the definition of line function
Day to day functions of procurement
What is the greatest cost to maintaining an inventory?
Product obsolescence
When would maintaining an inventory be a good idea?
When: The items are essential You can receive volume discounts There are long lead times
What is the average cost of carrying inventory?
25 - 35%
Define “Recovery”
The ability of procurement to get urgently required materials and services from a supplier at a premium costs.
Define Central Stores Management and which of the service, staff or line functions is it?
It is determining which and how many times to maintain. Receiving and inspecting is part of this. It is a line function.
Where would you find information regarding procurement’s various authorities?
Policies, procedures, and practices
What are information gathering solicitations?
RFI Letters Of Interest Pre solicitation conference
What is value analysis applied to the writing of specifications?
Requirements analysis. This is done in the planning stage of solicitations.
What types of specifications are there?
Design Performance Combination
Who is responsible for making the clean up process difficult?
Matthew.
If you use design characteristics for your specification, who is bearing the risk?
The agency. If product fails to meet the agency’s need, the agency bears the cost.
What are performance specs also called?
Functional specifications
When would design specs be used?
Highly technical, construction, specialized items.
What type of contract might have a large group of related items, which is a more sophisticated version of a blanket order?
Systems contract
What is an incentive contract?
Rewards the contractor for reaching predetermined goals
Who bears all risk with a fixed price contract?
The supplier bears the risk
Which fixed price method is used when market stability is a concern, and which fixed price method has the best cost control incentive?
Fixed price with economic price adjustment Firm fixed price because the contractor keeps all savings
What fixed price contract would be used if you want to reward high quality performance?
Fixed price incentive
What kind of price would you use, if you can only determine a price for the first period but not subsequent ones?
Fixed price plus redetermination
When there is uncertainty and many potential cost risks, what type of pricing structure would you use in your contract?
One of the Cost reimbursement types or pricing structures.
What pricing reimburses the supplier for all reasonable allowable costs?
Cost plus fixed fee
What kind of procurement is also known as a “directed contract”?
Sole source procurement
When are partial payments made?
They are made as work is completed
Are progress payments are made, is this equal to acceptance of the work?
No
What type of payments are best for software?
Milestone, because they are tied to successful completion of certain milestones.
What are incentive payments?
They are tied to certain goals, for example reducing costs or delivery above a certain level.
What payment type holds back a portion of payment until the agency knows all contract obligations are met?
Retainage payments
When would progress payments be used?
To assure performance A method for financing the contractor during the contract Made as progress is made on the contract Does not indicate acceptance
What are the characteristics of incentive pricing types?
Made as contractor reaches predetermined goals
What pricing type is used to ensure that the contractor pays his sub-suppliers?
Retainage
Describe the two stages when you could encounter a protest?
During the solicitation stage, and during intent to award
If a contractor protests requirements during the solicitation stage, does the agency have to change them?
No, not if it the change would interfere with the agency’s mission.
What is the usual path of steps that a protest may take?
Protest, if denied hearing, if denied then litigation
What is transitional language in a contract?
Language that indicated both parties have agreed to something
What is another name for “whereas clauses”?
Recitals
What is severability in a contract?
If a court says part of the contract is not valid, The rest of the contract is still valid.
If you take into consideration how acceptance is defined in the contract, what type of contract risk are you addressing?
Performance Risk
If you are considering how disputes are handles in the contract, what type of risk are you considering?
Contractural Risk
