Chapter 12 - Procurement

Question 1

When do bidder conferences occur?

Answer 1

Used to ensure that all prospective sellers have clear understanding of procurement requirements. Before that they get submitted.

Question 2

What are the 3 types of contracts?

Answer 2

Fixed price
Time and Materials
Cost Reimbursement

Question 3

Main element of Time and Materials contract?

Who wins?

Answer 3

Buyer pays per hour or per item.

Small $, short time.

Seller wins.

Buyer has medium cost risk.

Question 4

What situation is Time and Materials contract used?

Answer 4

Services when level of effort cannot be defined when contract is awarded

Question 5

What situation is Cost Reimbursable used?

Answer 5

Exact scope is uncertain , therefore costs cannot be estimated accurately enough to effectively use a fixed price contract

Question 6

Why are incentives needed?

Answer 6

Seller focused on profits
Buyer focused on total cost, performance, schedule.

Motivate seller to do the right thing.

Question 7

Name the top 4 fixed-price contract advantages

Answer 7

1. Less work for buyer to manage
2. Seller wants to control costs
3. Companies have experience
4. Buyer knows total price before work begins

Question 8

Name the top 4 disadvantages of fixed-price contract

Answer 8

1. Seller charge more for change orders because underpriced the work originally.
2. Seller may not complete because they run out of money
3. more work for buyer to write PSC
4. More expensive if PSC is incomplete and seller needs to add to the price for increased risk.

Question 9

What are the top three advantages of time and material contract?

Answer 9

1. Contract prep quick because SOW less detailed.
2. Short duration.
3. Used to add contract bodies

Question 10

What are the three disadvantages of time and material?

Answer 10

1. Profit for seller in every hour billed.
2. Seller has no incentive to control costs
3. Small efforts
4. Day to day oversight from buyer

Question 11

What are the top three advantages of cost reimbursable contract?

Answer 11

1. Contract prepared very quick because simple SOW
2. less work to define scope than fixed price.
3. Less cost than fixed price because seller does not have to add much for risks

Question 12

What are the 4 disadvantage for Cost Reimburse contracts?

Answer 12

1. Must audit seller’s invoices or recharge.
2. More work for buyer to manage because SOW is not well defined
3. Seller only has moderate incentives to control costs
4. Total price unknown

Question 13

Select the correct contract type:

You need to begin work right away

Answer 13

T and M

Question 14

Select the correct contract type:

You want to buy expertise in determining what needs to be done

Answer 14

CR

Question 15

Select the correct contract type:

You know exactly what needs to be done

Answer 15

FP

Question 16

Select the correct contract type:

You are buying a programmer services to augment your stuff for a short.

Answer 16

TM

Question 17

Select the correct contract type: you need work done but you don’t have time to audit invoices on this work

Answer 17

FP

Question 18

Select the correct contract type:

You need to rebuild a bridge as soon as possible after storm

Answer 18

FPIF

Question 19

Select the correct contract type:
The project requires a high level of expertise to complete and you want to have the best performance possible in the finished product

Answer 19

CPIF

Question 20

Select the correct contract type:

You need to hire a contractor to perform research and development.

Answer 20

CR

Question 21

Select the correct contract type:

The scope of work is complete but the economy is unpredictable

Answer 21

FPEPA

Question 22

Select the correct contract type:

You’re buying standard commodities

Answer 22

PO

Question 23

What does point of total assumption mean?

Answer 23

Fixed-price incentive fee contracts only.

Refers to the amount above which the seller bears all the loss of a cost overrun.

PTA = ceiling-target/buyer share ratio +target