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Flashcards in Procurement Deck (98):
1

3 COMMON NEGOTIATION STRATEGIES

Competition, Deadline, The Boss is Missing

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4 MAIN TYPES OF CONTRACTS

1. Purchase Order 2. Fixed Price 3. Time & Materials 4. Cost-Reimbursable

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4 TYPES OF PROCUREMENT DOCUMENTS

RFQ, RFI, RFP (or RFT), RFB (or invitation to bid)

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5 ALTERNATE NAMES FOR A SELLER

Contractor, Subcontractor, Vendor, Service Provider, Supplier

5

5 COMPONENTS OF A CONTRACT

CCOLA - 1. Capacity (competency, of legal age, and individual legal entities) 2. Consideration (the inducement to change possession from one seller to the buyer) 3. Offer (a proposition to exchange something for something else) 4. Legal Purpose (the reason for the contract has to be for something legal) 5. Acceptance (a buyer's willingness to accept the offer from the seller)

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8 ALTERNATE NAMES FOR A BUYER

Client, Customer, Prime Contractor, Contractor, Acquiring Org, Government Agency, Service Requestor, Purchaser

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ADMIN PROCUREMENT INPUT (7)

1. Pg Procurement Mgmt Plan (rules for admin) 2. Pg Budget Baseline (guide measurement of income and expenses) 3. Contracts (legal rules of agreement) 4. Approved Change Requests (authorizes change for component and the changes to be put into the contract) 5. Pg Performance Reports (is the seller meeting its obligations?) 6. Payment Approval Requests (PM makes request with evidence work done to milestone) 7. Component Payment Schedules (match request to agreed payment timing)

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ADMIN PROCUREMENT OUTPUT (7)

1. Pg Procurement Mgmt Plan Updates (due to approved changes) 2. Pg Budget Baseline Updates (due to approved changes) 3. Contracts Updates (due to approved changes) 4. Pg Budget Updates (contract amounts that do not correspond to budget) 5. Pg Performance Report Updates (updates on performance on comp) 6. Payment Approvals (confirmed payments requests sent to finance to pay) 7. Payment Schedule Updates (as impacted by change request)

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ADMINISTER PROGRAM PROCUREMENTS

The process of managing the contracts that impact the program so that deliverables meet cost constraints, deadlines, and quality standards These actions are laid out in the Contract Mgmt Plan which is to be completed during the life of the contract.

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BIDDERS CONFERENCES

Conferences that occur prior to bid or proposal creation so that potential bidders may ask questions. Q&A's are made available to all bidders

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BUDGET MANAGEMENT SYSTEM

The system that tracks and regulates the program budget, tracks and regulates program component contracts, and critically, provides notification of feasible over-expenditures and a method of identifying actual over-expenditure; typically integrated wit the enterprise budget management system to achieve optimal savings and cost advantages

12

BUY DECISION QUALITIES

Buyer doesn't possess the skills needed for the work. Also if the buyer doesn't possess the capacity to do the work.

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BUYER

The person or group in an organization that acquires products, services, or results

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CEILING PRICE

A % of the target cost. Maximum total amount the work is expected to cost with any cost overruns being considerd

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CLOSE PG PROCUREMENT INPUT (5)

1. Pg Mgmt Plan - guide actions needed to close 2. Contracts - check for all steps for closure followed 3. Pg Budget - check for funds for any final payments to close contract 4. Pg Performance Reports - check all issues closed as related 5. Component Closure Notification - notice that all work should be complete and may proceed to closing procurement

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CLOSE PG PROCUREMENT OUTPUT (3)

1. Closed Contracts (archive for legal period) 2. Procurement Performance Reports (follow-up items to add to issue register, lessons learned, etc) 3. Closed Budget Allocation (close after final payment. remaining funds returned to main pg budget)

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CLOSE PROGRAM PROCUREMENTS

The process of formally closing each contract impacting the program; closure can only be conducted if the deliverables are completed in a satisfactory manner, all payments have been made, and all contractual issues have been resolved

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COMPETITION NEGOTIATION STRATEGY

Using one seller (fictition or real) against another to attain the best price or desired terms

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COMPETITIVE ANALYSIS OF SERVICES PROVIDERS

identification and assessment of potential suppliers for the porducts and services reqired by each component

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COMPONENT PAYMENT SCHEDULES

Schedules that distinguish the milestone points that indicate when funds are due contractors

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COMPONENT SCOPE STATEMENTS

statements developed from the determination of required component achievemets which are used to propel contract statements of work for the components

22

CONDUCT PROCUREMENT INPUTS (7)

1. Pg Procurement Mgmt Plan 2. Contract Mgmt Plan 3. Comp Cost Estimates (from updated budget) 4. Qualifies Seller List 5. Pg Assets (templates, etc) 6. Subcontractor Procurement Plans 7. Pg Mgmt Plan (risks, assumptions, constraints, etc)

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CONDUCT PROCUREMENT OUTPUT (7)

1. Selected Sellers (Who for Buy) 2. Internal Service Providers (Who for Make) 3. RFP's 4. Contract Mgmt Plan Updates (include modifications based on actual contracts put in place) 5. Pg Procurement Mgmt Plan Updates (modif based on actual contracts in place) 6. Contracts 7. Component Payment Schedule Updates (per contracts put in place)

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CONDUCT PROGRAM PROCUREMENT T/T (10)

1. Procurement Planning 2. Bidder Conferences 3. Distribution of RFP's 4. Develop Qualified Seller List 5. Contract Negotiation 6. Proposal Eval System 7. Expert Judgment 8. Contract Mgmt Procedures 9. Change Control Procedures 10. Seller Selection

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CONDUCT PROGRAM PROCUREMENTS

The process of determining the approach to conducting the program procurement activities, including strategies, measurements, review processes, methodology, analysis guidelines, and reporting rquirements

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CONTRACT

A mutually binding agreement that requires the services provider to supply the specified services or goods to the buyer who is required to pay for them per the terms of the document

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CONTRACT ADMINISTRATOR

manager of the contract and is resonsibl with protecting the integrity and purpose of the contract (contract police). The only erson who can change the contract.

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CONTRACT INTERPRETATIONS ADMINISTRATORS SHOULD KNOW

1. Contract replaces anything agreed to prior to contract. (not in contract, NOT requirement) 2. all items (reports, quality control, inspections, etc) should be completed before closing 3. Spell out numbers rather than numerics 4. Use formal contract admendments to agree to changes 5. Any changes made before signed should be handwritten and initiated by all parties 6. qualification criteria should be clearly spelled out

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CONTRACT MANAGEMENT PLAN

A contract management plan is a plan to provide governance for a specific contract over its life ; the plan is typically only created for large purchases or acquisitions and addresses requirements for execution, delivery, and documentation on the part of the buyer and the seller

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CONTRACT MANAGEMENT PLAN PURPOSE TO PGM

Helps to 1. Define the rules for archiving doc 2. establish work payments 3. addresses contract changes 4. validate the work is complete 5. close the contract when complete

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CONTRACT SPECIAL PROVISIONS

items added to a contract to account for any standard terms that will not meet the needs of the work involved.

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COST-PLUS-FIXED-FEE CONTRACT (CPFF) (Buyer Risk level, Seller Risk leel, description, when to use)

Buyer - Medium / Seller - Small. A contract in which the supplier receives payment for allowable costs plus a fixed fee for the work delivery. Typically used when buyer knowes generally what is needed but not fully defined on what is needed to build it.

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COST-PLUS-INCENTIVE-FEE CONTRACT (CPIF) (Buyer Risk level, Seller Risk leel, description, when to use)

Buyer - Medium / Seller - Small. A contract in which the supplier receives payment for allowable costs, as well as pre-negotiated fee and, in cases where incentives are met, an incentive fee. Use when want to urge the supplier to provide the work sooner.

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COST-PLUS-PERCENTAGE OF COST CONTRACT (CPPC) (Buyer Risk level, Seller Risk leel, description, when to use)

Buyer - Large / Seller - Small. A contract that reimburses the seller for cost plus a negotiated percentage of the total costs. Not preferred by buyers since shady sellers could use it to inflate their fees by increasing the "costs".

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COST-REIMBURSABLE CONTRACT (CR) (Buyer Risk level, Seller Risk leel, description, when to use)

A contract in which a supplier is paid for direct and indirect cost actually incurred on the program or project

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DEADLINE NEGOTIATION STRATEGY

Using fictitious or real deadline to attempt to get a party to sign the contract

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DESIGN SOW

SOW with exact details of exact design specifications. Typically when buyer knows exactly what they want and does not want any variance from the specifications. Typically used with fixed-price contracts.

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FIRM-FIXED-PRICE CONTRACT (FFP)

a contract in which the seller provides products or services based on a well defined scope of work for a set price

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FIXED-PRICE CONTRACT (A.K.A. LUMP-SUM) (Buyer Risk level, Seller Risk leel, description, when to use)

Buyer - Small / Seller - Large risk. A contract that pays a seller a fixed price for a well defined or detailed product or service. One of Most Commonly used since provides stable budgeting for buyer. Appropriate when detailed scope of work provided, the less the details, the higher the risk of quoting wrong.

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FIXED-PRICE-ECONOMIC PRICE ADJUSTMENTS (FPEPA) (Buyer Risk level, Seller Risk leel, description, when to use)

Buyer - Small / Seller - Large risk. Fixed Price contract used with a multi-year contract in order to compensate for economic changes from year to year based on national economic metric.

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FIXED-PRICE-INCENTIVE-FEE CONTRACT (FPIF) (Buyer Risk level, Seller Risk leel, description, when to use)

Buyer - Small / Seller - Large Risk. A contract in which the seller provides products or services based on well defined scop of work for a set price and includes a fee structure that provides more payment for achieving pre-defined performance objectives as incentive for supplier. Used when buyer needs to accelerate the schedule to capitalize on market opportunity.

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FORMAL ACCEPTANCE

Formal approval by the buyer that the completed work has met the specifications per the contract. Needed to then begin Close Program Procurements

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FUNCTIONALITY SOW

SOW which details the functinoality needed. Seller allowed to propose the solution as long as the end results achieved. Typically in a Cost-Plus Contract.

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GOODS

Products that have been created and are available for purchase

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INSPECTIONS AND AUDITS OF PROCUREMENT

formal examinations of procurement processes that are conducted periodically and may result in change requests

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INVITATION FOR BID (IFB)

a document requesting an approach, price, and specific details on the proposed approach by the seller. Negotiation occurs for scope, time and cost. Like an RFP, but used for government sealed bidding conferences.

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MAKE DECISION QUALITIES

Buyer owns intellectual property associated with the work and wants to maintain control of the information. Also if the buyer has excessive qualified capacity

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MAKE-OR-BUY DECISION

An initial part of the procurement process in which a decision is made to either create the product by the company that needs it or to outsource it and have another company create it

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MARKET ENVIRONMENTAL FACTORS

market conditions that have a positive or negative influence on the program; examples are regulations, demographics, cultural trends, and emerging technology

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NON-COMPETITIVE FORM OF PROCUREMNT

Done only when there is one source for the products or the buyer has an established relatioship and mechanism in place for established price. 2 Types - Sole Source and Single Source

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PAYMENT APPROVAL

the output of "admin procurements" which is the process of confirming, authorizing, and submitting payment requsts to the finance department for payment

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PAYMENT CONTROL SYSTEM

methods and controls applied to the processes of payment requrest approval and fulfillment

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PLAN PROCUREMENT INPUTS (4)

1. Market Environment Factors - (outside influencing factors) Regulations, demographics, cultural trends, emerging tech 2. Pg Budget Allocations for components (How much you can spend) 3. Component Scope Statements (What to buy/make) 4. Pg Charter - (What authority and resources you already have)

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PLAN PROCUREMENT OUTPUTS (4)

1. Pg Procurement Mgmt Plan 2. Contract Mgmt Plan 3. Budget Updates 4. Qualified Seller List

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PLAN PROCUREMENT T/T (5)

1. Expert Judgement 2. Procurement Planning 3. Assess Org Competencies 4. Comparative Analysis of Svrc Providers 5. Make or Buy Analysis

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PLAN PROGRAM PROCUREMENTS

the process of distinguishing what needs to be procured, determining when it needs to be procured, and evolving strategies for procurements

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PMI GOAL FOR NEGOTIATION

WIN/WIN outcome

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POINT OF TOTAL ASSUMPTION

Used in government or defense contracts. establishes the point the seller is responsible for all cost overruns associated with fixed price incentive fee contract. Is reached when all cost overruns fall to the seller. Purpos is to calculate the maximum amount of money the buyer will pay regardless of cost overrun on the contract

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POINT OF TOTAL ASSUMPTION EQUATION

PTA = [(Ceiling Price - Target Price)/Buyer Share] + Target Cost

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PROCUREMENT

The acquisition of goods or services from an outside source or vendor

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PROCUREMENT DOCUMENTS

Documents involved in the bidding and proposal activities; can include request for information (RFI), request for quote (RFQ), or request for proposals (RFP)

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PROCUREMENT MANAGEMENT PLAN

Document that dtermines make vs. buy decisions, establishes and create required procurement documents, defines how to run bidders conferences, addresses procurement sources, selects vendors, and establishes vendor contracts

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PROCUREMENT PLANNING

basis for the procurement management plan, the procurement approach, and the contracting approach; typical participants are the program manager, specified program stakeholders, and those responsible for the managemetn of procurement, contracts, and other legal aspects of procurement

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PROFIT

Money made after expenses have been subtracted from revenue

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PROFIT MARGIN

Ratio between evenues and profit on a program, project, product, or initiative

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PROFIT RATE AT TARGET COST

target profit / target cost

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PROGRAM ASSETS

includes formal templates, informal templates, management systems, guidelines, policies, procedures, and organizational structures such as the procurement department and the legal department

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PROGRAM BUDGET ALLOCATION

The allotment of budget funds by the program manager; often costs are shared across the components for labor and material

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PROGRAM BUDGET ESTIMATE UPDATES

Output of the "Plan Procurement". Budget is decomposed into component-level budgets and more detail is added so the component-level budgets can be used to assess vendor responses

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PROGRAM FINANCIAL METRICS

the exhaustive measurements used for program benefits; measurement against metrics used to approve program, set by program scope and cost changes, used to determine if the program should be modified, continued, or cancelled

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PROGRAM OPERATIONAL COSTS

The operational and framework costs that occur as a result of managing the program; framework costs include personnel, resource, and PMO costs

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PROGRAM PAYMENT SCHEDULES

Schedules that distinguish the points where the funding organization receives funding

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PROGRAM PROCUREMENT MANAGEMENT

The process of attaining goods and services for a program from outside the organization

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PROGRAM PROCUREMENT MANAGEMENT PLAN

Helps define how the procurement needs of the program will be addressed. Includes: 1. depictions of all activities and deliverables required for procurement definition, integration, and coordination and addresses: Supplier identification; in-house evaluation; procurement, and management capabilities as they relate to procured products and services; the manner in which contract management will be conducted; acceptable contract types; payment for products and services; and the closign of contracts

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PROGRAM-PREFERRED VENDORS LIST

a list that a buyer can use as a screening mechanism in the procurement process. Buyer considers only vendors that have met some predefined qualifications. Can save time by eliminating prelim screening processes.

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PROPOSAL EVAL SYSTEM

A technique used in the "Conduct Procurement Process" to rank and score proposals; both objective and subjective criteria with weighting, screening, or seller rating systems

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PURCHASE ORDER (Buyer Risk level, Seller Risk leel, description, when to use)

Neutral for both parties. A unilateral agreement requiring approval by the Buyer since the Seller has offered the product at a predefined price. Typically used for comodity items.

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QUALIFIED SELLER LIST

Roster of vendors qualified to perform the work as it relates to the program and its component

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RENT OR BUY CALCULATION

Purchase = purchase cost + daily maintenance cost. Rent = daily rental fee which usually includes maintenance fees.

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REQUEST FOR INFORMATION (RFI)

a request to a potential seller from the buyer for specific information. Typically used to solicit info to learn more about a company

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REQUEST FOR PROPOSAL (RFP)

(also called a Request for Tender) a document that describes what the buyer wants from a potential supplier and the criteria for the acceptability of the vendor. Requests, approach, price, and specfic details about how the seller proposes to do the work. Negotiations occur based on scope, time, cost. Typically for bigger, higher priced, customized service or product.

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REQUEST FOR QUOTE (RFQ)

A document used to get bids or quotes from possible suppliers, usually for commodities with minimal customization or small dollar amounts. Little to no negotiations occur

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SCOPE OF WORK

The part of the contract that describes what the seller will do for the buyer. Two types - Design or Functionality.

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SELLER

An individual or company that provides goods or services to a company or individual

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SHARE

Contract component that divides and remaining money between the buyer/seller. Typically associated with coming in under budget.

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SHARE RATIO

The ratio between the buyer and seller for any cost savings or overruns

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SINGLE SOURCING

choosing a partner you prefer even though there is competition available.

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SOLE SOURCING

using a company that has no other competition such as a patent owner or some other IP owner

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STANDARD TERMS AND CONDITIONS IN A CONTRACT

non-negotiable contract items (or a tight range of allowances). For example - payment terms, IP rights, sub-contracting rights.

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TARGET COST

The expected cost of the work in the contract

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TARGET PRICE

Target Cost + Target Profit. Total target value of the contract work barring any over or under runs

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TARGET PROFIT

The expected profit of the work in the contract

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THE BOSS IS MISSING NEGOTIATION STRATEGY

Stating that another person who is key to approving something is not there

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TIME AND MATERIAL (T&M) CONTRACT (Buyer Risk level, Seller Risk leel, description, when to use)

Buyer - Small / Seller - Small. A contract that provides for acquiring services at specified fixed hourly rates and materials at cost. Typically used for smaller initiatives, staffing supplementation, initial discovery work to define full work, or for materials on initiative to complement the labor.

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Ways RFP's might be distributed

industry publications, procurement websites, direct mailing to potential suplier.

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What does a Program Procurement Mgmt Plan help do?

1. Determine make or buy decisions 2. Define the procurement rules 3. Establish what procurement documents (RFP, RFI, RFQ) are needed 4. Create procurement documents 5. Determine the evaluation criteria in the procurement docs 6. Run bidders conferences 7. Address single source and sole source procurement 8. Select vendors to do the work or provide the service 9. Establish contract(s) with vendors

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CONTRACT CLOSURE PROCEDURES

1. Follow org's policies, processes, and procedures for legally closing/terminating contract

2. Verify work completion criteria met OR doc work not performed and circumstances if terminating

3. Note all unaccounted variations for follow-up

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CLOSE PG PROCUREMENT T/T (3)

1. CONTRACT CLOSURE PROCEDURE - for systematic legal closure of contract to ensure all work complete and variations followed up. RECORD IN PROGRAM ISSUE REGISTER!

2. SUPPLIER PERFORMANCE REVIEW - last chance to address deficiencies with suppliers!

3. BUDGET ALLOCATION RECONCILLIATION - ensure expenses reconcile fully so finances may be closed