Procurement Flashcards
(47 cards)
What is the process of procurement management?
- Plan Procurement management
- Conduct procurements
- Control procurements
What are the inputs to the Plan Procurement Management process?
• Project Charter
• Business documents
• Project management plan
• Project documents:
○ Project team assignment
○ Requirement documentation
○ Resource requirements
○ Risk register
Stakeholder register
• EEFs
• OPAsWhat are the key outputs of the Plan Procurement Management process?
- Procurement management plan
- Procurement strategy
- Procurement statement of work
- Source selection criteria
- Make-or-buy decisions
- Bid documents
- Independent cost estimates
- Change requests
- Project document updates
- OPAs updates
What are the key outputs of the Conduct Procurements process?
- Selected sellers
- Agreements (signed contracts)
- Change requests
- Project management plan updates
- Project documents updates
- OPAs updates
- Resource calendars
What are the key outputs of the Control Procurements process?
- Closed procurements
- Procurement documentation updates
- Work performance information
- Change requests
- Project management plan updates
- Project documents updates
- OPAs updates
- Formal acceptance of deliverables
What is an agreement?
A document or communication that outlines internal or external relationships and their intentions.
What is a contract?
A type of written or verbal agreement, typically created with an external entity, where there is some exchange of goods or services for some type of compensation (usually monetary); a contract forms the legal relationships between the entities.
What is the difference between centralised and decentralised contracting?
- Centralised: there is one procurement department, and the procurement manager handles procurements for many projects.
- Decentralised: there is no procurement department or procurement manager assigned, and the project manager may be responsible for the plan, as well as conducting and monitoring work on all procurements.
What are the advantages and disadvantages of centralised contracting?
• Advantages:
○ Higher level of procurement expertise
○ Standardised practices provide efficiency
○ Continuous improvement, training and shared lessons learned
• Disadvantages
○ Procurement manager’s attention is divided among many projects
○ More difficult for the project manager to obtain contracting help when needed.
Describe the project manager’s role in procurement.
- Make sure the contract contains all the scope of work and project management requirements
- Incorporate mitigation and allocation of risks into the contract
- Be involved during contract negotiations to protect the relationship with the seller
- Work with the procurement department to manage changes to the contract
What is a qualified seller list?
A list of sellers that have been preapproved. List might be in OPAs.
What is a seller proposal or price quote?
A seller’s response to the bid documents that represents an official offer from the seller; a proposal is usually the response to a request for proposal (RFP); a quote is usually the response to a request for quote (RFQ).
What is source selection analysis?
Determines the criteria that will be used to select sellers.
What are the 3 broad categories of contracts?
- Fixed-price: FP
- Cost reimbursable: CR
- Time and Material: T&M
What is a fixed-price contract? Advantages and disadvantages?
There is one set fee for accomplishing the work.
• Advandages
○ Less work for the buyer to manage;
○ Seller had a strong incentive to control costs;
○ Companies have experience with this type of contract;
○ The buyer knows the total price before the work begins
• Disadvantages
○ Seller may try to make up profits by charging more
○ Seller may try to not complete some of the procurement statement of work
○ Requires more work for the buyer to write the procurement statement of work
○ Can be more expensive than other types if the procurement statement of work is incomplete.
Who has the cost risks in a cost-reimbursable contract?
Who has the cost risks in fixed-price contract?
- Cost-reimbursable: the risk is borne by the buyer.
* Fixed-price: the risk is borne by the seller.
What is a fixed-price incentive fee (FPIF) contract?
The buyer pays a fixed price plus an additional fee if the seller exceeds performance criteria stated in the contract.
What is a fixed-price award fee (FPAF) contract?
The buyer pays a fixed price plus and award (paid in full or in part) based on the seller’s performance.
What is a fixed price economic price adjustment (FPEPA) contract?
A fixed price contract with a built-in economic price adjustment to cover cost increases due to future economic conditions.
Ex: price increase planned based on Consumer Price Index evolution.
What is time and material contract? Advantages and disadvantages?
The buyer pays on a per-hour or per-item basis.
• Advantages
○ Can be created quickly
○ Contract duration is brief
○ Good choice when you are hiring “bodies”
• Disadvantages
○ Every hour or unit billed is profit for the seller
○ The seller has no incentive to control costs
○ Appropriate only for small levels of effort on projects
○ Requires a great deal of day-to-day oversight
What is a purchase order?
A unilateral contract typically used for buying commodities.
Purchase orders become contracts when the buyer accepts the terms.
What is a Cost-reimbursable contract? Advantages and disadvantages?
All the seller’s costs are reimbursed by the buyer.
• Advantages
○ Allows for a simpler procurement statement of work
○ Usually requires less work to define scope
○ Generally less costly
• Disadvantages
○ Requires auditing seller’s invoices
○ Requires more work for the buyer
○ Seller has only a moderate incentive to control costs
○ The total price is unknown
What is a Cost Plus Fixed Fee (CPFF) contract?
CPFF: all the seller’s costs are reimbursed by the buyer, and a fixed fee is negotiated for the seller’s profit.
Fixed Fee ratio = % estimated cost
What is a Cost Plus Percentage of Cost (CPPC) contract?
CPPC: all the seller’s costs are reimbursed by the buyer, and the buyer also pays a specified percentage of those costs as a fee or profit.
Fixed Fee ratio = % actual cost
