Procurement Management

Question 1

What is the process of procurement management?

Answer 1

Plan Procurement Management

Conduct Procurements

Control Procurements

Close Procurements

Question 2

What are the inputs to the Plan Procurement Management process?

Answer 2

Project management plan

Requirement documentation

Activity resource requirements

Enterprise environmental factos

Organizational process assets

Risk register

Stakeholder register

Any procurement already in place

Project schedule

Initial cost estimates for work to be procured

Question 3

What are the key outputs of the Plan Procurement Management process?

Answer 3

Make-or-buy decision

Procurement management plan

Procurement statements of work

Procurement documents

Source selection criteria

Change requests

Question 4

What are the key outputs of the Conduct Procurement process?

Answer 4

Selected sellers

Signed contracts

Resource calendars

Change requests

Updates to project management plan and project documents

Question 5

What are the key outputs of the Control Procurement process

Answer 5

Subtantial completion of contract requirements and deliverables

Work performance information

Change requests

Updates to project management plan
and project documents

Question 6

What are the key outputs of the Close Procurement process?

Answer 6

Formal acceptance

Closed procurements

Updates to lesson learned and records
(part of organizational process assets)

Question 7

What is an agreements?

What is a contract?

Answer 7

Agreement: A document or communication that outlines
internal or external relationship and their intentions

Contract: A type of written or verbal agreement, typically created with an external entitiy, where there is some exchange of goods or service for some type of compensation (usually monetary); a contract forms a legal relationship between the entities

Question 8

What is the difference between centralized and decentralized contracting?

Answer 8

Centralized: There is one procurement department, and the procurement manager handles procurements for many projects

Decentralized: A procurement manager is assigned to one project full-time and reports directly to the project manager

Question 9

What are the advantages and disadvantages of centralized contracting?

Answer 9

Advantages:
-Higher level of procurement expertise

• Standardized practise provide efficiency
• Clear career path in procurement management
• 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

Question 10

What are the advantages and disadvantages of decentralized contracting?

Answer 10

Advantages:
-Project manager has easier access to contracting expertise

• Procurement manager has more loyalty to the project
• Procurement manager has a better understanding of the project needs

Disadvantages:
-No home department for the contracts person after the project

• Difficult to maintain a high level of contracting expertise
• Duplication of expertise/inefficient use of procurement resources
• Contracting processes aren’t standardized
• No career path as a procurement manager in the company

Question 11

What is required for a legal contract?

Answer 11

Offer

Acceptance

Consideration

Legal capacity

Legal purpose

Question 12

What is included in a contract?

Answer 12

Legal terms

Business terms regarding payments

Reporting requirements

Marketing literature

Proposal

Procurement statement of work

Question 13

Describe the project manager’s role in procurement

Answer 13

Understand the procurement processe

Make sure the contract contains all the scope of the work and project management requirements

Incorporate mitigation and allocation of risks into the contract

Help tailor the contract to the project

Be involved during contract negociations to protect the relationship with the seller

Make sure all the work in the contract is done, not just the technical scope

Work with the procurement manager to manager changes to the contract

Question 14

What is the procurement management plan?

Answer 14

A plan that documents how procurement will be planned, executed, controlled and closed

Question 15

What is a make-or-buy analysis?

Answer 15

Deciding whether the performing organization should do the project work itself or outsource some or all the work

Question 16

What are the three broad categories of contracts?

Answer 16

Cost-reimbursable (CR)

Fixed Prices (FP)

Time and Material (TM)

Question 17

What is a cost-reimbursable contact?

Answer 17

All the seller’s costs are reimbursed by the buyer

Question 18

What is a fixed-price contract?

Answer 18

There is one set fee for accomplishing all the work

Question 19

What is a time and material contract?

Answer 19

The buyer pays on per-hour or per-item basis

Question 20

What is a cost plus fixed price (CPFF) contract?

Answer 20

All the seller’s cost are reimbursed by the buyer, and a fixed fee is negociated for the seller’s profit

Question 21

What is a cost plus percentage of cost (CPPC) contract?

Answer 21

All the seller’s cost are reimbursed by the buyer, and the buyer also pays a specified percentage of those costs as fee or profit

Question 22

What is a cost plus incentive fee (CPIF) contract?

Answer 22

The seller’s costs are reimbursed by the buyer, and the buyer and seller share any cost saving or overruns

Question 23

What is a cost plus award fee (CPAF) contract?

Answer 23

All the seller’s costs are reimbursed by the buyer, and the buyer pays a base fee plus an award amount (a bonus) base on performance

Question 24

What is a fixed price incentive fee (FPIF) contract?

Answer 24

The buyer pays a fixed price plus an additional fee if the seller exceeds performance criteria stated in the contract

Question 25

What is a fixed price award fee (FPAF) contract?

Answer 25

The buyer pays a fixed price plus an award (paid in full or in part) based on the seller's performance level

Question 26

What is a fixed price economic price adjustment (FPEPA) contract?

Answer 26

A fixed-price contract with a built-in economic price adjustment to cover cost increase due to future economic conditions

Question 27

What is a purchase order?

Answer 27

A unilateral contact typically used fo buying commodities Purchase orders become contracts once they are "accepted" by the seller's fulfillments of the contract

Question 28

What do incentives accomplish? What might incentives be used for?

Answer 28

They align the seller's motivation with the buyer's objectives Time Cost Quality Scope

Question 29

Who has the cost risk in a cost-reimbursable contract? Who has the cost risk in fixed-price contract?

Answer 29

Cost-reimbursable: The risk is borne by the buyer Fixed price: The risk is borne by the seller

Question 30

What is the ceiling price?

Answer 30

The highest price the buyer will pay It's a condition of the contract that must be agreed to by both parties before signing

Question 31

What is the point of total assumption?

Answer 31

For fixed price incentive fee contracts, the amount above which the seller bears all the loss of a cost overrun

Question 32

Describe the 3 different type of procurement statement of work.

Answer 32

Performance: Conveys what the final product should accomplish Functional: Convey the end purpose of result (the minimum essential characteristics of the product) Design: Convey exactly what work is to be done and how it should be completed

Question 33

What are the procurement documents?

Answer 33

Request for proposal (RFP) Invitation for bid (IFB) Request for quotation (RFQ) A request for information (RFI) is sometimes considered a procurement document, thought it does not really belong in this category

Question 34

What is a nondisclosure agreement?

Answer 34

An agreement between the buyer and the prospective sellers identifying the information or documents they will hold confidential and control, and who in the organization will have access to the confidential information

Question 35

What are standard contract terms and conditions? What are special provisions?

Answer 35

Standard contract terms and conditions: Terms and conditions that are used for all contracts within the company Special provisions: Terms and conditions created for the unique needs of the project

Question 36

Name common terms and conditions that may be in contract.

Answer 36

Please review the long lists of terms and conditions and what they mean in the Procurement Management chapter of CAPM.

Question 37

What is a letter of intent?

Answer 37

A letter from the buyers, without legal binding, saying the buying intends to hire the seller

Question 38

What does privity means?

Answer 38

A contractual relationship between two or more companies

Question 39

What does noncompetitive procurement mean?

Answer 39

The work is awarded to a single source or a sole source without competition

Question 40

What are source selection criteria? When are these criteria created, and when are they used?

Answer 40

The factors the buyer will use to evaluate (weight or score) responses from the sellers They are created during the Plan Procurement Management process, and are used during the Conduct Procurement process to pick a seller

Question 41

What is a bidder conference? What should a project manager watch out for during a bidder conference?

Answer 41

A meeting with prospective sellers to make sure they all understand the procurement and have a chance to ask questions Watch for: - Collusion - Sellers not asking questions in from of the competition Make sure all the question and answers are documented and distributed to all the potential sellers

Question 42

What is a qualified seller list?

Answer 42

A list of sellers that have been preapproved

Question 43

What are the objectives of negotiations?

Answer 43

Obtain a fair and reasonable price Develop a good relationship with the seller

Question 44

What are some examples of negotiation tactics?

Answer 44

``` Attack Personal insults Good guy/Bad guy Deadline Lying Limited authority Missing man Fair and reasonable Delay Extreme demands Withdrawal Fait accompli ```

Question 45

Wy might there be conflict between the contract administrator and the project manager?

Answer 45

The potential administrator is the only one with the power to change contract

Question 46

What is a contract change control system?

Answer 46

A system created to control changes to the contract

Question 47

What is the purpose of a procurement performance review?

Answer 47

Verify that the seller is performing as they should Identify what the buyer can do to help the seller do the work Determine if any change are needed to improve the buyer-seller relationship and processes they are using

Question 48

Define claims administration

Answer 48

Managing claims (request by the seller for compensation from the buyer)

Question 49

What is the key function of a records management system?

Answer 49

Maintain an index of contract documentation and records so that they can be retrieved if necessary

Question 50

What occurs during the Close Procurement process?

Answer 50

Product validation Procurement negotiation Financial closure Procurement audit Updates to records Final contract performance reporting Documentation of lessons learned Creation of procurement file

Question 51

What is a procurement audit?

Answer 51

A structured review of the procurement process and identification of lessons learned to help future procurements