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Flashcards in Procurement Management Deck (38):
1

Plan Procurement Management

2.9.1 Planning Process Area, Procurement Mgmt KA

The process of documenting project procurement decisions, specifying the approach, and identifying potential sellers

Inputs: Project Charter, Business Documents, Project Management Plan, Project Documents, EEF, OPA
Tools & Techniques: Expert Judgement, Data Gathering (e.g. Market Research), Data Analysis, Source Selection Analysis, Meetings
Outputs: Procurement Management Plan, Procurement Strategy, Bid Documents, Procurement Statement of Work, Source Selection Criteria, Make-or-buy Decisions, Independent Cost Estimates (inside or outside the organization), Change Requests, Project Documents Update, OPA Updates

2

Fixed-Price Contracts

2.9.1 Plan Procurement Management TT

Setting a fixed total price for a defined product, service, or result to be provided.

May also incorporate financial incentives for achieving or exceeding selected project objectives. Sellers are legally obligated to complete such contracts, with possible financial damages if they do not

3

Firm Fixed Price Contracts

2.9.1 Plan Procurement Management TT

Most commonly used contract type

Price for goods is set at the outset and not subject to change unless the scope of work changes. Any cost increase due to adverse performance is the responsibility of the seller, who is obligated to complete the effort.

4

Firm Price Incentive Fee Contracts

2.9.1 Plan Procurement Management TT

Fix-price arrangement that gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed upon metrics.

Under FPIF contracts, a price ceiling is set, and all costs above that are the responsibility of the seller

5

Fixed Price with Economic Price Adjustment Contracts

2.9.1 Plan Procurement Management TT

Use whenever the seller's performance period spans a considerable period of years, as is desired with many long-term relationships.

It's a fixed-price contract, but with a special provision allowing for pre-defined financial adjustments to the contract price due to changed conditions, such as inflation changes, or cost increases (or decreases) for specified commodities.

6

Cost-Reimbursable Contracts

2.9.1 Plan Procurement Management TT

Contract involves payments (cost reimbursements) to the seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit.

Provides the flexibility to redirect a seller whenever the scope of the work cannot be precisely defined at the start and needs to be altered, or when high risks may exist in the effort

7

Cost Plus Fixed Fee Contracts

2.9.1 Plan Procurement Management TT

Seller is reimbursed for all allowable costs for performing the contract work, and receives a fixed-fee payment calculated as a percentage of the initial estimated project costs.

Fee is only paid for completed work and does not change due to seller performance.

8

Cost Plus Incentive Fee Contracts

2.9.1 Plan Procurement Management TT

Seller is reimbursed for all allowable costs for performing the contract work, and receives a predetermined incentive fee based on achieving certain performance objectives as set forth in the contract.

If final costs are less or greater than estimated, then both buyer and seller share costs from the departures based upon a pre-negotiated cost-sharing formula.

9

Cost Plus Award Fee Contracts

2.9.1 Plan Procurement Management TT

Seller is reimbursed for all legitimate costs, but the majority of the fee is earned only based on the satisfaction of certain broad subjective performance criteria defined and incorporated into the contract.

10

Time and Materials Contract

2.9.1 Plan Procurement Management TT

Hybrid type of contractual arrangement that contain aspects of both cost-reimbursable and fixed-price contracts.

Resemble cost-reimbursable contracts in that they can be left open ended and may be subject to a cost increase for the buyer.

Resemble fixed-fee arrangement when certain parameters are specified in the contract. Unit labor or material rates can be preset by the buyer and seller, including seller profit, when both parties agree on the values for specific resource categories.

11

Make-or-Buy Analysis

2.9.1 Plan Procurement Management TT

General management technique used to determine whether particular work can best be accomplished by the project team or should be purchased from outside sources.

12

Market Research

2.9.1 Plan Procurement Management TT

Examination of industry and specific vendor capabilities

13

Force Majeure

2.9.1 Plan Procurement Management TT

A clause you may see in a contract that says if something like a war, riot, or natural disaster happens, you're excused from the terms of the contract

14

Point of Total Assumption

2.9.1 Plan Procurement Management TT

The point at which the seller assumes the costs.

In a fixed-price contract, this is the point where the costs have gotten so large that the seller basically runs out of money from the contract and has to start paying the costs.

15

Procurement Documents

2.9.1 Plan Procurement Management Outputs

The statement of work (SOW) for each procurement is developed from the project scope baseline and defines only that portion of the project scope that is to be included within the related contract.

Describes the procurement item in sufficient detail to allow prospective sellers to determine if they are capable of providing the products, services, or results .

16

Procurement Management Plan

2.9.1 Plan Procurement Management Output

Component of the project management plan that describes how a project team will acquire goods and services from outside the performing organization.

17

Procurement Documents

2.9.1 Plan Procurement Management Output

Used to solicit proposals from prospective sellers. Terms such as bid, tender, or quotation are generally used when the seller selection decision will be based on price, while the term proposal will be used when other considerations such as technical capability or approach are paramount.

RFI
IFB (invitation for bid)
RFP
RFQ
tender notice
invitation for negotiation
invitation for seller's initial response

18

Source Selection Criteria

2.9.1 Plan Procurement Management Output

Often included as part of the procurement documents. Such criteria are developed and used to rate or score seller proposals, and can be objective or subjective

19

Conduct Procurements

3.9.2 Executing Process Phase, Procurement Mgmt KA

Process of obtaining seller responses, selecting a seller, and awarding a contract.

20

Bidder Conferences

3.9.2 Conduct Procurements TT

Meetings between the buyer and all prospective sellers prior to submittal of a bid or proposal. Used to ensure that all prospective sellers have a clear and common understanding of the procurement requirements, and that no bidders receive preferential treatment.

21

Proposal Evaluation Techniques

3.9.2 Conduct Procurements TT

You're going to have to work closely with the seller to figure out if his proposal is really appropriate for the work. It's kind of the catch-all that's there to remind you that there's no single way to evaluate a proposal. You need to look at the whole picture-- seller, your needs, and the job.

On complex procurements, where source selection will be made based on seller responses to previously defined weighted criteria, a formal evaluation review process will be defined by the buyer's procurement policies. The evaluation committee will make their selection for approval by management prior to the award.

22

Independent Estimates

3.9.2 Conduct Procurements TT

Procuring organization may elect to either prepare its own independent estimate, or have an estimate of costs prepared by an outside professional estimator, to serve as a benchmark on proposed responses.

23

Advertising

3.9.2 Conduct Procurements TT

Existing lists of potential sellers often can be expanded by placing advertisements in general circulation publications such as selected newspapers or in specialty trade publications.

24

Procurement Negotiations

3.9.2 Conduct Procurements TT

Clarify the structure, requirements, and other terms of the purchases so that mutual agreement can be reached prior to signing the contract.

25

Selected Sellers

3.9.2 Conduct Procurements Output

Those who have been judged to be in a competitive range based on the outcome of the proposal or bid evaluation, and who have negotiated a draft contract that will become the actual contract when an award is made.

26

Agreements

3.9.2 Conduct Procurements Output

A procurement agreement includes terms and conditions, and may incorporate other items that the buyer specified regarding what the seller is to perform or provide.

27

Control Procurements

4.9.3 Monitoring & Controlling Process Area, Procurement Mgmt KA

Process of managing procurement relationships, monitoring contract performance, and making changes and corrections to contracts as appropriate.

Inputs: Project Management Plan, Project Documents, Agreements, Procurement Documentation, Seller Proposals, EEF, OPA
Tools & Techniques: Expert Judgement, Advertising, Bidder Conferences, Data Analysis, Interpersonal and Team Skills
Outputs: Selected Sellers, Agreements, Change Requests, Project Management Plan Updates, Project Documents Update, OPA Updates

28

Contract Change Control System

4.9.3 Control Procurements TT

Defines the process by which the procurement can be modified

29

Procurement Performance Reviews

4.9.3 Control Procurements TT

Structured review of the seller's progress to deliver project scope and quality, within cost and on schedule, as compared to the contract.

30

Inspections and Audits

4.9.3 Control Procurements TT

Conducted during the execution of the project to verify compliance in the seller's work processes or deliverables.

31

Performance Reporting

4.9.3 Control Procurements TT

Work performance data and reports supplied by sellers are evaluated against the agreement requirements. Work performance information from this evaluation is then reported as appropriate.

32

Payment Systems

4.9.3 Control Procurements TT

Payments to the seller are usually processed by the accounts payable system of the buyer after certification of satisfactory work by an authorized person on the project team.

33

Claims Administration

4.9.3 Control Procurements TT

Contested charges and potential constructive changes are those requested changes where the buyer and seller cannot reach an agreement on compensation for the change or cannot agree that a change has occurred.

These contested changes are variously called claims, disputes, or appeals

34

Records Management System

4.9.3 Control Procurements TT

used by the project manager to manage contract and procurement documentation and records. It consists of a specific set of processes, related to control functions, and automation tools are consolidated and combined as part of the project management information system.

35

Work Performance Information

4.9.3 Control Procurements Output

Provides a basis for identification of current or potential problems to support later claims or new procurements. By reporting on the performance, the organization increases knowledge of the performance of the procurement, which supports improved forecasting, risk management, and decision making.

36

Close Procurement

5.9.4 Closing Process Area, Procurement Mgmt KA

Process of completing each procurement

Inputs: Project Management Plan, Project Documents, Agreements, Procurement Documentation, Approved Change Requests, Work Performance Data, EEF, OPA
Tools & Techniques: Expert Judgement, Claims Administration, Data Analysis, Inspection, Audits
Outputs: Closed Procurements, Work Performance Information, Procurement Documentation Updates, Change Requests, Project Management Plan Updates, Project Documents Update, OPA Updates

37

Procurement Audits

5.9.4 Close Procurement TT

Structured review of the procurement process originating from the Plan Procurement Management process through Control Procurements.

Objective is to identify successes and failures that warrant recognition in the preparation or administration of other procurement contracts on the project, or on other projects in the organization.

38

Procurement Negotiations

5.9.4 Close Procurement TT

Final equitable settlement of all outstanding issues, claims, and disputes by negotiation is a primary goal.