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PMP > Procurement Management > Flashcards

Procurement Management Flashcards

1
Q

What is a contract?

A

requires formality, mutually binding

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2
Q

What are the processes for procurement management?

A

plan procurement management
conduct procurements
control procurements

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3
Q

What is the purpose of project procurement management?

A

provides the processes necessary to purchase or acquire products, services or results needed from outside the project team

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4
Q

What is a centralised environment?

A

A centralised environment is when there is a single procurement department that handles all procurements
Usually used in more mature (larger) organisations.

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5
Q

What is a decentralised environment?

A

A decentralised environment is when there is a full time procurement manager assigned to each project. Usually used in smaller organisations.

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6
Q

What is done at the plan procurement management stage?

A

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

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7
Q

What is a bid?

A

a bid is an offer of a price, especially at an auction

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8
Q

When would a proposal be used?

A

a proposal would be used when other considerations such as technical capability or technical approach are the most important

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9
Q

What are the different contract types?

A

Fixed price, time and materials, cost reimbursable

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10
Q

What is the purpose of the conduct procurements stage?

A

to obtain sellers responses, select a seller and award a contract

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11
Q

What is the purpose of the control procurements stage?

A

to manage procurement relationships

monitor contract performance

make any necessary changes or corrections

closing out contracts

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12
Q

What are the trends or emerging practices that need to be taken into consideration before procuring?

A 
Advances in tools
More advanced risk management
Changing contract processes
Logistics and supply chain management
Technology and stakeholder relations
Trial engagements
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13
Q

What are the outputs of the plan procurement management process?

A 
Procurement management plan
Procurement strategy
Bid documents
Procurement statement of work
Source selection criteria 
Make or buy decisions
independent cost estimates
Change requests
Update to project docs such as lessons learnt/milestone list/risk register/stakeholder register/requirements documentation/requirements traceability matrix 
Operational Process Assets updates
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14
Q

What are the advantages of a T&M contract?

A

Quick to create the contract
Contract duration is brief
Best option when you hire resources to increase your staff for a short period of time

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15
Q

What are the disadvantages of a T&M contract?

A

Seller is making profit for every hour/resource
No incentive for the seller to control costs
Only suitable for small projects
Buyer needs resources to oversee work on a daily basis

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16
Q

What are the different types of Fixed Priced contracts?

A

Firm Fixed Price Contracts (FFP) - Price doesn’t change unless the scope changes

Fixed Price Incentive Fee Contracts (FPIF) - Financial incentive tied to achieving certain project objectives related to cost, schedule or technical performance of the seller. A price ceiling is set and all costs above the price ceiling are the responsibility of the seller. This is known as the ‘Point of Total Assumption’.

Fixed Price with Economic Price Adjustment Contracts (FP-EPA) For long-term contracts. Provision for pre-defined final adjustments to the contract price due to changed conditions, such as inflation changes, or cost increases / decreases for specific commodities.

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17
Q

What is the purpose of a bidder conference?

A

Ensuring all vendors have a clear understanding of the procurement

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18
Q

What is a cost reimbursable contract also known as?

A

A Cost Plus contract

19
Q

What are the main points for cost reimbursable contracts?

A

Payment based on actual cost spent on the project, plus a fee representing the seller profit.

Flexibility for scope changes.

Financial incentives to the seller when the seller exceeds the performance targets on cost, schedule and technical performance; financial damages to the seller when the seller falls below performance targets.

20
Q

What are the different types of cost reimbursable contracts?

A

Cost Plus Fixed Fee Contracts (CPFF) Seller receives actual cost + fixed fee (a % of the initial estimated project cost).

Cost Plus Incentive Fee Contracts (CPIF) Seller receives actual cost + incentive based on achieving performance objectives. If final costs are less or greater than original cost, both buyer and seller share costs based on a pre-negotiated cost sharing formula.

Cost Plus Award Fee Contracts (CPAF) Seller is reimbursed of legitimate cost but majority of the fee is earned based on performance criteria in the contract.

21
Q

What are the advantages of a cost reimbursable contract?

A

Simpler procurement statement of work is required.

Less work is required to define scope than for an FP contract.

Lower cost than FP because the seller does not have to add as much for risk.

22
Q

What are the disadvantages of a cost reimbursable contract?

A

Requires auditing the seller’s invoice.

More work for the buyer to manage.

No incentive to control the cost for the seller.

Total price is not known upfront.

23
Q

What are the inputs for the plan procurement management process?

A

Project charter

Business documents - business case/benefits mgmt plan

Project management plan - scope baseline/quality mgmt plan/scope mgmt plan/resource mgmt plan

Project documents - milestone list/project team assignment/requirements documentation/requirements traceability matrix/resource requirements/risk register/stakeholder register

Enterprise environmental Factors
Operational process assets

24
Q

What are the Tools and Techniques required for the plan procurement management process?

A 
Expert Judgement
Data gathering 
Data analysis
Source selection analysis
Meetings
25
Q

What are the inputs for the conduct procurement phase?

A

Project management plan - scope management plan/requirements management plan/communications management plan/risk management plan/procurement management plan/configuration management plan/cost baseline

Project documents - lessons learned register/project schedule/requirements documentation/risk register/stakeholder register

Procurement documents

Seller responses

Operational Process Assets

Enterprise Environment Factors

26
Q

What are the Tools and Techniques for the conduct procurement phase?

A 
Expert judgement 
Data analysis - proposal evaluation
Advertising
Bidder Conferences
Interpersonal and team skills - negotiation
27
Q

What are the outputs for the conduct procurement phase?

A

Selected sellers
Agreements
Change Requests

Project management plan updates - requirements management plan/quality management plan/communication management plan/risk management plan/procurement management plan/scope baseline/schedule baseline/cost baseline

Project documents updates - lessons learned register/risk register/stakeholder register/requirements documentation/requirements traceability matrix/resource calendar

OPA updates

28
Q

What are the inputs for the control procurement phase?

A

Project management plan - Requirements management plan/Risk management plan/Procurement management plan/Change management plan/Schedule baseline

Project documents - Assumptions log/Lessons learned register/milestone list/Quality reports/Requirements documentation/Requirements traceability matrix/Risk Register/Stakeholder Register

EEF
OPA
Agreements
Procurement documents
Approved change requests
Work performance data
29
Q

What are the Tools and Techniques for the control procurement phase?

A 
Expert Judgement
Data analysis - Performance reviews/Earned value analysis/Trend analysis
Claims Administration
Inspection
Audits
30
Q

What are the outputs for the control procurement phase?

A

Closed procurements
Work performance information
Change requests

Procurement documents updates

Updates to project documents - Lessons learned register/Resource requirements/Requirements traceability matrix/Risk register/Stakeholder register

Updates to project management plan - Risk management plan/Procurement management plan/Schedule baseline/Cost baseline

Updates to OPA

31
Q

What is a MSA?

A

Master Services Agreement
Used in agile/adaptive environments
Larger projects may take an adaptive approach for some deliverables and a more stable approach for others, in this case a MSA may be used for the overall engagement. This allows for change to occur without impacting the overall contract.

32
Q

Because each project is unique, tailoring considerations should include?

A

Complexity of procurement
Physical location
Governance and regulatory environment
Availability of contractors

33
Q

When should defining roles and responsibilities be done related to procurement and who may this include?

A

Early on in the plan procurement management phase as these will be documented in the procurement management plan.

Could include personnel from the purchasing or procurement department as well as personnel from the buyers organisational legal department.

34
Q

What is make-or-buy analysis?

A

It is used to determine if the work can be best accomplished by the project team or if it should be purchase from outside resources

35
Q

What is an RFI?

A

Request For Information
A RFI is raised when more information on the goods or services is required from the sellers. This is usually followed by and RFP or an RFQ.

36
Q

What is an RFQ?

A

Request For Quotation
A RFQ is raised when more information on the goods or services is required on how vendors would satisfy the requirements and/or how much it will cost.

37
Q

What is an RFP?

A

Request For Proposal
A RFP is used when there is a problem in the project and the solution is not easy to determine. This is the most formal ‘request for’ documents and has strict procurement rules for content, timeline and seller responses.

38
Q

What is the formula to identify seller/buyers fee in a FPIF contract?

A

Target cost - actual cost x ratio + target fee/profit

39
Q

What is included in the Procurement Strategy?

A

Procurement delivery methods
Type of agreements
Procurement phases

40
Q

What are the different types of bid documents?

A

RFI - Request for information
RFQ - Request for quotation
RFP - Request for proposal

41
Q

What is included in the SOW?

A 
Description of the procurement item
Specification, quality requirements and performance metrics
Acceptance methods and criteria
Performance data and other reports required
Quality 
Period and place of performance
Currency: payment schedule
Warranty
42
Q

What is included in the procurement management plan?

A

How procurement work will be coordinated and integrated with other project work, particularly with resources, schedule and budget

Timetable for key procurement activities

Procurement metrics to manage the contract

Responsibilities of all stakeholders

Procurement assumptions and constraints

Legal jurisdiction and currency used for payment

Information on independent estimates

Risk management issues

Prequalified sellers (if applicable)

43
Q

What are the major components in an agreement document?

A 
Procurement SOW or major deliverables
Schedule, milestone, or date by which a schedule is required
Performance reporting
Pricing and payment terms
Inspection, quality and acceptance criteria
Warranty and future product support
Incentives and penalties
Insurance and performance bonds
Subordinate subcontractor approvals
General terms and conditions
Change request handling
Termination clause and alternative dispute resolution mechanisms

PMP (18 decks)

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