Procurement Management

What does privity mean?

A contractual relationship between two or more companies

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

What is a letter of intent?

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

What is a qualified seller list?

A list of sellers that have been preapproved

What is a bidder conference

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 front of the competition Make sure all the questions and answers are documented and distributed to all the potential sellers

What is a procurement management plan

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

What is a procurement audit

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

What the contract change control system?

A system created to control changes to the contracts

What is a purchase order?

A unilateral contract typically used for buying commodities. Purchase orders become contracts once they are"accepted" by the seller's fulfillment of the contract

What are the advantages and disadvantages of centralized contracting?

Advantages: Higher level of procurement expertise, standardized practices 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 PM to obtain contracting help when needed

What are the advantages and disadvantages of decentralized contracting?

Advantages: PM 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 manger in they company

What is an agreement? What is a contract?

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

What is a cost-reimbursable contact?

All the seller's costs are reimbursed by the buyer

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

All the seller's costs are reimbursed by the buyer, and a fixed fee is negotiated for the seller's profit

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

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

What is a cost-plus award fee (CPAF) contact

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

What is a nondisclosure agreement?

An agreement between the buyer and 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

What are some examples of negotiation tactics?

Attacks, Personal insults, Good guy/Bad guy, Deadline, lying, limited authority, missing man, fair and reasonable, delay, extreme demands, withdrawal, fait accompli

What is the difference between centralized and decentralized contracting

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 an reports directly to the project manager

What are the key outputs of the control procurements process

Change requests, Substantial completion of contract requirements and deliverables, work performance information, updates to project managment plan an project documents

What is a contract?

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

What are the three broad categories of contracts

Cost-reimbursable (CR) Fixed price (FP) Time and material (T&M)

Who has the cost risk in a cost reimbursable contract?

Cost-reimbursable The risk is borne by the buyer

What is make-or-buy analysis?

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

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

Fixed-price: The risk is borne by the seller

What is the point of total assumption

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

What are the key outputs of the close procurements process

Formal acceptance, closed procurements, updates to lessons learned and records (part of OPAs)

What is included in a contract?

Legal terms, business terms regarding payments, reporting requirements, marketing literature, proposal, procurement statement of work

What is the key function of a records management system

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

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

Make or buy- decisions, procurement management plan, procurement statements of work, procurement documents, source selection criteria, change requests

Define claims adminstration

Managing claims (requests by the seller for compensation from the buyer

What are objectives of negotiation?

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

What is required for a legal contracts?

Offer, Acceptance, Consideration, Legal capacity, Legal purpose

Describe the three different types of procurement statements of work

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

What is the process of procurement management

Plan Procurement Management, Conduct Procurements, Conduct Procurements, Close Procurements

What occurs during the Close Procurements process?

Product validation, procurement validation, financial closure, procurement audit, updates to records, final contract performance reporting, documentation of lessons learned, creation of procurement file

What are the inputs to the Plan Procurement Management Process?

Project management plan, requirements documentation, activity resource requirements, EEFs OPAs, Risk register, stakeholder register, Any procurements already in place, project schedule initial cost estimates for work to be procured

What are the procurement documents?

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

What are the key outputs of the conduct procurements process?

Selected sellers, signed contracts, resource calendars, change requests, updates to project management plan and project documents

What are special provisions?

Special provisions: Terms and conditions created for the unique needs of the project

What are standard contract terms and conditions?

Terms and conditons that are used for all contracts within the company

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 pus an award (paid in full or in part) based on the seller's perfomrance level

What is a time and material contract?

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

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

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

What are source selection criteria?

The factors the buyer will use to evaluate (weight or score) responses from the sellers

What is the ceiling price

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

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

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

What does noncompetitive procurement mean?

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

What is a fixed-price contract

There is one set fee for accomplishing all the work

What do incentives accomplish?

They align the seller's motivations with the buyer's objectives

When are source selection criteria created and when are they used?

They are created during the Plan Procurement Management Process, and they are used during the conduct procurements process to pick a seller

What can incentives be used for?

Time, Cost, Quality and Scope

Describe the PM's role in procurement

Understand the procurement process, Make sure the contact contains all the scope of 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 negotiations to protect the relationship with the seller. Make sure all the work the the contract is done, not just the technical scope. Work with the procurement manager to manage changes to the contract

What is the purpose of a procurement performance review?

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 changes are needed to improve the buyer-seller relationship and the processes they are using