1. What is the difference between centralized and decentralized contracting
Centralized: There is one procurement department, and the procurement manager handles procurement for many projects
Decentralized: 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
2. What are the three board categories of contracts
- Cost-Reimbursable (CR)
- Fixed-Price (FP)
- Time and Material (T&M)
3. Define fixed price contract and name the advantages & disadvantages
There is one set fee for accomplishing all the work.
Advantages: Less work for the buyer to manage seller has 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 profits by charging more
Seller may try not to 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.
4. Who has the cost risk in a fixed-price contract
The risk is borne by the seller
5. What are the challenges with procurement management in agile projects
Details of scope cannot be determined earlier in the project and the intangible nature of products can make it difficult to evaluate and get acceptance for the work.
6. What is standard contract
A contract most commonly used by the buyer, who puts their terms and conditions into standard format that is used over and over.
7. What are some examples of special provisions
May include additions, charges, or deletions to a standard contract.
8. What is privity
A contractual relationship
9. What is an incentive fee versus an award fee
In an incentive fee contract, the buyer pays an additional fee if the seller exceeds performance criteria stated in the contract, incentives are used to bring the seller’s objectives in line with the buyers. In an award fee contract, the buyer pays an award (paid in full or in part) based on the seller’s performance.
10. What is the purpose of a customized contract
Meets the needs of both the buyer and seller: the customer retails flexibility to reprioritize work and the seller is not penalized for sharing information about increased costs. Customized contracts also remove the incentive for the seller to add large contingencies to the project price.
11. What is the fixed price with economic price adjustments (FPEPA) contract
A fixed-price contract with a built-in economic price adjustment to cover cost increased due to future economic conditions.
12. Describe a graduated fixed-price contract
An agile contract that shares some of the risk and reward associated with schedule variance between the customer and supplier.
13. What is a purchase order
A unilateral contract typically used for buying commodities. Purchase orders become contracts when the buyer accepts the terms.
14. Who has the cost risk in a cost-reimbursable contract
The risk is borne by the buyer.
15. Define time and material contract and name advantages and disadvantages
The buyer pays on a per-hour or per item basis.
Advantages: Can be created quickly contract duration is brier; 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-today oversight.
16. Define cost-reimbursable contract and name the 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
17. What is a cost-plus fixed fee (CPFF) contract & cost-plus percentage of cost (CPPC) contract
In both contract types all the seller’s cost are reimbursed by the buyer. For a CPFF a fixed fee is negotiated for the seller’s profit. For a CPPC the buyer also pays a specified percentage of costs as a fee or profit
18. What does the sharing radio describe
How the cost savings or cost overrun will be shared as appointed by percentage (e.g., 80/20, 80 % buyer/ 20 % seller)
19. What is ceiling price
The highest price the buyer will pay, it’s a condition of the contract that must be agreed to by both parties before signing.
20. What is the point of total assumption
For fixed price incentive fee contracts the amount above which the seller bears all the loss of a cost overrun
21. What id the difference between a ceiling price and a target price
The ceiling price is the maximum amount the buyer will pay; the target price is the price the buyer expects to pay.
22. What is nondisclosure agreement
An agreement between the buyer and prospective sellers identifying the information or documents they will control and hold confidential and who in the organization will have access to the confidential information.
23. What is a letter of intent
A letter from the buyer without legal binding saying the buyer intends to hire the seller.
24. What is an agreement versus a contract
Agreement: A document or communication that outlines internal or external relationships and their intentions
Contract: A type of written or verbal agreement, typically created with an external entity, where there is some exchange of good or services for some type of compensation (usually momentary) a contract forms the legal relationship between the entities
25. What is a force majeure
A situation that can be considered an “act of nature” and is an allowable excuse for either party not meeting contract requirements. A force majeure clause is usually included in a standard contract.
26. What is make-or-buy analysis
Deciding whether the performing organization should do the project work itself or outsource some or all the work.
27. What is source selection analysis
Determines the criteria that will be used to select sellers.
28. What is a procurement management plan
A plan that documents how procurements will be planned, executed and controlled.
29. What are source selection criteria. When are these criteria created and when are they used?
The factors the buyer will use to evaluate responses form the sellers.
Source selection criteria are created during the plan procurement management process and are used during the conduct procurements.
30. 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.
Design: Conveys exactly what work is to be done and how it should be completed
31. What does noncompetitive procurement mean
The work is awarded to a single source or a sole source without competition.
32. What is a fixed price work package
An alternative option within statements of work; they are used in conjunction with agile contracts to mitigate the risks of understanding or overestimating project work be reducing the scope and cost involved in the work being estimated.
33. What are the types of bid documents
Request for proposal (RFP)
Request for quotation (RFQ)
Request for information (RFI)
Invitation for BID (IFB)
34. What is bidder conference. What should PM watch out during a bidder conference?
A meeting either in person or via an online forum, 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 & answers are documented and distributed to all the potential sellers.
35. What is the purpose of proposal evaluation
Provides a basis to quantitatively evaluate proposals and minimize the influence of personal prejudices.
36. What does a weighting system do
Enables the buyer’s evaluation committee to analyse sellers’ responses using the weighted source selection criteria.
37. What is an independent cost estimate
The buyer may prepare an internal estimate or use the input of experts to come up with a benchmark against which to validate the bids provided by outside sellers.
38. What are the objectives of negotiation
Obtain a fair and reasonable price.
Develop a good relationship between the buyer and the seller.
39. What is required for a legal contract
Offer, Acceptance, Consideration, Legal Capacity & Legal Purpose
40. What is a contract change control system
A system created to control changes to the contract.
It is included in the contract so everyone is prepared for the amount of work it will take to make changes in addition to completing the work described in the change.
41. Why might there be conflict between the procurement manager and the project manager
The procurement manager is the only one with the power to change the contract.
42. What are the inputs to the Plan Procurement Management Process
Project Charter, Business documents, Project management plan, Enterprise environmental factors, Organizational process assets and Project Documents….
-
-
-
- Project team assignments
- Requirements documentation
- Resource requirements
- Risk Register
- Stakeholder register
-
-
43. What would be the reason for termination of a contract
Cause: The buyer may terminate a contract for cause if the seller breaches the contract (does not perform according to the contract)
Convenience: The buyer can also terminate the contract before the work is complete because they no longer want the work done (termination for convenience)
44. What is the purpose of formal acceptance
For documentation, confirmed acceptance that may result in requirements for incentives or rewards at points in the contract.
45. What are the key outcomes 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
- Organizational Process Assets Updates
46. What needs to be done for procurement closure
- Product Validation
- Procurement Negotiation
- Financial Closure
- Procurement audit
- Updates to records
- Final Contract performance Reporting
- Documentation of lessons learned.
- Creation of procurement file
47. What are the key outputs of the Conduct Procurement Process
Selected Sellers, Agreements, Change Requests, Project Management Plan Updates, Project Documents Updates and Organizational Process assets updates.
48. What are the key outputs of the Control Procurement Process
Closed Procurements, Procurement documentation updates, Work performance information, Change Requests, Project Management Plan Updates, Project Documents updates, Organizational Process Assets Updates.
49. 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.
50. Define Claims Administration
Managing claims (requests by the seller for compensation from the buyer)
51. What does a records management system do
Keep procurement documentation complete, organized, and accessible.
52. When are procurements considered closed
When a contract is completed and when a contract is terminated before the work is completed