Chapter 12 - Procurement Mgmt

Question 1

What is a fixed price contract and what kind of subcategories are there?

Answer 1

Fixed total price for a defined product. Appropriate when the requirements are well defined and no scope change expected

1. Firm fixed price
2. Fixed price incentive fee: with financial incentive tied to specific metrics (e.g. cost). There is a price ceiling, and costs above it responsibility of seller
3. Fixed price with economic price adjustments - inflation or changes in commodity prices

Question 2

What is a cost reimbursable contract and what subcategories are there?

Answer 2

Payments to the seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit

1. Cost plus fixed fee
2. Cost plus incentive fee: incentive based on achieving certain performance objectives. Can include pre-negotiated risk / gain sharing ratio
3. Cost plus award fee: majority of fee is earned based on the satisfaction of certain brod subjective performance criteria in the contract (so based on buyer’s judgement)

Question 3

What are time and material contracts

Answer 3

Hybrid type with both cost-reimbursable and fixed price elements. Often used for staff Augmentation or the acquisition of experts

Question 4

What is the procurement strategy?

Answer 4

The approach by the buyer to determine the delivery method and the type of legally binding agreements that should be used

1. delivery method e.g. no subcontracting, joint venture
2. Contract type e.g. fixed price
3. Procurement phases and e.g. criteria for moving from phase to phase

Question 5

What are bid documents and give 3 examples?

Answer 5

Used to solicit proposals from prospective sellers

1. Request For Information: information about the goods to be acquired
2. Request For Quotation: how vendors would satisfy requirements and how much it will cost
3. Request For Proposal: used when there is a problem and the solution is not easy to determine. Most formal of the request documents

Question 6

What is the procurement statement of work?

Answer 6

Developed from project scope baseline and defined the portion of project scope to be included in the contract, describing it in sufficient detail to allow prospective sellers to determine if they are capable of providing the products, services or results

TOR is similar to the SOW

Question 7

What is the end result of conduct procurements?

Answer 7

The established agreements including formal contracts

Question 8

What is the difference between a contract and an agreement?

Answer 8

A contract is the legal relationship between entities, it is mutually binding and provides a framework for how the failure by one side will be addressed and ultimately remedied in court.

An agreement encompasses documents or communications the outline internal or external relationships in their intentions. The charter and the project management plans are examples of agreements that are not contracts

Question 9

What is the difference between centralised and decentralised contracting?

Answer 9

Centralised has a procurement department that is lead responsible for contracting and the project manager will have more responsibility

Question 10

What is a single source procurement and a sole source procurement?

Answer 10

Single source= contract with preferred seller. Do not want to look for another seller

Sole source=only one seller exists, e.g. has patent