Section 9
Project Procurement Management
Name the four processes involved in Project Procurement Management.
ANSWER
- Plan procurement management
- Conduct procurements
- Control procurements
- Close procurements
[Planning, Executing, Monitoring and Controlling, and Closing]
2 QUESTION
List the four tools and techniques for the plan procurement management process.
ANSWER
- Make-or-buy analysis
- Expert judgment
- Market research
- Meetings
[Planning]
What type of change constitutes one of the major areas of cost growth?
ANSWER
Change to project scope.
[Monitoring and Controlling]
4 QUESTION
What is the purpose of a warranty?
ANSWER
As stated in source selection criteria, it states what the seller proposes to warrant for the final product and through what time period.
[Planning]
List the nine inputs to the plan procurement management process.
ANSWER
- Procurement management plan
- Requirements documentation
- Risk register
- Activity resource requirements
- Project schedule
- Activity cost estimates
- Stakeholder register
- Organizational process assets
- Enterprise environmental factors
[Planning]
6 QUESTION
List the four other project management processes that may be applied to the control procurement process.
ANSWER
- Direct and manage project work
- Control quality
- Perform integrated change control
- Control risks
[Monitoring and Controlling]
What is a make-or-buy analysis?
ANSWER
A technique used to determine whether particular work can be accomplished by the project team or must be purchased from an outside source.
[Planning]
8 QUESTION
Why should advertising be used in the conduct procurements process?
ANSWER
To expand existing lists of potential sellers.
[Executing]
What is accomplished during conduct procurements?
ANSWER
Seller responses are obtained, sellers are selected, and contracts are awarded.
[Executing]
10 QUESTION
Who bears the cost risk in a cost-reimbursable contract—the seller or the buyer? Explain.
ANSWER
The buyer.
He or she is obligated to reimburse the seller for all allowable and allocable costs incurred during contract performance.
[Planning]
Provide two examples of requirements documentation as an input to plan procurement management.
ANSWER
Information about project requirements.
Requirements with contractual and legal implications that may include health, safety, security, performance, environmental insurance, intellectual property rights, equal employment opportunity, licenses, and permits.
[Planning]
12 QUESTION
What are the objectives of procurement performance reviews?
ANSWER
To identify performance successes or failures, progress with respect to the procurement statement of work, and contract noncompliance, which would allow the buyer to quantify the seller’s demonstrated ability or inability to perform work.
[Monitoring and Controlling]
What are teaming agreements? How do they impact the roles of the buyer and seller?
ANSWER
Legal contractual agreements between two or more parties to form a partnership or joint venture, or similar relationship.
The agreement defines buyer-seller roles for each party so the roles are predetermined.
[Planning]
14 QUESTION
Describe a time-and-materials contract.
ANSWER
A contractual arrangement that contains aspects of both cost-reimbursable and fixed-price arrangements. Time-and-materials contracts are open ended to the extent that the full value of the arrangement is not defined at the time of the award; but they are fixed to the extent that unit rates are preset by the buyer and seller.
[Planning]
Where are the requirements for formal procurement closure found?
ANSWER
In the contract and the procurement management plan.
[Planning]
16 QUESTION
What is a cost-plus-fixed-fee contract? When do the fee amounts change?
ANSWER
A contract under where the seller is reimbursed for all allowable costs and a fixed fee calculated as a percentage of the initial estimated contract cost. The fee is paid only for completed work and only changes if the project scope changes.
[Planning]
What are the characteristics of a well-written SOW?
ANSWER
The SOW should be clear, complete, and concise and should include a description of any collateral services required, such as performance reporting or post-contract operational or maintenance support for the procured item.
[Planning]
18 QUESTION
What is a cost-plus-incentive-fee contract? How are costs shared between buyer and seller?
ANSWER
A contract where the seller is reimbursed for allowable costs and paid a predetermined incentive fee as a bonus for achieving stated performance objectives. If the final costs are less than or greater than the original estimated costs, both the buyer and seller share the differences based on a prenegotiated cost-sharing formula.
[Planning]
What is a fixed price with economic price adjustment contract?
ANSWER
One that is used when the seller’s performance period spans a number of years. It is a fixed-price contract that includes a special provision allowing for predetermined final adjustments to the contract price that are due to changed conditions such as inflation or cost increases or decreases for specific commodities.
[Planning]
20 QUESTION
What is the seller’s risk objective in Project Procurement Management? What two broad categories of contract types satisfy this objective?
ANSWER
To minimize risk while maximizing profit potential.
- Fixed-price contracts
- Time and material contracts
[Planning]
What is the key benefit of the conduct procurements process?
ANSWER
It provides alignment of internal and external stakeholder expectations through established agreements.
[Executing]
22 QUESTION
Why is the scope statement an input to plan procurement management?
ANSWER
Because it includes the product, service, or results description; the list of deliverables; acceptance criteria; and important information on technical issues or concerns that could impact cost estimating.
[Executing]
What is the difference between these four terms: bid, quotation, tender, and proposal?
ANSWER
Bid, quotation, or tender generally are used if the seller selection decision will be based on price, while a proposal is used when other conditions such as technical capability and technical approach are significant.
[Planning]
24 QUESTION
List the three broad categories of contracts.
ANSWER
- Cost reimbursement
- Time and materials
- Fixed price
[Planning]
Provide at least seven examples of source selection criteria used in plan procurement management.
ANSWER
- Understanding of need
- Overall or life-cycle cost
- Technical capability
- Risk
- Management approach
- Technical approach
- Warranty
- Financial capacity
- Production capacity and interest
- Business size and type
- Past performance of sellers
- References
- Intellectual property rights
- Proprietary rights
[Planning]
26 QUESTION
What are seller performance evaluations? When are they prepared?
ANSWER
Assessments of the seller’s ability to continue to perform on the current contract; opinions on whether the seller should be allowed to perform work on future contracts or to rate how well the seller is performing on the contract.
As an output to control procurements
[Monitoring and Controlling]
What are qualified seller lists? What is their purpose?
ANSWER
Prequalified lists of sellers who have been prescreened for their qualifications and past experience. (To direct procurements to those sellers who can perform on resulting contracts.)
[Executing]
28 QUESTION
What is meant by requested but unresolved changes? How should they be handled?
ANSWER
They can include direction provided by the buyer or actions by the seller that the other party considers a constructive change to the contract.
Since they may be disputed and may lead to a claim, they should be identified and documented in the project correspondence.
They require change requests.
[Monitoring and Controlling]
What is a cost-plus-award fee contract?
ANSWER
A contract in which the seller is reimbursed for all allowable costs, but the majority of the fee is earned based only on satisfying certain broad, subjective performance criteria defined and incorporated into the contract. The buyer determines the fee based on subjective determination of seller performance.
[Planning]
30 QUESTION
What is a bidder conference? When should it be held?
ANSWER
A bidder conference (also called a contractor conference, vendor conference, or prebid conference) is a meeting with prospective sellers to ensure that they have a clear, common understanding of the buyer’s needs and contract terms and conditions.
Before sellers prepare their proposals.
[Executing]
What is the purpose of the procurement statement of work (SOW)? List seven items that may be included in it.
ANSWER
It describes the procurement deliverables in sufficient detail so prospective sellers can determine if they can provide what the buyer has specified.
- Specifications
- Quantity desired
- Quality levels
- Performance data
- Period of performance
- Work locations
- Other requirements
[Executing]
32 QUESTION
What is a fixed-price-incentive-fee contract?
ANSWER
One where the buyer pays the seller a fixed amount, as defined by the contract, and the seller can earn an additional amount if defined performance criteria are met.
[Planning]
What is a weighting system? Why is it used in the conduct procurements process?
ANSWER
A method to quantify qualitative data as a proposal evaluation technique. It may be used to select a single seller to sign a standard contract or to establish a negotiating sequence by ranking proposals by the weighted evaluation scores.
[Executing]
34 QUESTION
What types of costs are considered in a make-or-buy analysis?
ANSWER
Both the direct and indirect support costs of a prospective procurement.
[Planning]
What are make-or-buy decisions? When are they prepared?
ANSWER
They are the result of a make-or-buy analysis to determine if the project team will do the work or if an outside source will be used. If the decision is to make, the procurement management plan may define internal processes and agreements. If the decision is to buy, a process is followed to reach an agreement with a seller.
They are an output of plan procurement management.
[Planning]
36 QUESTION
List three administrative activities that are part of close procurements?
ANSWER
- Finalizing open claims
- Updating records to reflect final results
- Archiving this information for future use
[Closing]
What is the buyer’s risk objective in project procurement management?
ANSWER
To place maximum performance risk on the seller while maintaining incentives for economic and efficient performance.
[Planning]
38 QUESTION
What is a contract?
ANSWER
A mutually binding agreement that obligates the seller to provide a specific service or product and obligates the buyer to pay for it; a legal relationship subject to remedy in court.
[Executing]
When is a short list of qualified sellers established? Why is this done?
ANSWER
In the conduct procurements process.
To accelerate source selection by negotiating only with sellers who have a reasonable chance of award.
[Executing]
40 QUESTION
What is control procurements?
ANSWER
The process of managing procurement relationships, monitoring contract performance, and making changes and corrections if needed.
[Monitoring and Controlling]
How is market research used in plan procurement management?
ANSWER
As a tool and technique to examine industry and vendor capabilities. The intent is to help refine particular procurement objectives to leverage maturing technologies, while balancing risks associated with the breadth of vendors who can provide the needed materials or services.
[Planning]
42 QUESTION
Why should unresolved claims be carefully documented?
ANSWER
Because they may be subject to litigation.
[Closing]
When is the invitation for bid most appropriate?
ANSWER
For routine items when the primary objective is to award the contract based on the lowest price.
[Planning]
44 QUESTION
How is performance reporting used as a tool and technique in control procurements?
ANSWER
It provides management with information about how effectively the seller is achieving the contractual objectives.
[Monitoring and Controlling]
What is a firm-fixed-price contract? When is it used?
ANSWER
The type of contract where the seller furnishes goods or services at a fixed price regardless of its costs.
It is best suited for situations where the buyer can describe what it needs using detailed specifications.
[Planning]
46 QUESTION
How does the close procurements process support the close project process?
ANSWER
It verifies that all work and deliverables were acceptable.
[Closing]
In a fixed-price-incentive-fee (FPIF) contract, who is responsible for any costs that exceed the price ceiling?
ANSWER
The seller
[Planning]
48 QUESTION
List three reasons for early contract terminations.
ANSWER
- Mutual agreement of both parties
- Default of one party
- Convenience of the buyer if provided for in the contract
[Closing]
How are Internet searches used in conduct procurements?
ANSWER
As a tool and technique to communicate solicitations to the vendor community.
[Executing]
50 QUESTION
What is a negotiated settlement?
ANSWER
The final equitable settlement of all outstanding issues, claims, and disputes. Direct negotiation is the preferred method to reach a settlement; however, mediation or arbitration may also be considered. If all else fails, litigation is the last resort.
As a tool and technique in close procurements.
[Closing]
What is the purpose of the procurement management plan?
ANSWER
To describe how the procurement processes will be managed, from developing procurement documentation through contract closure.
[Planning]
52 QUESTION
What is a procurement audit? How is it used?
ANSWER
Structured review assessment and evaluation of the procurement process from plan procurements through control procurements.
Used to identify successes and failures which can be applied as lessons learned to other projects.
[Closing]
What type of procurement documentation should be reviewed in close procurements?
ANSWER
Information on contract schedule, scope, quality, and cost performance; contract change documentation; payment records; and inspection results.
[Closing]
54 QUESTION
What are two outputs from close procurements?
ANSWER
- Closed procurements
- Organizational process assets (updates)
[Closing]
What are examples of organizational process assets to update during control procurements?
ANSWER
- Correspondence
- Payment schedules and requests
- Seller performance evaluation documentation
[Monitoring and Controlling]
56 QUESTION
What is a contract change control system? What does it include?
ANSWER
Defines the process by which the procurement can be modified.
Includes paperwork, tracking systems, dispute resolution procedures, and approval levels necessary for authorizing changes.
[Monitoring and Controlling]
What are contested changes and potential constructive changes? What are three other terms for them?
ANSWER
Changes in which the buyer and seller cannot reach an agreement on compensation for the change or cannot agree that a change has occurred.
They may be called claims, disputes, or appeals.
[Monitoring and Controlling]
58 QUESTION
How are independent estimates used in the conduct procurements process?
ANSWER
To serve as a benchmark for proposed responses as significant differences in cost estimates may indicate the procurement statement of work was deficient, ambiguous, and/or prospective sellers have misunderstood or failed to respond to the procurement statement of work.
[Executing]
What are 10 items that may be part of procurement negotiations and then should be reflected in the final contract language?
ANSWER
- Responsibilities
- Authority to make changes
- Applicable terms and governing law
- Technical and business management approaches
- Technical solutions
- Overall schedule
- Payments
- Proprietary rights
- Contract pricing
- Price
[Executing]
60 QUESTION
List three organizational process assets to update as an output of close procurements.
ANSWER
- Procurement file
- Deliverable acceptance
- Lessons learned documentation
[Closing]