What is procurement?
Acquiring goods and/or services from an outside source (outside of the project team); also called purchasing and outsourcing.
Why outsource?
To reduce fixed and recurrent costs; focus on core business; access skills and technologies; provide flexibility; increase accountability.
Define fixed costs and recurrent costs.
Fixed costs: paid independent of any business activity. Recurrent costs: maintaining and operating a program after the initial, one-off investment.
What is a contract?
A mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them.
List the procurement management processes.
Planning procurements; conducting procurements; administering procurements; closing procurements.
What happens in planning procurements, and what is its important output?
Decide what to outsource, determine the type of contract, describe the work for sellers. Important output: the make-or-buy decision.
Name and describe the three contract types.
Fixed price/lump sum: fixed total price for a well-defined product. Cost reimbursable: payment for direct and indirect costs. Time and material: a hybrid of both, often used by consultants.
What is make-or-buy analysis?
A technique to determine whether an organization should make a product or service inside the organization or buy it from someone else; often involves financial analysis.
Lease for $800/day, or buy for $12,000 + $400/day: when is buying better?
12,000 + 400d = 800d → d = 30; if the item is needed for more than 30 days, purchasing is more economical.
What are the tools for planning purchases and acquisitions?
Make-or-buy analysis; expert judgment; market research.
What is the procurement management plan?
A plan describing how the procurement processes will be managed, from developing documentation for outside purchases to contract closure.
What is a statement of work (SOW)?
A description of the work required for the procurement; a type of scope statement. Used in a contract for only that contract's work, it is a contract SOW.
What is the difference between an RFP and an RFQ?
RFP solicits proposals when there are different approaches for meeting buyer needs. RFQ solicits quotes or bids giving pricing for standard items clearly defined by the buyer.
What factors should source selection evaluate?
Technical approach, past performance, price and management approach — with criteria prepared preferably before issuing a formal RFP.
What does conducting procurements involve?
Deciding whom to ask; sending documentation to potential sellers; obtaining proposals or bids; selecting a seller; awarding a contract.
What is a BAFO?
A best and final offer, often prepared by sellers on the short list.
What is a constructive change order?
An oral or written act or omission by someone with actual or apparent authority that can be construed to have the same effect as a written change order.
What does closing procurements involve?
Completing and settling contracts and resolving open items; checking all work was completed correctly, updating records, archiving information.
Name the tools for contract closure.
Procurement audits (lessons learned); negotiated settlements (smoother closure); records management system (organize, find and archive documents).