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133 Cards in this Set

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PROCUREMENT
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Project Procurement Management
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The processes required to acquire goods and services from outside the performing organization. Is discussed from the perspective of the buyer and assumes the seller is outside the performing organization.
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Project Procurement Management (12)
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1.      Procurement Planning
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The process of identifying which project needs can be best met by procuring products or services outside the performing organization. It involves consideration of whether to procure, how to procure, what to procure, how much to procure and when to procure it.
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2.      Solicitation Planning
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Involves preparing the documents needed to support solicitation.
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3.      Solicitation
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Involves obtaining information from prospective sellers on how project needs can be met. Most of the actual effort in this process is expended by the prospective sellers, normally at no cost to the project.
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4.      Source Selection
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Involves the receipt of bids or proposals and the application of the evaluation criteria to select a provider. However, the process is seldom straightforward. On major procurement items, this process may be iterated. A short list of qualified sellers will be selected and then a more detailed evaluation will be conducted based on a more detailed and comprehensive proposal.
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5.      Contract Administration
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Is the process of ensuring that the seller’s performance meets contractual requirements. The legal nature of the contractual relationship makes it imperative that the project team be acutely aware of the legal implications of actions taken when administering the contract. Project management processes that must be applied include
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a.       Project plan execution – Authorize the contractor’s work at the appropriate time,
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b.      Performance reporting - Monitor contractor cost, schedule and technical performance,
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c.       Quality control – Inspect and verify the adequacy of the contractor’s product,
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d.      Change control – Ensure that changes are properly approved and that all those with a need to know are aware of such changes.
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6.      Contract Close-Out
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Is similar to administrative closure in that it involves both product verification and administrative close-out. Early termination of a contract is a special case of contract close-out.
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Procurement Planning (12.1)
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1.      Inputs
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a.      Scope statement
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b.      Product description
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The description of the product of the project provides important information about any technical issues or concerns that would need to be considered during procurement planning.
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c.       Procurement resources
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If the performing organization does not have a formal contracting group, the project team will have to supply both the resources and expertise to support project procurement activities.
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d.      Market conditions
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Must consider what products and services are available in the marketplace, from whom, and under what terms and conditions.
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e.       Other planning outputs
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Other planning outputs, which must often be considered, include preliminary cost and schedule estimates, quality management plans, cash flow projections, the WBS, identified risks and planning staffing.
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f.        Constraints
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g.      Assumptions
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2.      Tools and Techniques
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a.      Make-or-buy analysis
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Technique used to determine whether a particular product could be produced cost-effectively by the performing organization. It must reflect the perspective of the performing organization as well as the immediate needs of the project.
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b.      Expert judgment
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c.       Contract type selection
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1)      Fixed price or lump sum contracts – Involves a fixed total price for a well-defined product. To the extent that the product is not well defined, both the buyer and seller are at risk.
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2)      Cost reimbursable contracts – This category of contract involves payment to the seller for its actual costs. Costs are usually classified as direct or indirect costs.
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Direct costs are incurred for the exclusive benefit of the project while indirect costs are allocated to the project by the performing organization as a cost of doing business.
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3)      Unit price contracts – Seller is paid a preset amount per unit of service and the total value of the contract is a function of the quantities needed to complete the work.
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3.      Outputs
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a.      Procurement management plan
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Should describe how the remaining procurement processes will be managed.
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b.      Statement(s) of work
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The SOW describes the procurement item in sufficient detail to allow prospective to allow prospective sellers to determine if they are capable of providing the item.
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Solicitation Planning (12.2)
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1.      Inputs
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a.      Procurement management plan
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b.      Statement(s) of work
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c.       Other planning outputs
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Solicitation planning should be closely coordinated with the project schedule. Other planning outputs which may have been modified from when they were considered as part of the procurement planning.
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2.      Tools and Techniques
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a.       Standard forms
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b.      Expert judgment
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3.      Outputs
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a.      Procurement documents
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Are used to solicit proposals from prospective sellers. The terms “bid” and "quotation” are generally used when the source selection process will be price driven while the term “proposal” is used when non-financial considerations such as technical skills or approach are paramount. Common names include Invitation for Bid (IFB), Request for Proposal (RFP), Request for Quotation (RFQ), Invitation for Negotiation, and Contractor Initial Response.
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b.      Evaluation criteria
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Used to rate or score proposals, as they may be objective or subjective. They are often included in the procurement documents. Criteria may include:
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1)      Understanding the need – Demonstrated by the seller’s proposal
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2)      Overall or life cycle cost – Will the selected seller produce the lowest total cost?
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3)      Technical capability – Does the seller have, or can the seller be reasonably expected to acquire, the technical skills and knowledge needed?
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4)      Management approach - Does the seller have, or can the seller be reasonably expected to develop, management processes and procedures to ensure a successful project?
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5)      Financial capacity - Does the seller have, or can the seller be reasonably expected to obtain, the financial resources needed?
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c.       Statement of work updates
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Solicitation (12.3)
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1.      Inputs
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a.      Procurement documents
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b.      Qualified seller lists
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Some organizations maintain lists or files with information on prospective sellers. These lists will generally have information or relevant experience and other characteristics of the prospective sellers.
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2.      Tools and Techniques
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a.       Bidder conferences
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Bidder conferences are meetings with prospective sellers prior to preparation of a proposal. They are used to ensure that all prospective sellers have a clear, common understanding of the procurement.
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b.      Advertising
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Existing lists of potential sellers can often be expanded by placing advertisements in general circulation or specialty publications.
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3.      Outputs
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a.      Proposals
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Proposals are seller-prepared documents that describe the seller’s ability and willingness to provide the requested product.
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Source Selection (12.4)
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1.      Inputs
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a.      Proposals
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b.      Evaluation criteria
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c.       Organizational policies
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2.      Tools and Techniques
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a.       Contract negotiation
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Involves clarification and mutual agreement on the structure and requirements of the contract prior to the signing of the contract.
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b.      Weighting system
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A weighting system is a method of quantifying qualitative data in order to minimize the effect of personal prejudice on source selection.
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c.       Screening system
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Involves establishing minimum requirements of performance for one or more of the evaluation criteria.
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d.      Independent estimates
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The procuring organization may prepare its own estimates as a check on proposed pricing. Significant differences from these estimates may be an indication that the SOW was not adequate or the seller either misunderstood or failed to respond fully to the SOW.
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3.      Outputs
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a.      Contract
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A contract is a mutually binding agreement, which obligates the seller to provide the specified product, and obligates the buyer to pay for it. Although all project documents are subject to some form of review and approval, the legally binding nature of a contract usually means that it will be subjected to a more extensive approval process. The legal contractual relationship that exists between the buyer and the seller is called “Contract Privacy.”
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Contract Administration (12.5)
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1.      Inputs
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a.      Contract
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b.      Work results
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The seller’s work results – which deliverables have been completed and which have not, to what extent are quality standards being met, what costs have been incurred or committed – are collected as part of the project plan execution.
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c.       Change requests
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Change requests may include modifications to the terms of the contract or to the description of the product or service to be provided.
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d.      Seller invoices
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2.      Tools and Techniques
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a.       Contract change control system
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Defines the process by which the contract may be modified. It includes the paperwork tracking systems, dispute resolution procedures, and approval levels necessary for authorizing changes.
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b.      Performance reporting
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Provides management with information about how effectively the seller is achieving the contractual objectives.
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c.       Payment system
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Payments to the seller are usually handled by the accounts payable system of the performing organization.
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3.      Outputs
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a.      Correspondence
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Contract terms and conditions often require written documentation of certain aspects of buyer/seller communications.
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b.      Contract changes
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Changes (approved and unapproved) are fed back through the appropriate project planning and project procurement processes and the project plan or other relevant documentation is updated as appropriate.
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c.       Payment requests
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This assumes that the project is using an external payment system.
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Contract Close-Out (12.6)
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1.      Inputs
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a.      Contract documentation
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Includes but is not limited to, the contract itself along with all supporting schedules, request and approved contract changes, any seller-developed technical documentation, seller performance reports, financial documents and the results of any contract-related inspections.
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2.      Tools and Techniques
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a.       Procurement audits
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Is a structured review of the procurement process from procurement planning through contract administration. The objective of a procurement audit is to identify successes and failures that warrant transfer to other procurement items on this project or to other projects.
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3.      Outputs
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a.      Contract file
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A complete set of indexed records should be prepared for inclusion with the final project records.
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b.      Formal acceptance and closure
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The person responsible for contract administration should provide the seller with formal written notice that the contract has been completed.
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