Interactive: Procurement

This eLearning course will quiz you on the knowledge contained in the Procurement lesson and help identify your weak areas.

You should know and understand the Fundamental concepts of Stakeholder Management as presented in Chapter 12 of the PMBOK and the PMP Exam Content Outline available from www.pmi.org

Which of the following statements are true or false about Procurement Management?

The Following are Correct:

It involves contracts that are legal documents between a buyer and a seller

Different types of contracts are appropriate based on risk and scope of work

It is about purchasing or acquiring the products, services or results needed from outside the project team, and includes planning, soliciting sources, choosing a source, administering the contract, and closing the contract.

Analytical Techniques using weighting systems for different vendor criteria is one way to compare and decide on which vendor to select

  • Plan Procurement Management is done once at the beginning of the project
  • Procurement Management is about managing the contract between the Sponsor and the performing organization the PM works for
  • It involves contracts that are legal documents between a buyer and a seller
  • Different types of contracts are appropriate based on risk and scope of work
  • It is about purchasing or acquiring the products, services or results needed from outside the project team, and includes planning, soliciting sources, choosing a source, administering the contract, and closing the contract.
  • The PM should always try to negotiate a contract that is most favorable to his organization assuming that vendors will do the same
  • Analytical Techniques using weighting systems for different vendor criteria is one way to compare and decide on which vendor to select
Select True or False for each statement.

Which of the following are inputs to Control Procurements?

Answers:

Agreements

Procurement Documents

Approved Change Requests

WPR

  • Agreements
  • Procurement Documents
  • Approved Change Requests
  • WPR
  • WPI
  • Stakeholder Register
  • Seller Proposals
Select all that apply.

Which of the following are tools/techniques used in Control Procurements?

Answers:

Procurement Performance Review

Inspections & Audits

Payment Systems

Claims Administration

  • Procurement Performance Review
  • Inspections & Audits
  • Payment Systems
  • Claims Administration
  • Proposal Evaluation Techniques
  • Independent Estimates
  • Market Research
Select all that apply.

Which of the following are true or false regarding Control Procurements?

The Following are True:

Ensures both buyer and seller performance meets procurement requirements according to the  terms of the legal agreements

Inspections and audits utilize both WPD and WPR to evaluate contract performance

Payment Systems is a tool

If an Approved Change Request authorizes an increase to the work being done by a vendor, Control Procurements is used to make changes to the contract with the vendor

  • Ensures both buyer and seller performance meets procurement requirements according to the terms of the legal agreements
  • Inspections and audits utilize both WPD and WPR to evaluate contract performance
  • Performed only by the Buyer
  • Litigation is preferable to Alternative Dispute Resolution in resolving contractual disputes
  • Control Procurements must be done on every project
  • Payment Systems is a tool
  • If an Approved Change Request authorizes an increase to the work being done by a vendor, Control Procurements is used to make changes to the contract with the vendor
Select True or False for each statement.

Place the terms where they belong.

  • Control
  • Change Control
  • Documents
  • CRs
  • Payment
  • Reviews
  • Seller
  • Contract
  • Pays
  • Integration
  • Records
  • Performance

Match the contract term to the correct definition

Answers:

Price - Amount the seller charges the buyer

Cost - Amount the seller pays to do the work

Fee (Profit) - Difference between Price and Cost

Target Price/Cost/Fee - Expected values agreed to in the contract

Sharing Ratio - Incentives usually expressed as a ratio (Buyer/Seller)

Ceiling Price - Highest price a buyer is willing to pay

Point of Total Assumption (PTA) - Only relates to FPIF agreements; refers to amount above which seller bears all loss of a cost overrun

  • Price
    Amount the seller charges the buyer
  • Cost
    Amount the seller pays to do the work
  • Fee (Profit)
    Difference between Price and Cost
  • Target Price/Cost/Fee
    Expected values agreed to in the contract
  • Sharing Ratio
    Incentives usually expressed as a ratio (Buyer/Seller)
  • Ceiling Price
    Highest price a buyer is willing to pay
  • Point of Total Assumption (PTA)
    Only relates to FPIF agreements; refers to amount above which seller bears all loss of a cost overrun

Match the contract types to their correct description.

Answers: 

Firm Fixed Price - Provides a set price that the buyer will pay no matter what

Fixed Price Incentive Fee - A combination of Fixed Price and Cost Plus-Incentive contract that sets a Ceiling Price thereby creating a Point of Total Assumption where the seller will bear 100% of all cost overruns

Cost Plus Fixed Fee - The buyer reimburses the seller for all allowable costs plus a set fee representing seller profit

Cost Plus Incentive Fee - The buyer reimburses the seller for all allowable costs plus a variable fee based on seller performance such as reducing costs

Cost Plus Award Fee - The buyer reimburses the seller for all allowable costs plus a bonus fee based on attainment of some goal like reaching an important milestone by a specified date

Time and Materials - Used when there is not a well-defined scope; buyer pays seller a preset rate for hours worked and material used

  • Firm Fixed Price
    Provides a set price that the buyer will pay no matter what
  • Fixed Price Incentive Fee
    A combination of Fixed Price and Cost Plus-Incentive contract that sets a Ceiling Price thereby creating a Point of Total Assumption where the seller will bear 100% of all cost overruns
  • Fixed Price with Economic Price Adjustment
    A set price which is tied to a price index such as inflation rate or currency exchange rate in order to protect both buyer and seller from fluctuations in value due to uncontrollable, external economic factors
  • Cost Plus Fixed Fee
    The buyer reimburses the seller for all allowable costs plus a set fee representing seller profit
  • Cost Plus Incentive Fee
    The buyer reimburses the seller for all allowable costs plus a variable fee based on seller performance such as reducing costs
  • Cost Plus Award Fee
    The buyer reimburses the seller for all allowable costs plus a bonus fee based on attainment of some goal like reaching an important milestone by a specified date
  • Time & Materials
    Used when there is not a well-defined scope; buyer pays seller a preset rate for hours worked and material used

Which of the following statements are true or false regarding contracts?

The Following are True:

Fixed Price contracts are good to use when there is a well-defined scope of work

Fixed Price with EPA contracts are good to use for long-term projects where the economic situation may change

A Fixed Price Incentive Fee contract works like a Cost Plus Incentive contract with the addition of a ceiling price

A Cost Plus Incentive contract pays the seller more $$ if they keep cost below a specific cost point agreed to by the buyer

  • Fixed Price contracts are good to use when there is a well-defined scope of work
  • Cost Plus contracts are the best to use when there is not a well-defined scope of work
  • Fixed Price with EPA contracts are good to use for long-term projects where the economic situation may change
  • A Time & Materials contract has the most risk for the seller
  • Buyers want Cost Reimbursable contracts
  • A Fixed Price Incentive Fee contract works like a Cost Plus Incentive contract with the addition of a ceiling price
  • A Cost Plus Incentive contract pays the seller more $$ if they keep cost below a specific cost point agreed to by the buyer
Select True or False for each statement.

In a Cost Plus Incentive Fee contract, the seller agreed to an estimated cost of $65,000, an estimated price of $82,500, and agreed to share 30% of any cost overrun or savings. Upon completion, the final cost was $66,350.

Complete the solution table below.
  • $65,000
  • $7,500
  • $82,500
  • 70/30
  • $66,350
  • $7095
  • $73,445

Place the terms and values where they belong on the graph and solve for Point of Total Assumption.

  • Ceiling Price
  • Target Price
  • Target Cost
  • Target Fee
  • Price
  • Cost
  • Point of Total Assumption
  • Share Ratio
  • 65
  • 63
  • .7
  • 60
  • 62,857

Which of the following are inputs to Plan Procurement Management?

Answers:

Requirements Documentation

Risk Register

Project Schedule

Activity Cost Estimates

  • Requirements Documentation
  • Risk Register
  • Project Schedule
  • Source Selection Criteria
  • Make or Buy Decisions
  • Activity Cost Estimates
  • Activity Duration Estimates
Select all that apply.

Which of the following are outputs of Plan Procurement Management?

Answers:

Make or Buy Decisions

Source Selection Criteria

Procurement Management Plan

Procurement Statement of Work

  • Contracts
  • Make or Buy Decisions
  • Source Selection Criteria
  • Seller Proposals
  • Procurement Management Plan
  • Procurement Statement of Work
  • Project Documents
Select all that apply.

Which of the following are true or false regarding Plan Procurement Management?

The Following are True:

Decisions on what to buy or what to create within the project team are made here

Market Research is a tool/techniqueMarket Research is a tool/technique

The project schedule is used here to determine when it is appropriate to make purchases

Change Requests is an output

  • Decisions on what to buy or what to create within the project team are made here
  • Market Research is a tool/technique
  • Determines whether to acquire outside support, and if so, what to acquire, how to acquire it, how much is needed, and what vendor to use
  • This should be done after contracts are written with vendors
  • The project schedule is used here to determine when it is appropriate to make purchases
  • Change Requests is an output
  • Make or Buy decisions are classified as RFP, RFQ, RFI, or IFB
Select True or False for each statement.

Place the terms where they belong.

  • Activity Resource
  • Activity cost
  • Make or Buy
  • Research
  • Plan
  • How
  • SOW
  • Selection
  • Contract
  • Close
  • Identified

Which of the following are inputs to Conduct Procurements?

Answers: 

Source Selection Criteria

Procurement SOW


  • Source Selection Criteria
  • Procurement SOW
  • Seller Proposals
  • Contracts
  • Resource Calendars
  • Independent Estimates
  • Project Documents
Select all that apply.

Which of the following are tools/techniques used in Conduct Procurements?

Answers:

Advertising

Procurement Negotiations

Independent Estimates

Proposal Evaluation Techniques

  • Source Selection Criteria
  • Advertising
  • Procurement Negotiations
  • Independent Estimates
  • Make or Buy Analysis
  • Meetings
  • Proposal Evaluation Techniques
Select all that apply.

Which of the following are outputs of Conduct Procurements?

Answers:

Change Requests

Resource Calendars

Contracts

Selected Sellers

  • Source Selection Criteria
  • Change Requests
  • Resource Calendars
  • Seller Proposals
  • Project Documents
  • Contracts
  • Selected Sellers
Select all that apply.

Which of the following is true or false regarding Conduct Procurements?

The Following are True:

It provides alignment of internal and external stakeholder expectations through established agreements

Bidder Conferences are used as a tool to ensure that all potential vendors have equal access to project information

Contract negotiations may involve the legal or purchasing department of your organization

Independent Estimates are used to help determine the validity of Seller Proposals

  • It provides alignment of internal and external stakeholder expectations through established agreements
  • Bidder Conferences are used as a tool to ensure that all potential vendors have equal access to project information
  • Make or Buy Decisions are made here
  • Contract negotiations may involve the legal or purchasing department of your organization
  • Source Selection Criteria is developed as Seller Proposals are considered
  • This process should be performed early in the project and only once
  • Independent Estimates are used to help determine the validity of Seller Proposals
Select True or False for each statement.

Place the terms where they belong.

  • Conduct
  • Stakeholder
  • Procure
  • PM Plan
  • Legal
  • Documents
  • Criteria
  • SOW
  • Conference
  • Estimates
  • Analytical
  • Contracts
  • Calendars

Which of the following are valid reasons to close a contract?

Answers:

Breach of the contract by the seller

Completion of all terms by the buyer and seller

Mutual agreement between buyer and seller

  • Breach of the contract by the seller
  • Only Substantial performance by the seller
  • Completion of all terms by the buyer and seller
  • An approved Scope Change Request
  • Mutual agreement between buyer and seller
  • At the convenience of the buyer
Select all that apply.

Which is true and false regarding Close Procurements?

The Following are True:

It can be performed at any stage of the project if there is a contract that needs to be closed

Procurement Documents, PM Plan and OPA are the inputs

This process must be completed for all contracts before Close Project or Phase can be completed

Performed every time there is a valid reason to terminate a legal relationship

  • It can be performed at any stage of the project if there is a contract that needs to be closed
  • The output is Project Documents Updates
  • Procurement Documents, PM Plan and OPA are the inputs
  • Lessons Learned are gathered here and archived as EEF updates
  • This process must be completed for all contracts before Close Project or Phase can be completed
  • Procurement Audits may be required to resolve any contractual claims
  • Performed every time there is a valid reason to terminate a legal relationship
Select True or False for each statement.

Place the terms where they belong.

  • Close
  • PM Plan
  • Procurement
  • Legal
  • Reference
  • Terminate
  • Audits
  • Negotiations
  • Closed
  • Breach
  • Alternative Dispute Resolution
  • Must
  • OPA