Deck 9: Project Procurement Planning

Question 1

The procurement planning process involves documenting requirements, which is usually done in a procurement document, such as a SOW, RFQ, or RFP.

Answer 1

True

Question 2

In make-or-buy analysis, describe at least three cost considerations for make and at least three cost considerations for buy.

Answer 2

In order to make an informed decision, a complete cost analysis must be done. The following are some cost considerations for both decisions:
• Make:
• Labor costs (that is, internal cost of human resources)
• Human resources knowledge; if needed knowledge is not present, training will be needed
• Cost to prepare and maintain all product artifacts (progress reports, testing, schedules, and so on)
• Rework costs, such as costs for requirements changes and fixing bugs
• Ongoing support costs, such as day-to-day maintenance and updates after implemented
• Opportunity costs (because while team members are working on this project, other items are not getting done)
• Buy:
• Cost associated with the procurement process
• Cost to manage the relationship
• Initial purchase cost, along with ongoing support costs

Question 3

Describe at least five sample criteria used in the evaluation of RFP or RFQ.

Answer 3

The following is a list of sample RFP or RFQ evaluation criteria:
• Initial and life cycle price
• Seller's ability to address each item in the SOW
• Seller's experience with similar projects
• Seller's customer references
• Seller's financial stability
• Seller's technical approach
• Seller's production capacity and interest
• Who owns intellectual property rights, if applicable

Question 4

Creating and signing contracts with organizations outside the project team's company is referred to as outsourcing, and if the seller is located in another country, it is referred to as nearshoring.

Question 5

Once a decision has been made to procure a product or service, what are the next questions that need to be answered, and how are they answered?

Question 6

List all of the contents of a procurement management plan.

Question 7

List at least five metrics that may be included in an SLA.

Question 8

What are processes of the Procurement Management knowledge area of PMBOK?

Question 9

The lowest priority goal of the procurement planning process is to determine which project needs can best be met by sellers or vendors outside the project team.

Question 10

Explain make-or-buy analysis and where it falls in the procurement process.

Question 11

Key decision points in make-or-buy analysis include cost, human resources, time, strategic direction, and risk.

Question 12

The project management body of knowledge (PMBOK) from the Project Management Institute (PMI) defines the processes of the Procurement Management knowledge area as plan procurements, conduct procurements, administer procurements, and close procurements.

Question 13

Procurement planning involves planning for those elements of the project that will be bought or created from someone outside the project team or organization.

Question 14

Explain fixed-cost, or lump-sum, contract from the perspective of the buyer and the perspective of the seller.

Question 15

Insourcing means hiring someone from outside the organization to perform work.

Question 16

What are the steps of the procurement management planning process?

Question 17

Name and describe the three common types of cost reimbursable contracts.

Question 18

Organizations have several choices available when deciding to purchase a product or service from a seller: lease, rent, or sell.

Question 19

Gartner predicts that offshore IT services spending will grow by 40 percent in the United States and by as much as 60 percent in Europe.

Question 20

The project team performing a make-or-buy decision must also look at the needs of the organization in the future.

Question 21

The SOW may contain all or some of the following information: a dictionary, standards and specifications, period of performance, critical success factors, deliverables, and special requirements.

Question 22

The service-level agreement is a document that describes the procurement item in sufficient detail to allow prospective sellers to determine whether they are capable of providing the item and potentially at what cost.

Question 23

Contracts generally fall into one of three broad categories: fixed-price or lump-sum, cost-reimbursable, and time and quality.

Question 24

Cost-reimbursable contracts include incentive clauses based on the seller meeting certain project objectives, such as schedule targets or cost targets.

Question 25

In most IT outsourced projects, it is extremely important to use the correct type of contract for both the seller and the buyer.

Question 26

The final deliverable from the purchase planning and acquisitions process is the procurement management plan.

Question 27

In a fixed-price category of contract, the seller assumes a large portion of the risk.

Question 28

The type of contract signed, along with the specific contract terms and conditions, establishes the degree of risk borne by the buyer and seller.

Question 29

Cost-reimbursable contracts work best in situations when the size of the project makes it difficult to define 100 percent of the tasks, thus making the budget estimate less accurate.

Question 30

Along with each service-level requirement, there must be an associated cost to the seller if the seller fails to deliver.

Question 31

The language used in the SOW requirements should avoid words that allow for multiple interpretations. Use active voice for all requirements and use shall whenever a provision is optional.

Question 32

The last objective of the procurement planning process is to prepare the documents needed to complete the procurement process to build evaluation criteria, and to find and request seller responses to the RFP or RFQ.

Question 33

The buyer/seller contract must be completed before moving on to the creation of the next procurement documents, the RFP and the RFQ.

Question 34

The evaluation criteria, which are used to rate and evaluate seller proposals, should be included in the procurement documents delivered to potential sellers.

Question 35

In a buyer/seller relationship, from the perspective of the buyer, the contract documents become the planning input documents to the project of delivering the required product or service.

Question 36

A flexible contract is appropriate when the SOW is sufficiently detailed and stable and the seller can prepare an accurate fixed price for completing the work.

Question 37

In the SLA, the costs to the seller if the seller fails to deliver need to be significant enough to provide an incentive to the seller to deliver the services.

Question 38

In the procurement document, evaluation criteria is information about the seller that helps the buyer determine whether the seller is qualified and has the resources to deliver the product or service. This information may contain financial information, customer references, and total number of similar products or services delivered.

Question 39

Time and material contracts assign all the risk to the seller and virtually none to the buyer.

Question 40

In most IT procurement contracts, a set of specific quality metrics are created and monitored; this is generally referred to as a status-level agreement (SLA).

Question 41

Which of the following is NOT one of three broad categories of contracts?

A) Irrevocable
B) Fixed-price
C) Lump-sum
D) Cost-reimbursable

Question 42

In this type of cost-reimbursable contract, the seller is reimbursed for allowable costs plus a fixed fee, calculated as a percentage of the allowable costs.

A) Cost-plus-percentage of cost (CPPC)
B) Cost-plus-fixed-fee (CPFF)
C) Cost-plus-incentive-fee (CPIF)
D) Cost-plus-flexible-fee (CPFF)

Question 43

Creating and signing contracts with organizations outside the project team's company is referred to as outsourcing, and if the seller is located in another country, it is referred to as ________.

A) nearshoring
B) offshoring
C) rural sourcing
D) outsourcing

Question 44

According to PMBOK, which of the following is a process of the Procurement Management knowledge area?

A) Plan procurements
B) Conduct procurements
C) Administer procurements
D) All of the above

Question 45

The seller/buyer relationship is based on a signed RFP.

Question 46

During a make-or-buy analysis, an organization must look objectively at the skills required to make the product and then evaluate current resources for a match and availability.

Question 47

In a cost-reimbursable contract, the seller is rewarded with bonus payments.

Question 48

________ means hiring someone from outside the organization to perform work.

A) Externalizing
B) Transference
C) Outsourcing
D) Delegating

Question 49

A ________ analysis will help the team determine whether it makes more sense to perform the activities within the project team or to contract with a seller.

A) make-or-buy
B) SWOT
C) risk
D) Pareto

Question 50

In many documented cases, a whole outsourced project has failed due to the wrong contract being used or key concepts being left out of the contract.

Question 51

In a T&M contract, the buyer is reimbursed for all previously defined costs and additional material costs of the seller to complete the product.

Question 52

The procurement planning process is used to determine what to procure, when to procure it, and ________ procure it.

A) how to
B) whether or not to
C) why to
D) who should

Question 53

This category of contract includes incentive clauses based on the seller meeting certain project objectives, such as schedule targets or cost targets.

A) Fixed-price
B) Cost-reimbursable
C) Time and material
D) Lump-sum

Question 54

When deciding to purchase from a seller, ________ or renting might present an attractive choice for organizations that need to be very conservative with their cash on hand.

A) buying
B) leasing
C) borrowing
D) selling

Question 55

Which of the following is NOT a key decision point in make-or-buy analysis?

A) Cost
B) Human resources
C) Risk
D) Project manager's preference

Question 56

In this type of cost-reimbursable contract, the seller is reimbursed for allowable costs plus a predetermined fee, an incentive bonus, based on meeting certain time and cost objectives.

A) Cost-plus-percentage of cost (CPCC)
B) Cost-plus-fixed-fee (CPFF)
C) Cost-plus-incentive-fee (CPIF)
D) Cost-plus-flexible-fee (CPFF)

Question 57

The key goal of the procurement planning process is to determine which project ________ can best be met by sellers or vendors outside the project team.

A) constraints
B) schedules
C) needs
D) team members

Question 58

________ planning involves planning for those elements of the project that will be bought or created from someone outside the project team or organization.

A) Procurement
B) Project
C) Resource
D) Investment

Question 59

In this type of cost-reimbursable contract, the seller is reimbursed for allowable (agreed to by buyer) costs plus a fee, calculated as a percentage (again agreed to by the buyer) of the actual costs.

A) Cost-plus-percentage of cost (CPPC)
B) Cost-plus-fixed-fee (CPFF)
C) Cost-plus-incentive-fee (CPIF)
D) Cost-plus-flexible-fee (CPFF)

Question 60

This category of contract is appropriate when the SOW is sufficiently detailed and stable and the seller can prepare an accurate fixed price for completing the work.

A) Fixed-price
B) Cost-reimbursable
C) Time and material
D) Irrevocable

Question 61

In the SLA, the ________ to the seller if the seller fails to deliver need to be significant enough to provide an incentive to the seller to deliver the services.

A) costs
B) rewards
C) legal actions
D) bonuses

Question 62

During a ________ analysis, an organization must look objectively at the skills required to make the product and then evaluate current resources for a match and availability.

A) SWOT
B) requirements
C) make-or-buy
D) project plan

Question 63

The ________ is a document that describes the procurement item in sufficient detail to allow prospective sellers to determine whether they are capable of providing the item and potentially at what cost.

A) service-level agreement
B) statement of work
C) buyer/seller contract
D) scope statement

Question 64

In a cost-reimbursable contract, the ________ is rewarded with bonus payments.

A) buyer
B) seller
C) project team
D) project manager

Question 65

The type of contract signed, along with the specific contract terms and conditions, establishes the degree of ________ borne by the buyer and seller.

A) risk
B) requirements
C) service
D) inputs

Question 66

The seller/buyer relationship is based on a signed ________.

A) RFQ
B) RFP
C) SOW
D) contract

Question 67

There are many types of procurement documents, but the most used on IT projects are the RFP and RFQ.

A) SLA and SOW
B) RFP and RFQ
C) SOW and RFP
D) SOW and RFQ

Question 68

The final deliverable from the purchase planning and acquisitions process is the ________ management plan.

A) scope
B) vendor
C) project
D) procurement

Question 69

Which of the following is NOT found in a SOW?

A) SLA
B) Dictionary
C) Critical success factors
D) Deliverables

Question 70

Outsourcing for organizations in the United States and all over the rest of the world is continuing to increase, utilizing more and more of an information technology (IT) department's ________.

A) resources
B) budget
C) quality
D) time

Question 71

A ________ is a key part of a contract between a buyer and a seller that specifies, usually in measurable terms, what specific services are to be provided.

A) sub-contract
B) scope statement
C) table of contents
D) service-level agreement

Question 72

In the procurement document, this is information about the seller that helps the buyer determine whether the seller is qualified and has the resources to deliver the product or service. This information may contain financial information, customer references, and total number of similar products or services delivered.

A) Evaluation criteria
B) Supplier qualifications and customer references
C) Pricing
D) SOW

Question 73

In a T&M contract, the seller is reimbursed for all previously defined costs and additional material costs of the ________ to complete the product.

A) buyer
B) seller
C) project team
D) project manager

Question 74

Which of the following is NOT part of the procurement management plan?

A) Types of contracts to be used
B) Delegation of authority
C) Templates for procurement documents
D) Project charter

Question 75

IDC, a leading market research firm, reports that the global market for services (for example, data center management, help desk support, network operations, applications maintenance, disaster recovery services) was $84.6 billion in 2004 and is estimated to reach $112.5 billion by the end of ________.

A) 2009
B) 2020
C) 2015
D) 2050

Question 76

In a buy decision, if the organization will have no further use for the item past the end of the contract, then this may be preferred over purchasing the product.

A) Lease or rent.
B) Buy.
C) Partner.
D) Outsource.

Question 77

These contracts are mainly used when the scope of the work cannot be defined up front and a seller is hired and works until the project/problem is completed.

A) Time and material
B) Cost-reimbursable
C) Fixed price
D) Iterative

Question 78

Which of the following is a cost consideration in a make decision?

A) Labor costs
B) Human resource knowledge
C) Rework costs
D) All of the above

Question 79

Creating the right type of ________ with the right terms and conditions will help an organization and a project team to transfer some of the project's risks and also to give the buyer a better means of managing the buyer/seller relationship.

A) SOW
B) SLA
C) contract
D) scope

Question 80

The final step in the RFQ or RFP preparation process is to develop and communicate the proposal evaluation criteria.

A) seller
B) qualification
C) acceptance
D) evaluation