Академический Документы
Профессиональный Документы
Культура Документы
Cost of corrective action by purchaser and chargeable to the supplier under terms of the
contract.
Bid Protest
allows an unsuccessful supplier an opportunity to protest the award of a government
contract to another supplier.
Bill of Lading
A receipt issued by a carrier for merchandise to be delivered to a party at some
destination.
Constructive Change
occurs when the PM's conduct enables performance differing from that prescribed by the
contract. The PM's conduct in effecting constructive change may either be affirmative or
a failure to act. Not part of change control of contract: For instance, if final product
performs better than standard specified in contract, or if the PM increases the quality over
and beyond what's stated in the contract.
Contract
a legal document of purchase or sale which is binding on both parties.
When entering into a contract, the people involved must have legal capacity to do so.
(the definition of legal capacity varies from state to state). Consideration must be
provided to both parties (in other words, there must be sufficient cause to contract). There
must be mutual assent.
Invitation for Bid (IFB)
PMBOK equates this with Request for Proposal and recognizes that it may have a more
specific meaning in certain application areas. (appropriate for high dollar, standard
items.)
Low-ball
In order to get an award, a contractor may submit at bid that's unrealistically low.
Pink Team Review
A seller responds to an RFP by developing a proposal. For sanity purposes, the proposal
is passed through the pink team once the outline is completed. The pink team looks at the
outline through the perspective of the buyer. The purpose of the team is to catch problems
with the proposal in the early stages.
Price Forecast
based on information gathered and analyzed about demand and supply. This forecast
provides a prediction of short and long term prices and the underlying reasons for those
trends.
Red Team Review
Once the proposal is in draft form, it passes through a red team which again looks at the
proposal through the buyer's perspective.
Reformation
A judicial remedy by which a court interprets the contract so as to express the real
intention of the parties (this is different from changes to the contract)
Request for Proposal (RFP)
A type of bid document used to solicit proposals from prospective sellers of products or
services. In some application areas, it may have a more specific meaning. (appropriate for
high dollar, non-standard items).
Procurement Planning
Process of identifying which project needs can be best met by procuring products or
services outside the project organization.
Involves knowing whether to procure, how to procure, what to procure, how much to
procure, and when to procure.
Input includes:
Scope statement
Product description
Procurement resources
Market conditions
Constraints
Assumptions
Methods include: make-or-buy analysis, expert judgment, and contract type selection
(fixed, cost reimbursable, etc.).
Output includes: Procurement management plan and statement of work (SOW) for each
planned contract.
Solicitation Planning
Input includes: procurement management plan, SOW's, and other planning Output.
Output includes:
Evaluation criteria: the criteria that will be used to rate or score proposals. The
criteria may be subjective or objective.
o
Statement of work updates.
o
Solicitation
The process of obtaining information (bids and proposals) 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 little or no cost to the project.
Output includes: Proposals prepared by the sellers explaining how the seller can provide
the requested product or service.
Source Selection
The process of receiving the bids and proposals from the sellers and applying the
evaluation criteria to select a provider.
Methods include:
Contract negotiation.
Contract Administration
The process of ensuring that the seller's performance meets contractual requirements.
Input includes: contract, work results, change requests, and seller invoices.
Methods includes: contract change control system, performance reporting, and payment
system.
Contract Closeout
The process of completing and settling the contract including any resolution of open
items.
Items are of relatively low dollar value such as supplies and materials
Contract Types
Principal Types
Cost
Fixed
Unit Price
Buyers have more flexibility than CPIF. Subjective judgments can be used to determine
rewards (such as a contractor's attitude).
The following contracts are ordered in increasing risk to the seller and
decreasing risk to the buyer.
Cost-Plus-Percentage of Cost (CPPC)
Seller is reimbursed for allowable costs of performing the contract and receives as profit
an agreed upon percentage of the costs.
No limit on the seller's profit. If the seller's cost increases, so does the profit.
Prohibited for federal government use. Used in private industry, particularly construction
projects.
The buyer project manager must pay particular attention to the control of the labor and
material costs so that the seller does not purposely increase these costs.
Seller is reimbursed for allowable costs of performing the contract and receives as profit
a fixed fee payment based on the percentage of the estimated costs.
The fixed fee does not vary with actual costs unless the scope of work changes.
Primarily used in research projects where the effort required to achieve success is
uncertain until well after the contract is signed.
Seller is paid for allowable performance costs along with a predetermined fee and an
incentive bonus.
If the final costs are less than the expected costs, both the buyer and seller benefit by the
cost savings based on a pre-negotiated sharing formula.
The sharing formula reflects the degree of uncertainty faced by each party.
Primarily used when contracts involve a long performance period with a substantial
amount of hardware development and test requirements.
Bottom line: provides incentive to seller to reduce costs by increasing profit potential.
Consists of target cost, target profit, target price, ceiling price, and share ratio.
For every dollar the seller can reduce costs below the target cost, the savings will be
shared by the seller and buyer based on the share ratio.
The share ratio is a negotiated formula which reflects the degree of uncertainty faced by
each party.
If the costs exceed the ceiling price, the seller receives no profit. Regardless of the actual
costs, the buyer pays no more than the ceiling price.
Risk is shared by both buyer and seller, but risk is usually higher for seller.
Usually used when contracts are for a substantial sum and involve a long production
time.
Bottom line: provides incentive to decrease costs which in turn increases profits. If costs
exceed a ceiling, then contractor is penalized.
Seller agrees to perform a service or furnish supplies at the established contract price.
CPPC
Estimated Cost
$1,000K
Percentage
10% ($100K)
$1,100K
(Estimated Cost + 10% * Estimated Cost)
If cost increases to $1,100K the total price would be $1,100K plus 10% of the
actual costs = $1,210K.
CPFF
Estimated Cost
$1,000K
Percentage
10% ($100K)
$1,100K
(Estimated Cost + 10% * Estimated Cost)
If cost increases to $1,100K the total price would be $1,100K plus 10% of the
original estimated costs = $1,200K.
CPIF
Estimated Cost
$1,000K
Predetermined
Fee
$100K
of the risk)
Actual Cost
$800K
Savings
$200K
Seller Gets
Buyer Saves
$170K
FPI
Target Cost
$1,000K
Target Profit
Target Price
$1,100K
Ceiling Price
Share Ratio
70/30
EXAMPLE A
Actual Cost
$800K
Savings
$200K
(Target cost - Actual cost)
Seller Gets
Buyer Saves
$140K
EXAMPLE B
Actual Cost
$1,300K
Seller Gets
$1,200K
(no profit and a $100K loss on costs)
Buyer Loses
$100K
(the pay-out is $100K over Target price = Ceiling Price)
$1,000K
EXAMPLE A
Actual cost
$700K
Seller's Profit
$300K
(Price - Actual Cost)
EXAMPLE B
Final cost
$1,100K
Seller's Loss
$100K on contract
Changes
The change control system should be defined and included in the changes clause
of the project.
o
The system should cover who initiates a change request, how is it processed and
funded and who has the final approval authority.
o
For major projects, a configuration control committee should be established
o
The change proposal must be explicit in terms of the impact of the change on the
contract work statement, specifications and drawings.
o
Legal: there must be mutual agreement to modify a contract and that agreement
must be supported by consideration (change clause is important!) OR
o
Change may also be accomplished by unilateral action if pursuant to the exercise
of options contained in the terms of the original contract.
o
Specifications
Either standard in nature where a specific design has been accepted throughout
the industry or tailored and unique to the situation at hand.
o
There is a behavioral component associated with the development of
specifications: These include:
Drive for competency: The person keeps changing the design which results
in increasing complexity and cost. (cannot come to a closure)
o
Monument syndrome: based on the desire to build a product that will last
forever regardless of the cost. (i.e., the pyramids)
Quality Control
Quality cannot be inspected into the product -- it must be built into it.
o
time.
o
Defects can be costly and damaging to the reputation of the company and the
project manager and the project team.
Warranties The concept of warranty is based on one party's assurance to the other that
the goods will meet certain standards of quality, including condition, reliability,
description, function or performance.
o
Express warranty: applies when service or product does not meet the level of
quality specified in the contract. (Section 2-313(1)(a) of the Uniform Commercial Code)
o
Implied warranty: is measured by "merchantability" or "fitness for a particular
use".
1.
Analogy: If you buy a lawnmower, you would expect it to cut grass. If you
use it on the carpet, the warranty doesn't apply.
Waiver
The client PM must be continually aware of the waiver pitfall.
Under the doctrine of a waiver, a party may relinquish rights he otherwise has
under the contract.
o
If the client PM knowingly accepts incomplete, defective or late performance and
accepts that performance without objection, the PM has waived his right to strict
performance.
o
Bonds
Breaches
Breach of contract: failure to perform a contractual obligation.
The measure of the damages for a breach is the amount of loss the injured party
has sustained.
o
Materials breach of contract: The non-faulted party is discharged from any
further obligations under the contract. The breach is so serious that it also deprives the
non-faulting party the expected benefits of the bargain.
o
Time: Should no time for performance be stated or implied in the contract, the
performance must be completed within a reasonable amount of time. However, if time is
critical, the contract should explicitly state "time is of the essence".
o
Time is of the essence: when explicitly stated within the contract, failure to
perform within the allotted time will constitute a materials breach of contract and the
buyer will not be required to accept late performance.
Negotiation
Stages of Negotiation
1. Protocol: Introductions are made, and the negotiators get to know each other. The
atmosphere for the rest of the negotiations is determined in this stage.
2. Probing: The negotiators begin the search process. Each party identifies issues of
concern. Strengths and weaknesses are identified and possible areas of interest.
3. Scratch Bargaining: This is the essence of the meeting. Actual bargaining occurs and
concessions are made. Points of concession are identified.
4. Closure: The two positions are summed up and final concessions are reached. The
agreements are summarized and documented.
5. Agreement: The main difficulty in this stage is ensuring both parties have an identical
understanding of the agreements. This stage should establish the plans for recording the
agreements in a written contract
2 Negotiation Tactics
Other party does not have to accept deadline, but often does
Surprise -- One party springs information such as a price change on the
other party
Stalling
One party may claim that an agreement cannot be finalized
because he has limited authority and cannot commit the company's resources.
A party may claim that the person with final authority is absent.
The "missing man" technique may also be used when the party does not have the
information asked for by the other party.
Fair and reasonable
Negotiator may claim the price for a computer is equitable because
that is what another company is paying.
Delays
Useful when tempers are beginning to flare, a team member is
going astray, to divert from a subject, etc.
Examples of delays: arrival of refreshments, request for recess, etc.
Reasoning together
Confusing the other party: deliberately distorting issues and figures. (If
this is done, someone should speak up before agreeing to anything)
Withdrawal
Make the other party appear unreasonable by pointing out all the
concessions made by the party
Arbitration - a third party may be brought in when agreement cannot be
reached.
Fait accompli - a party may claim that what is being asked for has already
been accomplished and cannot be changed.