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Procurement Management: Is the set of processes related to obtaining goods…
Procurement Management: Is the set of processes related to obtaining goods, services, or scope from outside the organization.
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Key Concepts / Terms:
Procurement Roles: There are two types of procurement roles and both are often played by project managers
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Contract Types: When procuring good or services there are three types of contracts that govern the deal and make a significant difference on who bears the risk.
Fixed Price Contracts (Lump Sum Contracts): This type of contract is popular when the scope of work is thoroughly defined. There is generally a single fee, although payments terms may be specified so cost is not necessarily a lump sum payable at the end
Firm Fixed Price (FFP): Risk is entirely moved to the seller , the price is fixed, with no provision for overruns.
Fixed Price Economic Price Adjustment: A type of contract popular in cases where fluctuations in the exchange rate or interest rate are anticipated to impact the project. An economic stipulation is included in the contract to protect the buyer. Economic stipulations may be based on exchange rate, consumer price index or other economic indices
Fixed Incentive Fee: The price is fixed with an incentive for meeting a target specified in the contract eg finishing ahead of schedule
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Time & Material Contracts: The seller charges for time plus the cost of any materials needed to complete the work
Point of Total Assumption: Is the cost point in the contract where a subcontractor assumes responsibility for all additional costs.
Formula Target Cost + (Ceiling price - target price) / Buyers % share of cost overrun
Plan Procurement Management:This process involves looking at the project and determining which components or services will be "procured" from an external source and which will be performed internally.
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Conduct Procurements: It carries out the procurement management plan, selects one or more sellers, and awards them the contract
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Control Procurements: Is the process where buyers and sellers review the contract and work results to ensure that the results match the contract
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Close Procurements: Is the process where the contract is completed by the buyer and seller. Ideally the contract is terminated amicably but not always the case. Contract may be terminated for any valid reason.
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Outputs:
Closed Procurements: The buyer's contract administrator sends formal written notice to the seller that the contract is complete
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