PMP Project Management Professional Study Guide, Third Edition (Certification Press)

Project procurement management allows a project to ascertain resources, materials, equipment, services, and other components needed to successfully complete the project. It is the process of finding sellers that can supply the needed products or services at a fair rate and meet the quality, time, and cost expectations of the project. The product description will help the project manager and the vendor determine what is the best solution for the procurement need.

One of the first activities the project manager and the project team complete together before procuring products is to determine the need to buy versus the ability to make the product. A decision tree can help the project manager determine which decision is most cost effective, reliable, and best for the project. A buy-versus-build analysis can compare the benefits of buying versus selling—including attributes other than just price and time.

Bidder conferences allow the bidders to meet with the project managers and other officials representing the seller to confirm the details of the Statement of Work. Recall that the Statement of Work is provided to all of the vendors that may be creating bids or proposals for the seller. The bidders’ conference allows the bidders to obtain any additional information they may need to create a full and complete bid, quote, or proposal. It is part of the solicitation process and proceeds to source selection.

PMP candidates—and project managers—must be familiar with the different contract types and when to use each one. Here’s a recap of the most common contract types:

• Cost Plus Fixed Fee Details the fixed cost of the contract which includes a profit margin for the seller.

• Cost Plus Percentage of Cost Has a price for the contracted product or service, but cost overruns are assigned to the buyer.

• Cost Plus Incentive Fee The seller determines a price for the product or service—but includes an incentive reward for completing the procured work on time or ahead of schedule.

• Fixed-Price A simple fixed price for the contract—but it can include an incentive for the seller to complete early, ahead of schedule, or other savings shared between the buyer and the seller.

• Lump-Sum The contract has one price for all of the contracted work.

• Time and Materials Price assigned for the time and materials provided by the seller.