IT Project Procurement Management Quiz

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Questions and Answers

What is a key reason for the increasing use of outsourcing in IT project procurement management?

It allows organizations to focus on core competencies. (correct)

It reduces the need for project documentation.

It guarantees lower costs without additional management.

It eliminates all project risks and uncertainties.

Which aspect is crucial when planning procurements for a project?

Determining the type of contract to use. (correct)

Establishing the project timeline.

Selecting project team members.

Preparing a detailed project budget.

What is an essential part of controlling procurements in project management?

Monitoring contract performance. (correct)

Establishing communication protocols.

Creating a risk management plan.

Developing training programs for sellers.

When conducting procurements, what should project managers consider for source selection?

The source selection criteria outlined in the procurement management plan. Signup and view all the answers

What type of software can assist in project procurement management?

Project management tools with budgeting features. Signup and view all the answers

What is the primary purpose of outsourcing in project management?

Access specialized skills and technologies Signup and view all the answers

Which company reduced its outsourcing from 90% to 10%?

GM Signup and view all the answers

What was a significant issue in the management of New York City’s IT projects?

Leadership issues leading to cost overruns Signup and view all the answers

What is the estimated value of the global IT industry in 2017?

$3.7 trillion Signup and view all the answers

What might be a reason for a company to choose not to outsource?

Desire to maintain complete control over all processes Signup and view all the answers

In the CityTime payroll system case, what amount did prosecutors accuse the project of being inflated by fraud?

$700 million Signup and view all the answers

Which option does NOT represent a benefit of outsourcing?

Reduction of operational flexibility Signup and view all the answers

Why is ongoing oversight critical in project procurement management?

To prevent fraud and mismanagement issues Signup and view all the answers

What is the first step in project procurement management?

Planning procurement management Signup and view all the answers

Which of the following is NOT a process in project procurement management?

Evaluating team performance Signup and view all the answers

What is a critical output of the planning procurement management process?

Make-or-buy decision Signup and view all the answers

Which action is part of controlling procurements?

Monitoring contract performance Signup and view all the answers

In project procurement management, when should a make-or-buy decision be made?

During the planning phase Signup and view all the answers

Which aspect does NOT involve direct interaction with sellers?

Planning procurement management Signup and view all the answers

What is the goal of conducting procurements?

To obtain seller responses and award contracts Signup and view all the answers

When should project procurement management processes be initiated?

Only if external resources are needed Signup and view all the answers

What is the purpose of preparing evaluation criteria before issuing an RFP?

To score or rate proposals effectively Signup and view all the answers

Which factor should be considered when evaluating proposals aside from the written document?

Past performance of the seller Signup and view all the answers

Who should lead the technical presentation team of a proposed seller?

The proposed project manager Signup and view all the answers

What is one of the initial steps in procurement management after planning?

Decide whom to ask to do the work Signup and view all the answers

What is a bidders’ conference primarily used for?

To clarify expectations with prospective sellers Signup and view all the answers

Which approach involves directly contacting suppliers to procure goods and services?

Direct approach Signup and view all the answers

What process follows obtaining proposals or bids in procurement management?

Select a seller Signup and view all the answers

What is typically the final output of the seller selection process?

A signed contract Signup and view all the answers

What document is crucial for outlining expectations to potential sellers?

Request for Proposal (RFP) Signup and view all the answers

Which individuals should be involved in writing and administering contracts?

Legal and contracting professionals Signup and view all the answers

What must project managers be vigilant about regarding changes in contracts?

Constructive change orders Signup and view all the answers

Which aspect is necessary when evaluating any change to a project?

Impact analysis Signup and view all the answers

What is an essential action to take when changes are made to project contracts?

Document changes in writing Signup and view all the answers

How should changes to any part of the project be managed?

Reviewed, approved, and documented properly Signup and view all the answers

Why is it important for project managers to be closely involved in contract changes?

To ensure new systems meet business needs Signup and view all the answers

What tool can assist organizations in maintaining contract control?

Contract change control system Signup and view all the answers

Which type of contract allows a buyer or supplier to terminate the agreement?

Termination clause contract Signup and view all the answers

What does make-or-buy analysis help determine?

Whether to outsource a service or produce it in-house Signup and view all the answers

Which option is considered when estimating the risk of time and material contracts?

The contract clauses Signup and view all the answers

What is a key role of expert judgment in procurement management planning?

To provide insight on supplier selection Signup and view all the answers

The procurement management plan varies primarily based on what factor?

Type of project Signup and view all the answers

What type of contract may be deemed low risk depending on project characteristics?

Unit-price contract Signup and view all the answers

Which tool assists project managers in identifying potential suppliers?

Market research Signup and view all the answers

Which of the following reflects unique issues that contracts must address?

Specific project needs Signup and view all the answers

Study Notes

Chapter 12: Project Procurement Management

Project procurement management is the process of acquiring goods and services from an external source
Outsourcing is a term used for purchasing goods and services from an outside source
The global IT industry was valued at $3.7 trillion in 2017
Outsourcing market is growing
Some companies, like Wal-Mart, prefer not to outsource
General Motors (GM) recently announced a shift from outsourcing 90% of IT services to only 10%

Learning Objectives (1 of 2)

Explain the importance of project procurement management and the increased use of outsourcing for information technology (IT) projects
Describe the work involved in planning procurements for projects, including contract types, procurement plans, statements of work, and source selection criteria
Discuss how to conduct procurements and strategies for obtaining seller responses, selecting sellers, and awarding contracts

Learning Objectives (2 of 2)

Discuss types of software available to assist in project procurement management
Discuss considerations for agile/adaptive environments

Importance of Project Procurement Management (1 of 4)

Procurement means acquiring goods and/or services from an external source
Other terms include purchasing and outsourcing

Importance of Project Procurement Management (2 of 4)

Why outsource?
- Access to skills and technologies
- Reduce fixed and recurring costs
- Allow the client organization to focus on core business activities
- Provide flexibility
- Increase accountability

What Went Wrong?

In 2011, New York City's mayor acknowledged City Hall mismanaged major IT projects
The CityTime payroll system was inflated by $700 million due to fraud
Nycaps (automated personnel system) experienced delays and cost overruns, increasing from $66 million to over $363 million

Importance of Project Procurement Management (3 of 4)

Project procurement management is about acquiring goods and services from external organizations for a project
Main processes: planning, conducting, and controlling procurements

Importance of Project Procurement Management (4 of 4)

Provides a detailed overview of Project Procurement Management, broken down into planning, conducting and controlling procurements
Includes the inputs, tools and techniques and outputs for each phase

Planning Procurement Management

Identifying project needs that can be met using an external product or service
Deciding whether to procure, how to procure, what to procure, how much to procure, and when to procure
Make-or-buy decision: if an organization does not need to buy from external sources, then there's no need to perform other procurement processes

Types of Contracts (1 of 3)

Fixed price/lump sum contracts: involve a set price for a defined product or service, using Point of Total Assumption (PTA)
Cost-reimbursable contracts: payment to the seller for direct and indirect costs
Includes cost plus incentive fee, cost plus fixed fee, and cost plus percentage of costs

Types of Contracts (2 of 3)

A visual representation (figure 12-2) illustrates different contract types and their relative buyer and seller risks.

Types of Contracts (3 of 3)

Contracts should include specific clauses to address unique project issues
Time and materials contracts and unit price contracts can have varying risk levels based on the project nature
Termination clauses allow buyer or supplier to end contracts

Tools and Techniques for Planning Procurement Management

Make-or-buy analysis: helps determine if an organization should create a product internally or from external sources
Expert judgment: seeking expert advice to plan contracts and acquisitions
Market research: identifying potential suppliers

Procurement Management Plan

Describes procurement processes from developing documentation for external purchases or acquisitions to contract closure
Content varies based on project needs

Statement of Work (1 of 2)

A statement of work (SOW) is a description of the work needed for a procurement
If a SOW is used as part of a contract, it's called a contract statement of work
A good SOW clarifies buyer expectations for bidders

Statement of Work (2 of 2)

Provides a detailed template (figure 12-3) for creating a Statement of Work

Procurement or Bid Documents

Request for Proposals (RFPs): used to gather proposals from potential sellers when there are various ways to meet the buyer's needs
Requests for Quotes (RFQs): used to obtain quotes for standard items clearly defined by the buyer (like a bid, tender, or quote)

Examples from a Real RFP

Government agencies often require procurement information to be open to the public
Buyers should clarify their requirements, so sellers can respond appropriately

Source Selection Criteria

Important to prepare evaluation criteria before issuing RFP/RFQs
Organizations rate proposals and often assign weights to criteria
Important to consider factors like past performance and management approach for proposals.
Some IT projects require potential sellers to present

Conducting Procurements (1 of 4)

Steps after planning for procurement management include deciding who will do the work, providing the appropriate documentation to potential sellers, obtaining proposals or bids from sellers, selecting a seller, and awarding a contract.

Conducting Procurements (2 of 4)

Organizations can advertise for goods and services in various ways
Approaching preferred suppliers or several potential suppliers to get bids, and holding bidders' conferences to clarify expectations is also common

Conducting Procurements (3 of 4)

This section includes a sample evaluation sheet (figure 12-4) for evaluating proposals based on various weighted criteria

Conducting Procurements (4 of 4)

After developing a short list of potential sellers, further detailed evaluation and proposal processes often follow.
Contract negotiations are common during the source selection phase
Sellers provide best and final offers(BAFOs). Final output is a signed contract

Controlling Procurements (1 of 4)

Ensuring seller performance meets contractual requirements
Contracts are legal relationships; legal professionals should be involved.
Project team members must be aware of potential legal problems.
Important to watch for constructive change orders (oral or written acts/omissions) with apparent authority

Controlling Procurements (2 of 4)

Suggestions for change control in contracts:
- Review, approve, and document changes to project elements as much as the initial planning phase.
- Perform impact analysis when evaluating changes in project plans.
- Maintain written documentation for changes in project plans.
- Project managers and teams should stay closely involved in ensuring business needs are met.
- Backup plans should be developed as needed for procurement processes

Controlling Procurements (3 of 4)

Closing procurements includes completing and settling contracts, resolving outstanding issues, final results, and archiving
Project teams determine all work completed correctly and satisfactorily; ensuring appropriate record updating

Controlling Procurements (4 of 4)

Procurement audits identify lessons learned from the procurement process
Records management systems help efficiently organize, find, and archive procurement documents
Ideally, all contracts involve a negotiated settlement from the buyer and seller. Mediation/arbitration may be used if necessary

Best Practice

Procurement can be more intelligent through the use of data science and predictive models
Data related to finance, marketing, etc. can be analyzed
Quality control and assurance departments can encourage employees to generate innovative supplier ideas

Using Software to Assist in Project Procurement Management (1 of 2)

Word-processing software is used for proposals and contracts
Spreadsheet software is used for proposal evaluation
Databases are helpful in tracking suppliers
Presentation software is useful for presenting procurement-related information
E-procurement software helps with electronic procurement functions

Using Software to Assist in Project Procurement Management (2 of 2)

Procure-to-pay suites support indirect procurements
E-purchasing, catalog management, and e-invoicing functionalities are useful software tools
Accounts Payable Invoice Automation is a common function

Considerations for Agile/Adaptive Environments

Agile Manifesto values customer collaboration over contract negotiation
Project procurement relationships are collaborative on agile projects
Buyer and seller work together throughout the entire process to create required products and services
Agile environments prioritize speed, clear logical processes to follow, and good project procurement management.

Chapter Summary

Procurement, purchasing, or outsourcing is the acquisition of goods and services from outside sources
Project procurement management involves planning and conducting procurement activities and then controlling those procurements
Deciding what to procure, and the contract type to use, and how to describe the effort in a statement of work are important
Several types of software can assist in project procurement management

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Description

Test your knowledge on key aspects of IT project procurement management, including outsourcing strategies and source selection considerations. This quiz covers the importance of planning, controlling, and managing procurements effectively in the IT industry.