Pmbok 4th edition chapter 12 - Project Procurement Management

CHAPTER 12

PROJECT PROCUREMENT MANAGEMENT

Ahmad H. Maharma
PMP®

12. Project Procurement Management
Monitoring &
Controlling Processes
Planning
Processes

Enter phase/ Initiating Closing Exit phase/
Start project Processes Processes End project

Executing
Processes

Process
Knowledge Area Monitoring &
g
Initiating
I iti ti Planning
Pl i Executing
E ti Closing
Cl i
Contol
Plan Purchases - Request Seller - Contract - Contract Closure
and Acquisitions Responses Administration
Procurement
Plan Contracting Select Sellers

Project Procurement
M
Management t
• The process necessary to process and acquire product or
services, or result needed from outside the project team.

• Involve planning, acquiring the product or services from
sources, choosing a source, administering the contract, and
closing out the contract.

• Can be applied to internal work orders formal agreements
Can be applied to internal work orders, formal agreements,
and contracts between organization units within single
entity.

Project Manager’s Role in Procurements
• PM must be involved in the creation of
contracts
• Key roles:
– Know the procurement process
– Understand contract terms and conditions
– Make sure the contract contains all project management requirements
such as attendance at meeting, reports, actions and communications
h tt d t ti t ti d i ti
deemed necessary
– Identify risks and incorporate mitigation and allocation of risks into the
contract
– Help tailor the contract to the unique needs of the project
– Align schedule of the contract and schedule of the project
– Involved in contract negotiation
Involved in contract negotiation
– Make sure procurement process done smoothly
– Work with contract manager to manage changes to the contract

Project Procurement Management includes the processes
necessary to purchase or acquire products, services, or results
y p q p , ,
needed from outside the project team.

The organization can be either the buyer or seller of the products,
services, or results of a project.

• Project Procurement Management includes the contract
management and change control processes

• (the buyer) that is acquiring the project from the performing
organization (the seller), and administering
organization (the seller) and administering

• 12.1  Plan Procurements—The process of documenting project
p
purchasing decisions, specifying the approach, and identifying
g , p y g pp , y g
potential sellers.

• 12.2  Conduct Procurements—The process of obtaining seller
responses, selecting a seller, and awarding a contract.

• 12.3  Administer Procurements—The process of managing
procurement relationships, monitoring contract performance,
and making changes and corrections as needed.

• 12 4 Close Procurements The process of completing each
12.4  Close Procurements—The process of completing each
project procurement.

• The seller will typically manage the work as a project if the acquisition is not just for
shelf material, goods, or common products. In such cases:

– The buyer becomes the customer, and is thus a key project stakeholder for the
seller.
– The seller’s project management team is concerned with all the processes of
The seller s project management team is concerned with all the processes of
project management, not just with those of this Knowledge Area.
– Terms and conditions of the contract become key inputs to many of the seller’s
management processes. The contract can actually contain the inputs (e.g., major
g p y p ( g, j
deliverables, key milestones, cost objectives), or it can limit the project team’s
options (e.g., buyer approval of staffing decisions is often required on design
projects).

• This chapter assumes that the buyer of items for the project is assigned to the project
team and that the
• sellers are organizationally external to the project team.
sellers are organizationally external to the project team

12.1 Plan Procurements
• Plan Procurements is the process of documenting project
p
purchasing decisions, specifying the approach, and identifying
g , p y g pp , y g
potential sellers.

• It identiﬁes those project needs which can best be, or must be,
met by acquiring products, services, or results outside of the
p j
project organization, versus those project needs which can be
g , p j
accomplished by the project team.

• This process involves determining whether to acquire outside
support and, if so what to acquire, how to acquire it, how much
, q
is needed, and when to acquire it.

12.1.1  Plan Procurements ‐ Inputs
p
.1  Scope Baseline
•  Scope statement.
Scope statement.
•  WBS.  (Section 5.3.3.1).
•  WBS    dictionary.

• .2 Requirements Documentation
•  Important information  about  project   requirements   that  is
considered   during  planning for procurements.
•  Requirements with contractual and legal implications that may
• Requirements with contractual and legal implications that may
include health, safety, security,
performance,environmental,insurance,intellectualpropertyrights,
equalemploymentopportunity, licenses, and permits—all of
which  are  considered when planning for procurements.

12.1.1  Plan Procurements ‐ Inputs
p
.3  Teaming Agreements
• Teaming agreements are legal contractual agreements between
Teaming agreements are legal  contractual agreements between
two or more entities to form a partnership or joint venture, or
some other arrangement as defined by the parties.
.4 Risk Register
.5  Risk‐Related Contract Decisions
.6 Activity Resource Requirements
6 Activity Resource Requirements
.7  Project Schedule
.8  Activity Cost Estimates
.8 Activity Cost Estimates
.9  Cost Performance Baseline
.10  Enterprise Environmental Factors
.11  Organizational Process  Assets

12.1.2 Plan Procurements – Tools and Techniques
q
1. Make‐or‐Buy Analysis
• Determine whether an organization should make or
Determine whether an organization should make or
perform particular product or service by themselves or
buy/acquire from others.
from others.
• Evaluate of the benefit and drawback
• Often involves financial analysis
Often involves financial analysis

• Make or buy analysis focus on:
Make or buy analysis focus on:
– skills and resources
– cost
– time
– How critical is it that we retain detailed control over a certain area?
– proprietary information or trade secret

q

q
2. Expert Judgment

• Expert technical judgment will often be used to assess the inputs to and
outputs from this process.
• Expert purchasing judgment can also be used to develop or modify the criteria
that will be used to evaluate seller proposals.

q
3. Contract Type

• Fixed‐price (FP) contracts
– Fixed Price (FP), or Lump Sum, or Firm Fixed Price (FFP)
– Fixed Price Incentive Fee (FPIF)
Fi d P i I ti F (FPIF)
– Fixed Price with Economic Price Adjustment (FP‐EPA)
– Purchase order : simplest type of fixed‐price contract; unilateral (signed by one party)

• Cost‐reimbursable (CR) contracts
– Cost Plus Fixed Fee (CPFF) or Cost Plus Percentage of Cost (CPPC)
– Cost Plus Incentive Fee (CPIF) :
– Cost Plus Award Fee (CPAF)
– Cost Contract (No fee/profit e.g. contract in nonprofit organization)

• Ti
Time and Material Contracts (T&M)
d M t i l C t t (T&M)
Hybrid type of contractual arrangement that contain aspects of both cost‐reimbursable and fixed‐price contracts

Fixed‐price (FP) contracts
• Used for acquiring goods or services with well defined
specifications or requirements.
p q
• Seller is most concerned with the SOW
• Sometime the buyer forces seller to accept a high level risk
• Seller would need huge amount of reserves
• Seller can try to increase profit by cutting scope

• Examples:
– FP: Contract = $1M
– FPIF: Contract = $1M + for every month added $1000
– FPAF: Contract = $1M + for every month added $1000 if performance exceed
– FPEA: Contract = $1M + additional pricing based on Government Center Bank depreciation rate.
– PO: $1K per 1 metric ton
$ p

Cost Reimbursable (CR) contracts
• Used when work is uncertain and, therefore, costs
cannot be estimated accurately enough
cannot be estimated accurately enough
• Requires the seller to have an accounting system
that can track costs
that can track costs
• Buyer requires auditing seller’s invoice

• Example:
– CPF/CPPC: Contract = cost + fee (10% of cost)
CPF/CPPC: Contract = cost + fee (10% of cost)
– CPFF: Contract = cost + $1K
– CPIF: cost + additional fee based on performance
p
– CPAF: cost + additional fee bases on manager
satisfaction (performance criteria)

Time & Material (T&M) contracts
• Used for service  efforts in  which the  level of effort
cannot be defined  at the time the contract  is awarded
• To make sure the costs do not become higher  than
budgeted, the buyer may put a "Not to Exceed" and time
limits l
li it clause in the contract.
i th t t
• Often used for staff augmentation, acquisition of experts,
pp
outside support

• Example:
– Contract = $1K per day plus expenses or material cost.
– Contract = $1K per day plus material at $5 per linear meter of
Contract = $1K per day plus material at $5 per linear meter of
wood.

Contract Types vs. Risk
• Effect of contract type on buyer & seller risk

Low High
Fixed Price
FFP
FPIF
BUYER
SELLER
RISK Time and Materials
RISK
Cost Reimbursable
CPIF
CPFF
T&M can be a high risk for buyer
CPF if contract does not include a
“total not-to-exceed” (NTE)
CPPC
High Low

12.1.2  Plan Procurements – Outputs
p
• .1  Procurement Management Plan

• The procurement management plan describes how the
procurement processes will be managed from developing
procurement documents  through contract closure.
– The procurement management plan can include guidance for:
•  Types of contracts to be used;
•  Risk management  issues;
•  Whether independent estimates will be used and if they are needed as evaluation criteria;
•  Those actions the project management team can take  unilaterally, if the performing
o ga at o as a p esc bed p ocu e e t, co t act g, o pu c as g depa t e t;
organization has a prescribed procurement, contracting, or purchasing department;
Standardized procurement documents, if they are needed;
•  Managing multiple suppliers;
•  Coordinating procurement with other   project aspects, such   as scheduling and performance
reporting;
reporting

p
• .1  Procurement Management Plan (cont.)

•  Any constraints and assumptions that could affect  planned  procurements;
•  Handling the required lead times to purchase items from sellers and coordinating them with
the project schedule development;
•  Handling the make‐or‐buy decisions and linking them into the Estimate  Activity Resource   and
Develop Schedule processes;
•  Setting the scheduled dates in each  contract for the  contract deliverables and coordinating
with the schedule development and control  processes;
with the schedule development and control processes;
•  Identifying requirements for performance bonds or insurance contracts to mitigate  some forms
of project risk;
•  Establishing the direction to be provided to the sellers on developing and maintaining a work
breakdown structure (WBS);
breakdo n str ct re (WBS)
•  Establishing the form and format to be used for the procurement/contract statements of work;
•  Identifying prequalified sellers, if any, to be used; and
•  Procurement metrics to be used to manage contracts and evaluate  sellers.
g

p
.2 Procurement Statements of Work

• The statement of work (SOW) for each procurement is developed from the project scope baseline
• and deﬁnes only that portion of the project scope that is to be included within the related
contract.
• The procurement SOW describes the procurement item in sufficient detail to allow prospective
sellers to determine if they are capable of providing the products, services, or results. Sufficient
detail can vary based on the nature of the item, the needs of the buyer, or the expected contract
form.
• Information included in a SOW can include speciﬁcations, quantity desired, quality levels,
performance data, period of performance, work location, and other requirements

p

p
.3  Make‐or‐Buy Decisions

• Make‐or‐buy decisions document the conclusions reached regarding what
project products,  services, or results will be acquired from outside the project
organization, or will be performed internally by the project team.
organization or will be performed internally by the project team

• This may also include decisions to require insurance policies or performance
• bond contracts to address some of the identified risks.
b d dd f h id ifi d i k

• The make‐or‐buy decisions document can be as simple as a listing that
includes a short justification for the decisions.

• q p
These decisions can be altered as subsequent procurement activities indicate
a requirement for a different approach


.4  Procurement Documents
• May includes:
May includes:
– Information for Sellers
– Contract statement of  work
– Proposed terms & conditions of the contract
Proposed terms & conditions of the contract
– Non‐disclosure agreement (NDA) ‐‐ to disclose some confidential information

• Procurement documents, examples:
– Request for Information (RFI)
Procurement Contract Type
– Invitation For Bid (IFB)
( ) document
– Request For Proposal (RFP) RFP CR
– Request For Quotation (RFQ) IFB FP
– Tender notice RFQ T&M
– Invitation for negotiation
– Invitation for seller’s initial response

Procurement Document
• Letter of Intent (LOI)
– It is not a contract but a letter without legal binding that says the buyer
It is not a contract, but a letter without legal binding, that says the buyer
intends to hire seller.

• Privity of contract
of contract
– A contractual relationship
– Example:
You hired a contractor A, and the contractor hires another sub‐contractor B to
deliver part of your work. Even though B is performing your work, he/she is
contractually not bound to you, because B contractually bound to “A” only.
So you need to talk to A instead of B.
So you need to talk to A instead of B.

• Teaming Agreements (or a join venture)
– Two sellers join force for one procurement


.5 Source Selection Criteria

• Some criteria for evaluating proposals and bids (due diligence):
– Understanding of need
– Technical Capability
– Past performance of sellers (experience)
– Project management approach
– Financial stability & capacity
– Intellectual & property rights
– Overall or life cycle cost
– Risk
– Warranty
– References


.6 Change Requests

• Change requests (Section 4.3.3.3) to the project management
plan, its subsidiary plans and other components  may result
from the  Plan   Procurements process. Change requests  are
processed for review and disposition  through the Perform
g g p ( )
Integrated Change Control  process (Section 4.5).

Noncompetitive Form of Procurement

• Form used when only one seller awarded without a
competitive procurement.
p p
• Should keep follow rules of bidding process and laws
• Saving time on procurement process

• Would be implemented in the following condition:
– The project under schedule pressure
p j p
– A seller has unique qualification
– There is only one seller
– A seller hold a patent
– Other mechanism exist that seller s prices are reasonable.
Other mechanism exist that seller’s prices are reasonable.

• Type of noncompetitive procurement
– Single source: contract directly to preferred seller.
– Sole source: there is one seller; might be a company owns a patent

Important Terms
• Price, Profit (fee), Cost
• Target price: used to compare the end result of the
Target price: used  to compare the end result of the
project with what was expected (the target price).
• Sharing ratio: Incentives take the form of a formula
Sharing  ratio: Incentives  take the form of a formula,
usually expressed as a ratio, e.g. 90/10 (buyer/seller)
• Ceiling price: This is the highest price the buyer will
Ceiling price: This  is the highest price the buyer will
pay.
• Point of total assumption (PTA):
Point of total assumption (PTA):
– This only applies to fixed price incentive  fee contracts
– Refers to the amount above which the seller bears all the loss of a cost overrun.
– Seller usually monitor actual costs against PTA to make still having profit.
y g gp
– Formula:

PTA =  ((Ceiling  price ‐ Target price)/Buyer's  share ratio) + Target cost

Exercise: Contract Calculation
In this cost plus incentive  fee contract, the cost  is estimated  at $210,000
and the fee at $25,000. The project is over, and the buyer has agreed that
the costs were, in fact, $200,000. Because  the seller's costs came in lower
h i f $200 000 B h ll ' i l
than  the estimated  costs, the seller shares  in the savings: 80 percent to
the buyer and 20 percent to the seller. Calculate the final  fee and final
price.
price
Target cost 210,000
Target fee 25,000
Target price 235,000
Sharing Ratio 80/20
Actual cost 200,000
200 000
Final fee 210,000 – 200,000 = 10,000
10,000 x 20% = 2,000
25,000 (target fee) + 2,000 = 27,000
5,000 ( a ge ee) ,000 ,000
Final price 200,000 + 27,000 = 227,000

12.2 Conduct Procurement

• Conduct Procurements is the process of obtaining seller
responses, selecting a seller, and awarding a contract.
p , g , g

• In this process, the team will receive bids or proposals and will
apply previously defined selection criteria to select one or
more sellers who are qualified to perform the work and
p
acceptable as a seller.

• A short list of qualified sellers can be established based on a
preliminary proposal.

12.2.1  Conduct Procurement ‐ Inputs

.1  Project Management Plan
.3  Source Selection Criteria
.4 Qualified Seller List
.5  Seller Proposals
.6 Project Documents
.7  Make‐or‐Buy   Decisions
.8  Teaming Agreements
.9  Organizational Process  Assets
9 O i ti lP A t

12.2.2 Conduct Procurements: Tools and Techniques

.1  Bidder  Conferences
• Bidder conferences (sometimes called contractor
Bidder   conferences  (sometimes   called   contractor
conferences, vendor  conferences, and pre‐ bid conferences)
are meetings with all prospective sellers   and buyers prior to
submittal of a bid or proposal. They are used to ensure that all
b itt l f bid l Th dt th t ll
prospective sellers have a clear and common understanding of
the  procurement (both  technical and contractual
requirements), and that  no bidders   receive preferential
treatment.  Responses to questions can be incorporated into
the  procurement documents as amendments. To be fair,
the procurement documents as amendments. To be fair,
buyers must take great  care to ensure that all prospective
sellers hear every question from any individual prospective
seller  and every answer from the buyer.
seller and every answer from the buyer


.2 Proposal Evaluation Techniques

• On  complex  procurements, where source selection  will be
made based on seller responses to previously defined
weighted criteria,  a formal evaluation review process will be
defined by the buyer’s procurement policies. The evaluation
pp y
committee will make their  selection for approval by
management prior to the award.

Proposal Evaluation (Tools & Techniques)
Proposal Evaluation or Bid or Price Quote
One or a combination of following process used
b f f ll d
for selecting seller:

– Weighting system
Evaluate by weighting the source selection criteria
E l t b i hti th l ti it i

– Independent estimate
Estimation created in‐house or with outside assistance

– Screening system
Eliminate sellers who do no meet minimum requirement

–P
Past performance history
f hi


.3  Independent  Estimates

• For  many  procurement   items,  the   procuring organization
may  elect   to  either  prepare  its own independent  estimate,
or have an  estimate  of costs    prepared by an  outside
professional estimator, to serve as a benchmark on proposed
p g
responses. Significant differences in cost  estimates  can be  an
indication  that  the  procurement statement  of work was
deficient,  ambiguous, and/ or that the  prospective sellers
either misunderstood   or failed to respond fully to the
either misunderstood or failed to respond fully to the
procurement statement of work.

• .4 Expert Judgment


.5  Advertising

• Existing lists of potential  sellers can often be expanded  by
placing advertisements  in general circulation  publications
such    as  selected newspapers   or in specialty  trade
publications.  Some government  jurisdictions require public
g yp p ,
advertising of certain types of procurement items, and most
government jurisdictions require public advertising of pending
government  contracts.


.6 Internet Search

• The internet has a major influence on most project
procurements  and supply chain acquisitions in organizations.
While  many commodities, components, and off‐the‐shelf‐
items can be quickly located and secured at a fixed‐price on
, g , g y p ,p
the internet,  the high‐risk, highly complex, procurement effort
that must be closely monitored  cannot be obtained by this
means.


.7  Procurement Negotiations

• Negotiations clarify the structure, requirements and other
terms of the purchases so that mutual agreement can be
reached prior to signing the contract. Final contract language
reflects all agreements reached. Subjects covered should
p , y g , pp
include responsibilities, authority to make changes, applicable
terms and governing law, technical, and business management
approaches, proprietary rights,  contract financing, technical
solutions, overall  schedule, payments, and price. Negotiations
solutions overall schedule payments and price Negotiations
conclude with a contract document  that can be executed by
both  buyer  and seller.

Procurement Negotiations
• PM may be involved during negotiation to clarify
requirement, protect relationship.
requirement protect relationship

• Objective of negotiation:
Objective of negotiation:
– Obtain fair and reasonable price
– Develop good relationship with the seller

• Main items to negotiate:
– Scope
– Schedule
– Price & payment
– Responsibilities
– Authority
– Applicable law
– Technical & business management approaches
– Contract financing

12.2.3 Conduct Procurements: Outputs

.1  Selected Sellers

• The  sellers selected are those sellers who have been judged to
be in a competitive range based upon the outcome of the
proposal or bid evaluation, and who have negotiated a draft
contract that will become the actual contract when   an award
is made. Final approval of all complex, high‐value, high‐ risk
pp p , g , g
procurements will generally  require organizational senior
management approval prior to award.


.2 Procurement Contract Award

• A  procurement contract is awarded to each selected seller.
The  contract can  be  in the form of simple purchase order or
a complex document. Regardless of the document’s
complexity, a contract is a mutually binding legal agreement
g p p p
that obligates the seller to provide the specified products, ,
services, or results, and obligates  the buyer to compensate
the seller. A contract is a legal relationship subject to remedy
in the courts. The major components in a contract document
in the courts The major components in a contract document
will vary, but will sometimes include the following:


• Statement of work or deliverables,
• Schedule baseline,
Schedule baseline,
• Performance reporting,
• Period of performance,
• Roles and responsibilities,
• Seller’s place of performance,
• Pricing,
• Payment terms,
• Place of delivery,
Pl f d li
• Inspection and acceptance criteria,
• Warranty,
Warranty


• Product support,
• Limitation of liability,
Limitation of liability,
• Fees and retain age,
• Penalties,
• Incentives,
• Insurance and performance bonds,
• Subordinate subcontractor approvals,
• Change request handling, and
• Termination and alternative dispute  resolution (ADR)
T i ti d lt ti di t l ti (ADR)
mechanisms. The  ADR method  can be decided in advance as
a part of the  procurement award.


.3  Resource Calendars
• The quantity and availability of contracted resources and
The quantity  and availability of contracted  resources and
those dates  on which   each specific resource can be  active
or idle are documented.

.4 Change Requests
.5  Project Management Plan Updates
5 Project Management Plan Updates
.6 Project Document Updates

Contract Document
• Purpose of contract:
– To define role and responsibilities
p
– To make things legally binding
– To mitigate or allocate risks.

• Contract has many names and types from simple to
complex document
– Agreement subcontract purchase order memorandum of understanding (MOU)
Agreement, subcontract, purchase order, memorandum of understanding (MOU)

• A legal contract will need..
– An offer
– Acceptance
– Consideration (Something of value, not necessary money)
– Legal capacity (Separate legal parties, competent parties)
Legal capacity (Separate legal parties competent parties)
– Legal purpose (We cannot have a contract for something illegal)

Contract Document
• Contract document usually includes:
– Statement of work or deliverables
Statement of work or deliverables
– Schedule baseline
– Performance reporting
– Period of performance
Period of performance
– Role & responsibilities
– Seller’s place of performance
– Pricing
– Payment terms
– Place of delivery
– Inspection and acceptance criteria
Inspection and acceptance criteria
– Warranty

Administer Procurements

• Administer  Procurements  is the   process of managing
p
procurement  relationships, monitoring  contract performance,
p, g p ,
and making changes and corrections as needed.

• Both the buyer and the seller will administer the
procurement contract for similar purposes.

• Each must ensure that both parties meet their contractual
obligations and that their own legal rights are protected.

• The Administer Procurements process ensures that the
seller’s performance meets procurement requirements and
seller’s performance meets procurement requirements and
that the buyer performs according to the terms of the legal
contract.

Administer Procurements

• The legal nature of the contractual relationship makes it
imperative that the project management team is aware of the
p p j g
legal implications of actions taken when administering any
procurement.

• On larger projects with multiple providers, a key aspect of
g g g
contract administration is managing interfaces among the
various providers.

12.3.1 Administer Procurements : Inputs


• Procurement documents contain complete supporting records
for administration of the procurement processes.
• This includes procurement contract awards and the statement
of work.

.3  Contract
.3 Contract
.4 Performance Reports
.5  Approved Change Requests
.6 Work Performance Information

12.3.2 Administer Procurements : Tools and Techniques

.1  Contract Change Control System

• A contract change control system defines the process by which
the procurement can be modified.

• It includes the paperwork, tracking systems, dispute resolution
procedures, and approval levels necessary for authorizing
procedures and approval levels necessary for authorizing
changes.

• The contract change control  system is integrated with the
integrated  change control system.


.2 Procurement Performance Reviews
• A procurement performance review is a structured review of the seller’s
p p
progress to deliver project scope and quality, within cost and on schedule,
as compared to the contract.

• It can include a review of seller‐prepared documentation and buyer
inspections, as well as quality audits conducted during seller’s execution of
the work.

• The objective of a performance review is to identify performance successes
or failures, progress with respect to the procurement statement of work,
or failures, progress with respect to the procurement statement of work,
and contract non‐compliance, which allow the buyer to quantify the
seller’s demonstrated ability or inability to perform work.

• Such reviews may take place as a part of project status reviews which
would include key suppliers.


.3  Inspections and Audits

• Inspections and audits required by the buyer and supported by
the seller as specified in the procurement contract can  be
conducted during execution of the  project to verify
compliance in the seller’s work processes or deliverables.

• If authorized by contract, some inspection and audit teams can
include buyer procurement personnel.


.4 Performance Reporting
• Performance reporting provides management with
Performance reporting provides management with
information about how effectively  the seller is achieving the
contractual objectives.

• .5  Payment Systems
• Payments to the seller are typically processed by the accounts
Payments to the seller are typically processed by the accounts
payable system of the buyer after certification of satisfactory
work by an authorized person on the project team. All
payments should be made and documented in strict
accordance with the terms of the contract.


• 6 Claims Administration

• Contested changes and potential constructive changes are those requested changes
where the buyer and seller cannot reach an agreement on compensation for the
change, or cannot agree that a change has occurred.

• These contested changes are variously called claims, disputes, or appeals. Claims
are documented, processed, monitored, and managed throughout the contract life
cycle, usually in accordance with the terms of the contract.

• If the parties themselves do not resolve a claim, it may have to be handled in
accordance with alternative dispute resolution (ADR) typically following procedures
d ith lt ti di t l ti (ADR) t i ll f ll i d
established in the contract.

• Settlement of all claims and disputes through negotiation is the preferred method.
Settlement of all claims and disputes through negotiation is the preferred method


.7 Records Management System

• A records management system is used by the project manager
to manage contract and procurement documentation and
records.

• It consists of a specific set of processes related control
It consists of a specific set of processes, related control
functions, and automation tools that are consolidated and
combined as part of the project management information
system

• The system contains a retrievable archive of contract
The system contains a retrievable archive of contract
documents and correspondence.

12.3.3 Administer Procurements : Outputs

.1   Procurement Documentation

• Procurement  documentation includes, but is not limited to,
the  procurement contract with all supporting schedules,
requested unapproved   contract  changes, and approved
change  requests.

• Procurement documentation also includes any seller‐
developed technical documentation and other work
performance information such  as deliverables, seller
performance reports, warranties, financial documents
g p y ,
including invoices and payment records, and the results of
contract‐related inspections.

12.3.3 Administer Procurements : Outputs

.2 Organizational Process Assets Updates
.3 Change Requests
.3 Change Requests
.4 Project Management Plan Updates

Close Procurements

• Close Procurements   is the  process of completing  each
p j p
project procurement.

• It supports the Close Project  or Phase process, since it
involves verification  that all work and deliverables  were
acceptable.

12.4.1 Close Procurements : Inputs


• To close the contract, all procurement documentation is
collected, indexed, and filed. Information on contract
schedule, scope, quality, and cost performance along  with all
contract change documentation, payment  records, and
contract change documentation payment records and
inspection  results are cataloged.

• This information can be used for lessons learned  information
and as a basis for evaluating contractors for future contracts.

12.4.2 Close Procurements : Tools and Techniques

.1 Procurement Audits

• A procurement audit is a structured review of the
procurement process originating from the Plan Procurements
process through Administer Procurements.

• The objective of a procurement audit is to identify successes
The objective of a procurement audit is to identify successes
and failures that warrant recognition in the preparation or
administration of other procurement contracts on the project,
or on other projects within the performing organization.

12.4.2 Close Procurements : Tools and Techniques

.2 Negotiated Settlements

• In all procurement relationships the final equitable  settlement
of all outstanding issues, claims, and disputes by negotiation is
a primary goal. Whenever settlement cannot be achieved
through direct negotiation, some form of alternative dispute
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resolution (ADR) including mediation or arbitration may be
explored.

• When all else fails, litigation in the courts  is the least desirable
option.
.3  Records Management System
3 Records Management System

12.4.3 Close Procurements : Outputs

.1  Closed Procurements
• The buyer, usually through its authorized procurement
The buyer, usually through its authorized procurement
administrator, provides the seller with formal written notice
that the  contract has been  completed.

• Requirements for formal procurement closure are usually
defined in the terms and conditions of the  contract and are
defined in the terms and conditions of the contract and are
included in the procurement management plan.

.2 Organizational Process  Assets Updates

Terms to conditions (A)
• ACCEPTANCE
The act of accepting by an authorized representative; an indication of a willingness to pay; the assumption of a legal
obligation by a party to the terms and conditions of a contract.
• ACQUISITION
The act of acquiring goods and services (including construction) for the use of a governmental activity through purchase, rent,
or lease. Includes the establishment of needs, description of requirements, selection of procurement method, selection of
sources, solicitation of procurement, solicitation for offers, award of contract, financing, contraction administration, and
related functions.
• ADDENDUM
An addition or supplement to a document; e.g., items or information added to a procurement document.
• ADVERTISE
To make a public announcement of the intention to purchase goods, services or construction with the intention of increasing
the response and enlarging the competition. The announcement must conform to the legal requirements imposed by
established laws, rules, policies and procedures to inform the public.
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• AGREEMENT
A duly executed and legally binding contract; the act of agreeing.
• ALP
Authority for Local Purchase: granted by the commissioner of Administration to an individual who has successfully completed
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all requirements established by the Materials Management Division.
• ALTERNATE RESPONSE
A substitute response; an intentional substantive variation to a basic provision or clause of a solicitation by a vendor.
• AMENDMENT/CHANGE ORDER
A written modification to a contract or purchase order or other agreements.
• APPROPRIATION
Sum of money from public funds set aside for a specific purpose.
• ARO
After Receipt of Order.

Terms to conditions (B)
• BEST VALUE
A result intended in the acquisition of all goods and services. Price must be one of the evaluation criteria when acquiring
goods and services. Other evaluation criteria may include, but are not limited to environmental considerations, quality, and
vendor performance.
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• BILL OF LADING
A written receipt or contract, given by a carrier, showing a list of goods delivered to it for transportation. The straight bill of
lading is a contract which provides for direct shipment to a consignee. The order bill of lading is negotiable; it enables a
shipper to collect for a shipment before it reaches its destination (this is done by sending the original bill of lading with a draft
drawn on the consignee through a bank). When the consignee receives the lading indicating that payment has been made,
the lading will be surrendered to the carrier's agent, and the carrier will then ship the goods to the consignee, and the bill of
lading will be surrendered to the carrier. Note: Shippers frequently consign shipments to themselves on order bills of lading so
that delivery is made only upon the shipper's order; the person or firm to be notified upon arrival of the shipment at
destination must be designated.
• BLANKET ORDER
A contract under which a vendor agrees to provide goods or services on a purchase‐on‐demand basis. The contract generally
establishes prices, terms, conditions and the period covered (no quantities are specified); shipments are to be made as
required by the purchaser.
• "BRAND NAME OR EQUAL" SPECIFICATION
A specification that uses one or more manufacturers brand names or catalog numbers to describe the standards of quality,
performance and other characteristics needed to meet the requirements of a solicitation and provide for the submission of
f d h h i i d d h i f li i i d id f h b i i f
equivalent products.
• BROKER
A business that carries no inventory and that has no written ongoing agreement with any manufacturer or manufacturer's
authorized distributor to sell the products of the manufacturer.
• BUSINESS
A contractor, subcontractor, supplier, consultant, or provider of technical, administrative, or physical services organized as a
sole proprietorship, partnership, association, corporation, or other entity formed for the purpose of doing business for profit.

Terms to conditions (C)
• COMMODITY
A transportable article of trade or commerce that can be bartered or sold.
• COMMODITY/SERVICE CONTRACT
Previously referred to as M‐contracts. Since the inception of MAPS the contract number is a six‐digit number assigned by
Previously referred to as "M‐contracts " Since the inception of MAPS, the contract number is a six‐digit number assigned by
the computer system. An "M" number is no longer assigned for these types of contracts.
• COMPREHENSIVE PROCUREMENT GUIDELINES (CPG)
Designates items that must contain recycled content when purchased by federal, state, and local agencies, or by contractors
using appropriated federal funds, when these agencies spend more than $10,000 a year on any of the designated items. For
example, if a state agency spends more than $10,000 a year on copy paper, and part of that money is from appropriated
example, if a state agency spends more than $10,000 a year on copy paper, and part of that money is from appropriated
federal funds, then that state agency must follow the EPS guidelines and buy 30 percent post‐consumer recycled paper.
(Section 6002 of the Resource Conservation and Recovery Act [RCRA] and Presidential Executive Order 13101.)
• CONSIDERATION
Something of value given or done as recompense that is exchanged by two parties; that which binds a contract.
• CONTRACT
Any written instrument or electronic document containing the elements of offer, acceptance, and consideration to which an
agency is a party.
• CONTRACT ADMINISTRATION
The management of all actions after the award of a contract that must be taken to assure compliance with the contract; e.g.,
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timely delivery, acceptance, payment, closing contract, etc.
• CONTRACTOR
A person who agrees to furnish goods or services for a certain price; may be a prime contractor or subcontractor.
• COOPERATIVE PURCHASING
The combining of requirements of two or more governmental units to obtain the benefits of volume purchases and/or
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reduction in administrative expenses.
• COOPERATIVE PURCHASING VENTURE (CPV)
A joint purchasing program designed by the State of Minnesota where governmental units obtain the benefits of volume
purchasing and/or reduction in administrative expenses by participating in the program and purchasing from existing State of
Minnesota commodity contracts.

Terms to conditions (D)
• DEALER, JOBBER OR DISTRIBUTOR
A business that maintains a store, warehouse, or other establishment in which a line or lines of products are kept in inventory
and are sold to the public on a wholesale or retail basis.
• DEBARMENT
The disqualification of a person to receive invitations for bids or requests for proposals, or the award of a contract by a
government body, for a specified time commensurate with the seriousness of the offense, the failure, or the inadequacy of
performance.
• DEFAULT
Failure by a party to a contract to comply with contractual requirements.
Failure by a party to a contract to comply with contractual requirements.
• DELIVERY
The formal handing over of property; the transfer of possession, such as by carrier to purchaser.
• DEMURRAGE
The detention of a ship, railroad, car or truck beyond a specified time for loading/unloading; the payment required and made
for the delay.
for the delay.
• DESIGN SPECIFICATION
A specification setting forth the required characteristics to be considered for award of contract, including sufficient detail to
show how the product is to be manufactured.
• DESTINATION
The place to which a shipment is consigned.
The place to which a shipment is consigned
• DOCUMENT TYPE
MAPS Procurement uses document type to differentiate among different functions for a requisition, solicitation, contract, or
order. The document type is a field to be entered on those screens that are for requisition solicitation, contract, or order.
• DROP SHIPMENT
Merchandise which is shipped by a manufacturer directly to a customer in response to the seller who collects orders but does
Merchandise which is shipped by a manufacturer directly to a customer in response to the seller who collects orders but does
not maintain an inventory.

Terms to conditions (E)
• ECONOMICALLY DISADVANTAGED AREA BUSINESS (ED)
Small business eligible for certification as socially disadvantaged business or economically disadvantaged area business: A
small business entity with its principal place of business in Minnesota organized for profit, including an individual,
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partnership, corporation, joint venture, association, or cooperative that is 51 percent owned and is operationally controlled
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on a day‐to‐day basis by citizens of the United States. The areas of economic disadvantage are determined by the US
Department of Labor.
• EMERGENCY ACQUISITION
A threat to public health, welfare, or safety that threatens the functioning of government, the protection of property or the
health or safety of people.
• ENERGY STAR
A federal standard applied to office equipment for the purpose of rating the energy efficiency of the equipment. Energy Star
computers, monitors, and printers save energy by powering down and going to "sleep" when not in use, resulting in a
reduction in electrical bills and pollution levels.
• ENVIRONMENTALLY PREFERABLE PRODUCT (EPP) ( )
A product or service that has a lesser or reduced impact on human health and the environment when compared with
competing products or services that serve the same purpose. Such products or services may include, but are not limited to
those which contain recycled content, minimize waste, conserve energy or water, and reduce the amount of toxics either
disposed of or consumed.
• EQUAL OR APPROVED EQUAL
Used to indicate that an item may be substituted for a required item if it is equal in quality, performance and other
characteristics.
• ESCALATION CLAUSE
A contract provision which permits the adjustment of contract prices by an amount or percent if certain specified
contingencies occur, such as changes in the vendor's raw material or labor costs.
• EVALUATION OF RESPONSES
The examination of responses after opening to determine the vendor's responsibility, responsiveness to requirements, and
other characteristics of the solicitation relating to the award.

Terms to conditions (F‐J)
• FISCAL YEAR
The 12 months between one annual settlement of financial accounts and the next; a term used for budgeting, etc. The fiscal
year for the U.S. Government is October 1 to September 30; the fiscal year for the State of Minnesota is July 1 to June 30.
• FIXED ASSETS
FIXED ASSETS
State property that is in one of four categories:
– all non‐expendable property having a normal life expectancy of more than two years and a value of $2,000 or more.
– all semi‐expendable property established by the owning agency's policy as fixed assets: any item having a normal life expectancy of more than two years and a value of less than
$2,000.
– all firearms, regardless of their value.
– all sensitive items, as established by the agency policy.

• FORMAL SOLICITATION
A solicitation which requires a sealed response.
• GOODS
All types of personal property including commodities, materials, supplies, and equipment.
• HAZARDOUS WASTE
Any waste (solid, liquid, or gas) which because of its quantity, concentration, or chemical, physical, or infectious
characteristics pose a substantial present or potential hazard to human health or the environment when improperly treated,
stored, transported, or disposed of.
• INFORMAL SOLICITATION
A solicitation which does not require a sealed response.
• INSURANCE
A contract between an insurance company and a person or group which provides for a money payment in case of covered
loss, accident or death.
• INVOICE
A list of goods or services sent to a purchaser showing information including prices, quantities and shipping charges for
payment.
• JOINT VENTURE
The temporary association of two or more businesses to secure and fulfill a procurement bid award.

Terms to conditions (L)
• LABOR SURPLUS AREA
A civil jurisdiction designated by the U.S. Department of Labor, usually updated annually in the late fall. Used as one of the
criteria for designating economically disadvantaged (ED) vendors.
• LEAD TIME
LEAD TIME
The time that it would take a supplier to delivery goods after receipt of order.
• LEASE
A contract conveying from one entity to another the use of real or personal property for a designated period of time in return
for payment or other consideration.
• LESS‐THAN‐TRUCKLOAD (LTL)
LESS‐THAN‐TRUCKLOAD (LTL)
A quantity of freight less than the amount necessary to constitute a truckload.
• LESSEE
One to whom a lease is granted.
• LESSOR
One who grants a lease.
One who grants a lease
• LIFE CYCLE COSTING
A procurement evaluation technique which determines the total cost of acquisition, operation, maintaining and disposal of
the items acquired; the lowest ownership cost during the time the item is in use.
• LINE ITEM
An item of supply or service specified in a solicitation for which the vendor must specify a separate price.
An item of supply or service specified in a solicitation for which the vendor must specify a separate price
• LIQUIDATED DAMAGES
A specific sum of money, agreed to as part of a contract to be paid by one party to the other in the event of a breach of
contract in lieu of actual damages, unless otherwise provided by law.
• LIST PRICE
The price of an article published in a catalog, advertisement or printed list from which discounts, if any, may be subtracted.
The price of an article published in a catalog advertisement or printed list from which discounts if any may be subtracted
• LOWEST RESPONSIBLE VENDOR
The vendor with the lowest price whose past performance, reputation and financial capability is deemed acceptable.

Terms to conditions (M)
• MANDATORY
Required by the order stipulated, e.g., a specification or a specific description that may not be waived.
• MAPS
The Minnesota Accounting and Procurement System. Quite often MAPS or AGPS is referred to when speaking of the
The Minnesota Accounting and Procurement System Quite often MAPS or AGPS is referred to when speaking of the
Procurement side of the system and GFS is referred to when speaking of the accounting side.
• MANUFACTURER
A business that makes or processes raw materials into a finished product.
• MARKET
The aggregate forces (including economics) at work in trade and commerce in a specific service or commodity. To sell,
The aggregate forces (including economics) at work in trade and commerce in a specific service or commodity To sell
analyze, advertise, package, etc.
• MATERIAL VARIANCE/MATERIAL DEVIATION
A variance or deviation in a response from specifications of conditions that allows a responder a substantial advantage or
benefit not enjoyed by all other responders or that gives the state something significantly different from what the state
requested in the solicitation document.
requested in the solicitation document.
• MATERIALS MANAGEMENT
Embraces all functions of acquisition, standards, quality control and surplus property management.
• MODEL PROCUREMENT CODE (MPC)
A publication approved by the American Bar Association which sets forth procurement statutory principles and policy
guidelines for managing and controlling the procurement of supplies, services and construction for public purposes;
guidelines for managing and controlling the procurement of supplies services and construction for public purposes;
administrative and judicial remedies for the resolution of controversies relating to public contracts; and a set of ethical
standards governing public and private participants in the procurement process.
• MULTIPLE AWARD
Contracts awarded to more than one supplier for comparable supplies and services. Awards are made for the same generic
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types of items at various prices.

Terms to conditions (N)
• NAICS (NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM) CODE [FORMERLY KNOWN AS SIC (STANDARD INDUSTRIAL
CLASSIFICATION) CODE]
Classification of business established by type of activity for the purpose of facilitating the collection, tabulation, presentation,
and analysis of data collected by various agencies of the United States government, state agencies, trade associations, and
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private research organizations for promoting uniformity and comparability in the presentation of statistical data relating to
those establishments and their fields of endeavor.
• NAPM
National Association of Purchasing Management. A nonprofit educational and technical organization of purchasing and
materials management personnel and buying agencies from the public and private sectors.
• NASPO
National Association of State Purchasing Officials. An organization of state procurement representatives for the purpose of
promoting efficient and effective public purchasing policies and procedures at the state level. NASPO is an affiliate of the
Control of State Governments (CSG).
• NEGOTIATION
Requests for proposals are sometimes used as a starting point for negotiations to establish a contract. RFPs generally include
more than just price considerations. This method is especially applicable when dealing with a single source manufacturer.
• NET PRICE
Price after all discounts, rebates, etc., have been allowed.
• NIGP
National Institute of Governmental Purchasing. A nonprofit, educational and technical assistance corporation of public
purchasing agencies and activities at the federal, state and local levels of government.
• NO BID
A response to a solicitation for bids stating that respondent does not wish to submit an offer. It usually operates as a
procedure consideration to prevent suspension from the vendors list for failure to submit a response.

Terms to conditions (O‐P)
• OPEN MARKET REQUISITION (OMR)
The requisition document type used in MAPS Procurement to request the purchase of a non‐contract item when the
requested item's estimated cost exceeds the authority for purchase level of the buyer. An OMR conveys the request for
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purchase to the person with the authority to purchase. The resulting order type is most often the Purchase Order Requisition
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(POR).
• OPTION TO EXTEND/RENEW
A provision (or exercise of a provision) which allows a continuance of the contract for an additional time according to
permissible contractual conditions.
• OSHA
The Occupational Safety and Healt
• PACKING LIST
A document which itemizes in detail the contents of a particular package or shipment.
• PARTIAL PAYMENT
The payment authorized in a contract upon delivery of one or more units called for under the contract or upon completion of
The payment authorized in a contract upon delivery of one or more units called for under the contract or upon completion of
one or more distinct items of service called for thereunder.
• PER DIEM
By the day.
• PERFORMANCE BOND
A contract of guarantee, executed subsequent to award by a successful vendor to protect the buyer from loss due to the
A contract of guarantee executed subsequent to award by a successful vendor to protect the buyer from loss due to the
vendor's inability to complete the contract as agreed.
• PERFORMANCE SPECIFICATION
A specification setting forth performance requirements determined necessary for the item involved to perform and last as
required.
• PLANT‐MATTER BASED OR BIO‐BASED PRODUCT
PLANT‐MATTER BASED OR BIO‐BASED PRODUCT
A product derived from renewable resources, including fiber crops, such as kenaf; chemical extracts from oilseeds, nuts, fruits
and vegetables (such as corn and soybeans); agricultural residues, such as wheat straw and corn stover; and wood wastes
generated from processing and manufacturing operations. These products stand in contrast to those made from fossil fuels
(such as petroleum) and other less renewable resources (such as virgin timber).

Terms to conditions (P)
• POINT OF ORIGIN
(shipping point)
The location where a shipment is received by a transportation line from the shipper.
• POLITICAL SUBDIVISION
POLITICAL SUBDIVISION
A subdivision of a state which has been delegated certain functions of local government. Can include counties, cities, towns,
villages, hamlets, boroughs and parishes.
• POST‐CONSUMER MATERIAL
A finished material which would normally be disposed of as a solid waste after its life cycle as a consumer item is completed.
Does not include manufacturing or converting wastes. This refers to material collected for recycling from office buildings,
Does not include manufacturing or converting wastes. This refers to material collected for recycling from office buildings,
homes, retail stores, etc.
• PRE‐CONSUMER MATERIAL
Material or by‐products generated after the manufacture of a product but before the product reaches the consumer, such as
damaged or obsolete products. Pre‐consumer material does not include mill and manufacturing trim, scrap, or broken
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material which is generated at a manufacturing site and commonly reused on‐site in the same or another manufacturing g
process.
• PREFERENCE
An advantage in consideration for award for a contract granted to a vendor by reason of the vendor's residence, business
location, or business classifications (e.g., minority, small business).
• PREPAID
A term denoting that transportation charges have been or are to be paid at the point of shipment.
• PREQUALIFICATION OF VENDORS
The screening of potential vendors in which such factors as financial capability, reputation and management are considered
when developing a list of qualified vendors. See Vendors List, Qualified Vendor/Responsible Vendor.

Terms to conditions (P)
• PRICE
The amount of money that will purchase a definite weight or other measure of a commodity.
• PRICE AGREEMENT
A contractual agreement in which a purchaser contracts with a vendor to provide the purchaser s requirements at a
A contractual agreement in which a purchaser contracts with a vendor to provide the purchaser's requirements at a
predetermined price. Usually involves a minimum number of units, orders placed directly with the vendor by the purchase,
and limited duration of the contract. See Blanket Order and Requirements Contract.
• PRICE FIXING
Agreement among competing vendors to sell at the same price.
• PROCUREMENT
The combined functions of purchasing, inventory control, traffic and transportation, receiving, inspection, store keeping, and
salvage and disposal operations.
• PROPRIETARY
The only items that can perform a function and satisfy a need. This should not be confused with "single source." An item can
be proprietary and yet available from more than one source. For example, if you need a camera lens for a Nikon camera, the
be proprietary and yet available from more than one source. For example, if you need a camera lens for a Nikon camera, the
only lens that will fit is a Nikon lens, thus, this lens is "proprietary." However, the Nikon lens is available from more than one
source, thus, it is not single source.
• PUBLIC PURCHASING
The process of obtaining goods and services for public purpose following procedures implemented to protect public funds
from being expended extravagantly or capriciously.
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• PURCHASE MANUAL
A document that stipulates rules and prescribes procedures for purchasing with suppliers and other departments.
• PURCHASE ORDER
The signed written acceptance of the offer from the vendor. A purchase order serves as the legal and binding contract
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between both parties.

Terms to conditions (Q)
• QUALIFIED VENDOR/RESPONSIBLE VENDOR
A vendor determined by a buying organization to meet minimum set standards of business competence, reputation, financial
ability and product quality for placement on the vendor list.
• QUALIFIED PRODUCTS LIST (QPL)
QUALIFIED PRODUCTS LIST (QPL)
A list of products that, because of the length of time required for test and evaluation, are tested in advance of procurement to
determine which suppliers comply with the specification requirements. Also referred to as an "approved brands list."
• QUALITY
The composite of material attributes, including performance features and characteristic, of a product or service to satisfy a
given need.
given need.
• QUANTITY
Amount or number.
• QUANTITY DISCOUNT
A reduction in the unit price offered for large volume contracts.
• RECYCLED CONTENT
RECYCLED CONTENT
The portion of a product that is made from materials directed from the waste stream; usually stated as a percentage by
weight.
• RECYCLED PRODUCT
A product that contains the highest amount of post‐consumer material practicable, or when post‐consumer material is
impracticable for a specific type of product, contains substantial amounts of pre consumer material.
impracticable for a specific type of product contains substantial amounts of pre‐consumer material
• REMANUFACTURED PRODUCT
Any product diverted from the supply of discarded materials by refurbishing and marketing said product without substantial
change to its original form.
• RENT
A rental contract giving the right to use real estate or property for a specified time in return for rent or other compensation.
A rental contract giving the right to use real estate or property for a specified time in return for rent or other compensation

Terms to conditions (R)
• REQUEST FOR BID (RFB)
A solicitation in which the terms, conditions, and specifications are described and responses are not subject to negotiation.
• REQUEST FOR PROPOSAL (RFP)
A solicitation in which it is not advantageous to set forth all the actual, detailed requirements at the time of solicitation and
A solicitation in which it is not advantageous to set forth all the actual detailed requirements at the time of solicitation and
responses are subject to negotiation. Price must be a factor in the award but not the sole factor.
• REQUIREMENT
Materials, personnel or services needed for a specific period of time.
• REQUIREMENTS CONTRACT
A form or contract that is used when the total long‐term quantity required cannot be definitely fixed, but can be stated as an
A form or contract that is used when the total long term quantity required cannot be definitely fixed but can be stated as an
estimate or within maximum and minimum limits with deliveries on demand.
• REQUISITION
An internal document that a functional department (stores, maintenance, production, etc.) sends to the purchasing
department containing details of materials to meet its needs, replenish stocks or obtain materials for specific jobs or
contracts.
contracts.
• RESIDENT VENDOR
A person, firm, or corporation authorized to conduct business in the State of Minnesota on the date a solicitation for a
contract is first advertised or announced. It includes a foreign corporation duly authorized to engage in business in
Minnesota.
• RESPONDER
One who submits a response to a solicitation document.
• RESPONSE
The offer received from a vendor in response to a solicitation. A response includes submissions commonly referred to as
"offers," "bids," "quotes," or "proposals."
• RESPONSIBLE BIDDER
RESPONSIBLE BIDDER
A bidder whose reputation, past performance, and business and financial capabilities are such that the bidder would be
judged by an appropriate authority as capable of satisfying an organization's needs for a specific contract.

Terms to conditions (R‐S)
• RESTRICTIVE SPECIFICATIONS
Specifications that unnecessarily limit competition by eliminating items capable of satisfactorily meeting actual needs. See
Performance Specification.
• REUSED PRODUCT
REUSED PRODUCT
Any product designed to be used many times for the same or other purpose without additional processing other than specific
requirements, such as cleaning, painting or minor repairs.
• RFP OR RFB CONFERENCE
A meeting arranged by a procurement office to help potential bidders understand the requirements of an RFB or an RFP.
• SALES TAX
SALES TAX
A levy on a vendor's sale by an authorized level of government.
• SEALED
A method determined by the commissioner to prevent the contents being revealed or known before the deadline for
submission of responses.
• SERVICES
Unless otherwise indicated, both professional or technical services and service performed under a service contract.
• SINGLE SOURCE
An acquisition where, after a search, only one supplier is determined to be reasonably available for the required product,
service or construction item.
• SMALL BUSINESS
SMALL BUSINESS
A designation for certain statutory purposes referring to a firm, corporation or establishment having a small number of
employees, low volume of sales, small amount of assets or limited impact on the market.
• SOLICITATION
The process used to communicate procurement requirements and to request responses from interested vendors. A
solicitation may be, but is not limited to a request for bid and request for proposal.
solicitation may be but is not limited to a request for bid and request for proposal
• SOURCE REDUCTION PRODUCT
A product that results in a net reduction in the generation of waste, and includes durable, reusable and remanufactured
products; products with no packaging or reduced packaging.

Terms to conditions (S‐T)
• SPECIFICATION
A concise statement of a set of requirements to be satisfied by a product, material or process that indicates whenever
appropriate the procedures to determine whether the requirements are satisfied. As far as practicable, it is desirable that the
requirements are expressed numerically in terms of appropriate units, together with their limits. A specification may be a
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standard, a part of a standard, or independent of a standard.
• STANDARD
An item's characteristic or set of characteristics generally accepted by the manufacturers and users of the item as a required
characteristic for all such items.
• STANDARDIZATION
The process of defining and applying the conditions necessary to ensure that a given range of requirements can normally be
met, with a minimum of variety, in a reproducible and economic manner based on the best current techniques.
• SURPLUS PROPERTY
Property in excess of the needs of an organization and not required for its foreseeable use. Surplus may be used or new, but it
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possesses some usefulness for the purpose it was intended or for some other purpose.
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• TABULATION OF RESPONSES
The recording of responses for the purposes of comparison, analysis and record keeping.
• TARGETED GROUP BUSINESS (TG)
A certified business designated by the commissioner of Administration that is majority owned and operated by a woman,
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person with disabilities, or a member of a specific minority group who provides goods, products, or services within
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purchasing categories designated by the commissioner.
• TERMS AND CONDITIONS
A phrase generally applied to the rules under which all bids must be submitted and the stipulations included in most purchase
contracts; often published by the purchasing authorities for the information of all potential vendors.
• TITLE
The instrument or document whereby ownership of property is established.

Terms to conditions ( T‐V)
• TORT
A wrongful act, other than a breach of contract, such that the law permits compensation of damages.
• TRUCKLOAD (TL)
1. A quantity of freight to which truckload rates apply or a shipment tendered as a truckload.
2. A highway truck or trailer loaded to its carrying capacity. See Less‐Than‐Truckload.
• UNIFORM COMMERCIAL CODE (UCC)
A comprehensive modernization of various statutes relating to commercial transactions, including sales, lease, negotiable
instruments, bank deposits and collections, funds transfers, letters of credit, bulk sales, documents of title, investment
securities and secured transactions. The Minnesota law is found in Minn. Stat. Ch. 336.
• UNIT PRICE
The price of a selected unit of a good or service (e.g., pound, labor hours, etc.).
( )
• UNSUCCESSFUL VENDOR
A vendor whose response is not accepted for reasons such as price, quantity, failure to comply with specifications, etc.
• VALUE ANALYSIS
An organized effort directed at analyzing the function of systems, products, specifications, standards, practices, and
procedures for the purpose of satisfying the required function at the lowest total cost of effective ownership consistent with
the requirements for performance, reliability, quality and maintainability.
• VENDOR
Someone who sells something; a "seller."
• VENDORS LIST
A list of names and addresses of suppliers from whom bids, proposals and quotations might be expected. The list, maintained
by the purchasing office, should include all suppliers who have expressed interest in doing business with the government.
• VIRGIN PRODUCT
A product that is made with 100 percent new raw materials and contains no recycled materials.
• VOLATILE ORGANIC COMPOUNDS (VOCs)
Compounds that evaporate easily at room tempurature and often have a sharp smell. They can come from many products,
such as office equipment, adhesives, carpeting, upholstery, paints, solvents, and cleaning products. Some VOCs can cause
cancer in certain situations, especially when they are concentrated indoors. VOCs also create ozone, a harmful outdoor air
pollutant.

Terms to conditions (W)
• WARRANTY
The representation, either expressed or implied, that a certain fact regarding the subject matter of a contract is presently true
or will be true. Not to be confused with "guarantee," which means a contract or promise by one person to answer for the
p
performance of another person.
p

For more information do not hesitate to
contact me.

Ahmad H. Maharma ‐ PMP®

• Ramallah, Palestine
• Phone: + (972) (2) 2968644
• Mobile: + (972) (599) 001155
E‐Mail: ahmad.maharma@gmail.com

Pmbok 4th edition chapter 12 - Project Procurement Management

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Pmbok 4th edition chapter 12 - Project Procurement Management