PMI SH - Plan and Manage Procurement

A project manager is managing a project whose sponsor has asked why some of the components of the project were developed in-house. Where can this information be found?

• In the Procurement Management Plan, under build vs. buy decisions

• In the Project Charter, under the assumptions and constraints section

• In the Technical Architecture Document, under solution boundaries

• In the Solution Architecture Document, under project purpose and justification

Answer explanation

Delivering part if the solution in house is an outcome of the buy vs build analysis and a decision that will be detailed in the procurement management plan

A project manager is leading a project with a scope partially delivered by a vendor. The vendor's processes and tools differ from the project team's, which may pose a risk.

How should the project manager mitigate this risk?

• Coach the internal project team to use the vendor's processes and tools.

• Train the vendor to use the same processes and tools as the internal team.

• Develop a strategy to align the internal and vendor processes and tools.

• Recommend engaging a new vendor that uses the internal processes and tools.

Answer explanation

Finding a common ground between internal and vendor processes is the most efficient solution. This allows for a smoother workflow and reduces integration risks.

The other answer choices are incorrect. While the team might adapt, forcing them to use unfamiliar tools can decrease efficiency and increase errors. Training the vendor might be expensive and time-consuming, especially if their processes are well-established. Finding a new vendor can be expensive, delay the project, and eliminate the benefits of the existing vendor relationship.

A project is in the testing phase, and the quality control team informs the project manager that the quality of the deliverables from one vendor is poor. Their investigation found that the staff assigned does not have the required certifications.

How did this issue arise?

• The vendors' proposal did not include the list of people assigned to the project.

• The project sponsor did not mandate three references from previous customers.

• The Procurement Management Plan did not include the certifications required

• The quality control team had too high of standards and tested too thoroughly

Answer explanation

The Procurement Management plan must include the certifications and qualifications required. Certifications are at the company level (ISO 900 Quality Management Certified) and/or at the individual staff level ( certified high voltage electrician, forklift license etc)

A project has begun to develop a new software application that will be used by the company's sales team. The project is expected to take six months to complete and has a budget of $100,000. The project manager has identified software development tools, hardware, and training to be procured.

What is the most important thing for the project manager to do while developing the procurement plan?

• Ensure that all resources will be procured within budget.

• Ensure that the project is on schedule with no delays.

• Ensure that all procured resources are of great quality.

• Ensure that all resources will be procured on schedule.

Answer explanation

The most important factor to consider when developing the procurement plan is the project's budget. The project manager needs to ensure that the procurement plan does not exceed the project's budget.

The other answer choices are incorrect. Factors such as the project's schedule, the quality of the resources, and the availability of the resources, are also important, but they are not as important as the project's budget. It is the budget that makes the resources and the project's completion possible.

A project manager is leading a project where a vendor is engaged in a fixed price contract. Even though the project requirements and timelines have been clearly defined and shared with the vendor, the project sponsor is worried about cost overrun.

How should the project manager respond to the sponsor?

• Inform the project sponsor that the risk of cost overrun is transferred to the vendor.

• Discuss this issue in the next team meeting and ask team members for feedback.

• Ask the project sponsor to provide contingency funding to mitigate the risk.

• Issue a request for proposal (RFP) to identify potential vendors if the issue materializes.

Answer explanation

In a fix price contract there is no risk of cost overrun, there is no need for mitigation actions

PMBoK Sixth Edition Chapter 12 states: "12.1.1.6 ORGANIZATIONAL PROCESS ASSETS

The various types of contractual agreements used by the organization also influence decisions for the Plan Procurement Management process.

Fixed-price contracts. This category of contracts involves setting a fixed total price for a defined product, service, or result to be provided. These contracts should be used when the requirements are well defined and no significant changes to the scope are expected. Types of fixed-price contract include:

Firm fixed price (FFP). The most commonly used contract type is the FFP. It is favored by most buying organizations because the price for goods is set at the outset and not subject to change unless the scope of work changes.

Fixed price incentive fee (FPIF). This fixed-price arrangement gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed-upon metrics. Typically, such financial incentives are related to cost, schedule, or technical performance of the seller. Under FPIF contracts, a price ceiling is set, and all costs above the price ceiling are the responsibility of the seller.

Fixed price with economic price adjustments (FPEPA). This type is used whenever the seller's performance period spans a considerable period of years, or if the payments are made in a different currency. It is a fixed-price contract, but with a special provision allowing for predefined final adjustments to the contract price due to changed conditions, such as inflation changes or cost increases (or decreases) for specific commodities'

This is a case of Fixed Price Contract, therefore, the correct answer is: "Inform the project sponsor that the risk of cost overrun is transferred to the vendor"

A project manager oversees a complex project in which a vendor is responsible for delivering several essential components. The project manager and the vendor team are located in different time zones, and this time zone difference has become a significant challenge, leading to productivity issues within the project. Team members from both sides often struggle to coordinate meetings, share updates, and communicate effectively due to the time zone disparities.

What should the project manager do to solve this issue?

• Closely monitor the project schedule and take action if milestones are missed.

• Ask both teams to change their working hours to a common time zone.

• Find a common space and relocate the vendor team with the project team.

• Terminate the engagement and find a new vendor in the local time zone.

Answer explanation

Asking both teams to change their working hours to a common time zone is the most direct way to address the productivity issues caused by the time zone difference. This would allow for more synchronous communication and collaboration, which can be essential for complex projects. It is a practical and cost-effective solution that promotes collaboration and communication without major disruptions. 

The other options are incorrect because they are not the most appropriate and effective responses to the problem.

Closely monitoring the project schedule and taking action if milestones are missed doesn't directly address the issue of time zone differences causing productivity problems. It's a good practice in general, but may not be enough to overcome the challenges of working with a vendor in a different time zone. 

Relocating teams is a drastic and impractical solution to address time zone differences. It's costly, disruptive, and may not be feasible. 

Terminating the engagement and finding a new vendor in the local time zone is a drastic measure that should only be considered as a last resort. It's an expensive and time-consuming approach, and it may not guarantee a better outcome if suitable vendors are not available locally.

A project manager is managing a project with a very aggressive delivery schedule and a firm completion date. The project requires expensive and fragile components that are prone to rework and rejections. The project manager is developing the vendor selection criteria.

What should be the strategy for vendor selection?

• Lowest price regardless of the vendor's warehouse location.

• Acceptable price if the vendor is closer to the project site.

• Project sponsor's recommendation based on past experience.

• Team members' recommendations based on past experience.

Answer explanation

The material's fragility and high probability of rework introduce the risk of delay in the project while waiting for replacements. The distance between the project site and the vendor's warehouse is important when the delivery time is tight. When vendors are “supplying materials of a high value and large size that are susceptible to rework and rejections,” they should be located as close to the project site as possible, Buch says. “The supplier’s vicinity is given preference over the price.”

The supplier of a tool for a manufacturing project informs the project manager that delivery of the tool will be late. The project manager orders the tool from another supplier.

After the tool from the second supplier arrives, the original supplier delivers the tool and submits an invoice according to the procurement agreement.

What should the project manager do next?

• Return the tool to the original supplier and refuse to pay the invoice because delivery was late.

• Keep the extra tool as a spare, pay the invoice from the contingency reserve, and update the lessons learned log.

• Consult the original supplier's procurement agreement to apply late delivery terms, and inform legal counsel of the issue.

• Compare the quality of both tools, select the tool that gives the best value, and return the other tool.

Answer explanation

A contract should clearly state the deliverables and results expected, including any late delivery. Anything not in the contract may not be legally enforced and therefore it is important to consult with legal or procurement before any action should be taken.

Question

A project manager is leading a project with an aggressive timeline that requires fast time to market because a competitor is working on a similar product. The project team cannot meet the go live date, and there are no other internal resources that can assist with the project.

How should the project manager mitigate this risk?

• Look for external resources who can assist in meeting the required go live date.

• Ask the team to remove the obstacles preventing them from meeting the go live date.

• Ask the project sponsor to set a new go live date based on available resources.

• Ask the team to focus only on the critical features and meet the go live date.

Answer explanation

From the stem it is clear that the issue can't be resolved with internal resources, the team doesn't have the capacity to deliver and the go live date is critical to the organization.

A project manager is on a project in a highly regulated environment with a very formal governance process. The project manager is developing the resource plan and identified that the project needs to engage many vendors.

Which strategies should the project manager use to reduce the procurement cycle?

(Choose 3).

• Vendors that you used in past projects

• Integrated teams from various departments

• Vendors recommended by management

• Regulated vendor list

• Focused expediting efforts

Answer explanation

By leveraging internal expertise, utilizing pre-approved vendors, and strategically expediting key steps, the project manager can effectively reduce the procurement cycle and contribute to the project's success. Integrating teams from various departments promotes internal collaboration, streamlines communication, and leverages expertise from different departments. Utilizing a regulated list of vendors will lead to quicker decisions and visibility in the procurement process. The project manager can expedite essential steps and efforts, without compromising thoroughness or compliance, by focusing on specific tasks and bottlenecks.

The other answer choices are incorrect because vendor selection should follow the governance process. Relying solely on past vendors might limit competition and potentially miss out on better options; Similarly, relying solely on management recommendations might bypass established procurement processes and potentially raise compliance concerns.