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Question		Answer
Alternative dispute resolution start learning		When there is an issue or claim that must be settled before the contract can be closed, the parties involved in the issue or claim will try to reach a settlement through mediation or arbitration.
Bid start learning		From seller to buyer. Price is the determining factor in the decision-making process.
Bidder conference start learning		A meeting of all the project’s potential vendors to clarify the contract statement of work and the details of the contracted work.
Contract start learning		A contract is a formal agreement between the buyer and the seller. Contracts can be oral or written—though written is preferred.
Contract statement of work (SOW also CSOW) start learning		This document requires that the seller fully describe the work to be completed and/or the product to be supplied. The SOW becomes part of the contract between the buyer and the seller.
Cost plus award fee contract start learning		A contract that pays the vendor all costs for the project, but also includes a buyer- determined award fee for the project work.
Cost plus fixed fee contract start learning		A contract that requires the buyer to pay for the cost of the goods and services procured plus a fixed fee for the contracted work. The buyer assumes the risk of a cost overrun.
Cost plus incentive fee start learning		A contract type that requires the buyer to pay a cost for the procured work, plus an incentive fee, or a bonus, for the work if terms and conditions are met.
Cost plus percentage of costs start learning		A contract that requires the buyer to pay for the costs of the goods and services procured plus a percentage of the costs. The buyer assumes all of the risks for cost overruns.
Direct costs start learning		These are costs incurred by the project in order for the project to exist. Examples include the equipment needed to complete the project work, salaries of the project team, and other expenses tied directly to the project’s existence.
Fixed-price contracts start learning		Also known as firm fixed-price and lump- sum contracts, these are agreements that define a total price for the product the seller is to provide.
Fixed-price incentive fee start learning		A fixed-price contract with opportunities for bonuses for meeting goals on costs, schedule, and other objectives. These contracts usually have a price ceiling for costs and associated bonuses.
Fixed-price with economic price adjustments start learning		A fixed-price contract with a special allowance for price increases based on economic reasons such as inflation or the cost of raw materials.
Force majeure start learning		An “act of God” that may have a negative impact on the project. Examples include fire, hurricanes, tornadoes, and earthquakes.
Independent estimates start learning		These estimates are often referred to as “should cost” estimates. They are created by the performing organization or outside experts to predict what the cost of the procured product should be.
Indirect costs start learning		These are costs attributed to the cost of doing business. Examples include utilities, office space, and other overhead costs.
Invitation for Bid (IFB) start learning		From buyer to seller. Requests the seller to provide a price for the procured product or service.
Letter contract start learning		A letter contract allows the vendor to begin working on the project immediately. It is often used as a stopgap solution.
Letter of intent start learning		A letter of intent is not a contract, but a letter stating that the buyer is intending to create a contractual relationship with the seller.
Make-or-buy decision start learning		A process in which the project management team determines the cost- effectiveness, benefits, and feasibility of making a product or buying it from a vendor.
Privity start learning		The contractual relationship between the buyer and the seller is often considered confidential and secret.
Procurement management plan start learning		A project management subsidiary plan that documents the decisions made in the procurement planning processes.
Procurement planning start learning		A process to identify which parts of the project warrant procurement from a vendor by the buyer.
Purchase order (PO) start learning		A purchase order is a form of unilateral contract that the buyer provides to the vendor showing that the purchase has been approved by the buyer’s organization.
Quotation start learning		From seller to buyer. Price is the determining factor in the decision-making process.
Request for Proposal (RFP) start learning		From buyer to seller. Requests the seller to provide a proposal to complete the procured work or to provide the procured product.
Request for Quote (RFQ) start learning		From buyer to seller. Requests the seller to provide a price for the procured product or service.
Risk-related contractual agreements start learning		When the project management team decides to use transference to respond to a risk, a risk-related contractual agreement is created between the buyer and the seller.
Screening system start learning		A tool that filters or screens out vendors that don’t qualify for the contract.
Seller rating systems start learning		These are used by organizations to rate prior experience with each vendor that they have worked with in the past. The seller rating system can track performance, quality ratings, delivery, and even contract compliance.
Terms of Reference start learning		Defines the obligations for the seller, what the seller will provide, and all of the particulars of the contracted work. Terms of reference is similar to the statement of work.
Weighting system start learning		This takes out the personal preferences of the decision maker in the organization to ensure that the best seller is awarded the contract. Weights are assigned to the values of the proposals, and each proposal is scored.

PMP 12#

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