Procurement, Contracts, and Vendor Management
Procurement questions test contract type selection, risk allocation, and the make-or-buy decision. Scenarios frequently offer a well-defined job with an uncertain requirement, where the cheapest bid or the wrong contract type is the trap.
Core rules
- Make-or-buy analysis compares cost and risk of internal delivery with external. Procurement documents: RFI gathers information, RFQ prices standard items, RFP requests a solution to a complex need, IFB seeks sealed prices for well-defined goods.
- Fixed-price (firm-fixed-price, fixed-price incentive fee, fixed-price with economic price adjustment): the seller bears cost risk, best when scope is well defined. Cost-reimbursable (cost plus fixed fee, incentive fee, award fee): the buyer bears cost risk, best when scope is uncertain. Time and materials: the buyer bears the risk of hours, so cap and monitor them.
- Source selection: least cost for commodities, qualifications for expertise, weighted scoring for balance. An independent cost estimate tests whether bids are reasonable.
- The procurement statement of work describes what the seller must deliver; it is not the project scope statement.
- Control procurements covers contract change control, inspections, claims administration, and audits; close procurement confirms completion and settles final payment.
Worked example
A city buys a standard payroll package. Scope is unambiguous, so a firm-fixed-price contract transfers cost risk to the seller and gives the buyer price certainty. A second project is a research portal whose requirements will evolve; a fixed price would force the seller to pad the bid for uncertainty, so a cost-plus-fixed-fee contract with a defined fee and a cost ceiling fits better. Time and materials suits staff augmentation where the buyer directs the work, provided hours are capped and reviewed.
Traps
Choosing the lowest bid when scope is uncertain. Using a fixed price for evolving requirements. Leaving time and materials uncapped. Treating the contract as the project scope statement. Skipping closeout paperwork and final payment.