Procurement, Contracts, and Vendor Management
What the exam tests
Procurement tests make-or-buy decisions, procurement documents, contract type selection, and vendor performance management. The central issue is risk allocation.
Core rules
- A procurement statement of work defines the work, deliverables, acceptance criteria, and constraints for the seller; it is not the project charter.
- Fixed-price contracts put cost risk on the seller and suit well-defined work. Firm-fixed-price is least flexible; fixed-price incentive fee shares overrun/underrun by formula.
- Cost-reimbursable contracts pay allowable costs plus fee; CPFF gives the seller little cost incentive, CPIF shares savings. They suit uncertain work but require cost auditing.
- Time-and-materials pays hourly rates plus materials; it suits staff augmentation or small evolving work but can grow without a ceiling.
- Source selection may use RFQ for price, RFP for solutions, or IFB for sealed price. Manage vendors with SOW-based acceptance, performance reviews, and contract change control.
Worked example
A utility buys standard meters with stable specifications. A firm-fixed-price contract is appropriate because scope is clear and the buyer wants price certainty. For a new analytics platform whose requirements will evolve, a time-and-materials contract with a not-to-exceed ceiling or a cost-plus-incentive-fee contract better accommodates change. Reasoning: contract type follows scope certainty and who can best manage cost risk.
Traps
- Calling T&M fixed-price because a rate is fixed.
- Using a cost-reimbursable contract for commodity work with clear specs.
- Accepting vendor deliverables without SOW acceptance criteria.
- Handling vendor disputes informally instead of through contract change control.