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Plan Procurement Management

5 minutes 5 Questions

Plan Procurement Management is the process of documenting project procurement decisions, identifying potential sellers, and determining the approach that will be used to acquire the necessary goods or services from external sources. This includes defining the procurement strategy, selecting contract types, and establishing evaluation criteria for vendor selection. In this phase, the project manager works with stakeholders to develop a procurement management plan, which lays out the requirements, risks, and procurement milestones.

Guide: Plan Procurement Management

Plan Procurement Management falls under Project Procurement Management as per the PMBOK Guide Seventh Edition. It is a process of documenting project procurement decisions, specifying the approach, and identifying potential sellers.
Importance: It helps ensure that the contract with the vendor is clear and aims at meeting the project's requirements.
What is it?: It's a process where project managers determine if they need outside assistance for the project or if they will handle everything in-house. They then identify potential sellers and document their procurement decisions.
How it works?: The process begins with defining procurement requirements. Then, requests for proposals (RFPs) are created and issued to potential sellers. Once proposals are received, they are reviewed and a vendor is chosen.
Exam Tips: Answering Questions on Plan Procurement Management: When answering questions, remember procurement management starts early in the project. If a question asks about the project's lifecycle, remember procurement planning starts during the planning phase, not the execution phase. In case, the question includes contract types, understand that they are part of the procurement management plan. Fixed-price contracts offer more risk to the seller, while cost-reimbursable contracts put more risk on the buyer. And if you're asked about seller performance evaluations, remember they're done during the control procurements process, not during planning.

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PMP - Procurement Management Example Questions

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Question 1

As a project manager for a large real estate development, you’ve discovered that local building codes have been updated recently, potentially impacting the use of materials that have already been ordered. What is the best course of action?

Correct Answer: Talk with the procurement management team to discuss possible legal implications and to replace or remove the ordered materials that may violate the updated codes.

The best course of action is to discuss the potential impact of the updated building codes with the procurement management team. They can assess any legal implications and determine if the already ordered materials need to be replaced or removed to comply with the new regulations. Proceeding with materials that violate the codes could lead to costly fines, project delays, or even legal consequences. Waiting for an inspection to see if the changes are enforced is risky and could result in last-minute changes or work stoppages. Ordering new materials without consulting the procurement team could lead to unnecessary expenses and potential waste. By proactively communicating with the procurement team, the project manager can make an informed decision that ensures compliance and minimizes negative impacts on the project timeline and budget.

Question 2

You are the project manager for a software development project and have decided to outsource a part of the project due to lack of technical expertise in-house. What should be the most important consideration while developing a contract for the same?

Correct Answer: The specific scope of work for the outsourced part

When outsourcing a part of a project, the most important thing to consider is the specific scope of work for the outsourced part. This scope clearly defines what work the outsourced team is responsible for and ensures everyone has the same understanding of the tasks to be completed. While the overall project management plan and the contractual obligations of other vendors are important, they are not the MOST important when developing a contract for outsourcing. Ensuring the scope of the outsourced work is clearly defined is critical to avoid confusion, poor performance, or legal disputes. The office layout where the outsourced team will be working doesn't have the same relevance.

Question 3

You are managing a project where you need to procure a complex and expensive machine. The delivery time is quite long. What can help you manage this effectively?

Correct Answer: Use a contract with an advance payment clause.

The best choice in this scenario is to 'Use a contract with an advance payment clause'. This can facilitate a sense of surety for the supplier that they will receive payment, and it also allows you to manage your cash flow more effectively. Paying for the machine in full, upfront, might not be economically viable and is considered risky as you may face potential loss if the supplier fails to deliver. Rescheduling the project according to supplier's convenience may interrupt the project timeline and affect other aspects of the project. Purchasing a cheaper, less complex machine may not meet the project's requirements and could compromise the quality of the final product or service. Therefore, those options are less advisable.

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