Back to Project Management Professional (PMP)

Procurement Planning

Planning the procurement process

5 minutes 5 Questions

Procurement Planning is a critical process in project management that establishes how a project will acquire goods and services from external sources. This systematic approach determines what to procure, when to procure it, how much to procure, and under what terms. The primary output of this proc…

Concepts covered
Make-or-Buy AnalysisSupplier Relationship ManagementBid DocumentsProcurement Management PlanContract TypesSource Selection CriteriaMarket ResearchEvaluation CriteriaContract NegotiationProcurement Performance Monitoring
Test mode:
Start practice test
PMP - Procurement Planning Example Questions

Test your knowledge of Procurement Planning

Question 1

A research institute hired a company to conduct a broad field investigation, with an understanding that the costs predicted at the beginning might not be exactly the final costs of the project. Which contract type suits this situation?

Correct Answer: Cost Plus Fixed Fee Contract (CPFF)

Given that the costs predicted at the beginning are expected not to exactly match the final costs of the project, the Cost Plus Fixed Fee Contract (CPFF) type is most suitable.

In a CPFF contract, the company conducting the investigation would be paid for all allowable actual costs incurred plus a fixed fee, which is calculated as a percentage of the initial estimated project costs. This arrangement allows for unexpected cost overruns to be covered and paid for by the hiring institute, making this type of contract flexible with fluctuating project costs.

On the other hand, the other contract types do not provide this flexibility - the Firm Fixed Price Contract (FFP) pays a set amount regardless of actual costs, the Fixed Price Incentive Fee Contract (FPIF) might not cover increased costs that lack performance incentives, and the Time and Materials Contract (T&M) ties payment to the time and materials used without considering potential cost overruns.

Question 2

What is the purpose of a procurement statement of work (SOW)?

Correct Answer: To clearly define the deliverables and performance expectations for the procurement.

The purpose of a procurement statement of work (SOW) is mainly to clearly define the deliverables and performance expectations for the procurement. This serves as an official document that clearly details the work to be performed along with a specific timeline. Other choices are partially correct but do not capture the primary essence of a SOW. For instance, while a SOW may summarize the procurement process and scope for stakeholders, and outline the procurement schedule and timeline, these are not its primary purpose. Similarly, describing the procurement team and roles and responsibilities is not the main function of a SOW, and while it may contain such information, its primary aim is not to act as an organizational or team structure document. Therefore, the most accurate answer is 'To clearly define the deliverables and performance expectations for the procurement.'

Question 3

What is an IFB?

Correct Answer: A document that solicits bids from potential suppliers for the provision of goods or services.

An Invitation for Bid (IFB) is indeed a document that solicits bids from potential suppliers for the provision of goods or services. It is an open bidding process where the suppliers are invited to submit their bids, and the most competitive one is chosen. Other mentioned descriptions of IFB are not accurate. A detailed description of goods or services to be provided is not an IFB but more likely a Statement of Work (SOW). While payment terms may be outlined in an IFB, it's not the primary focus of this document. The detailed procurement schedule isn't the IFB itself, but it might be established based on the responses received from the IFB.

More Procurement Planning questions
318 questions (total)
Start 100 question test