Procurement Facts

A statement of work (SOW) is provided to the potential sellers so that they can create accurate bids, quotes, and proposals for the buyer. A bidders' conference may be held so that sellers can query the buyer on the product or service to be procured.

A contract is a formal agreement, preferably written, between a buyer and seller. In order to be valid, a contract must have:

• Acceptance

• Consideration

• Capacity to enter into a contract

On the CAPM exam, procurement questions are usually from the buyer's point of view. All requirements the seller is to complete should be clearly written in the contract. Requirements of both parties must be met, or legal proceedings may follow. Contract types include the following:

• Cost-reimbursable contracts require the buyer to assume the risk of cost overruns.

• Fixed-price contracts require the seller to assume the risk of cost overruns.

• Time and material contracts are good for smaller assignments, but can impose cost overrun risks to the buyer if the contract between the buyer and seller does not include a "not to exceed clause." This clause, commonly called an NTE clause, puts a cap on the maximum amount for the contract time and materials.

• A purchase order is a unilateral form of contract.

• A letter of intent is not a contract, but shows the intent of the buyer to purchase from a specific seller.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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