PMP Certification: Project Procurement Management Terms (based on PMBOK® Guide, 6th Edition)


Project Procurement Management Terms

by Project Management Process Group

1. Plan Procurement Management


  • Agreements. Any and all formal contracts defining intentions around the project or some component of the project.
  • Contract. A compulsory agreement between two or more parties with obligations, roles, and responsibilities clearly defined.
  • Contract Types. Three basic categories of contracts, with optional incentive fees:
    • Fixed price contract.
      • Firm fixed price (FFP)
      • Fixed price incentive fee (FPIF)
      • Fixed price with economic price adjustment (FP-EPA)
    • Cost-reimbursable contract

pmp 2018 project procurement management terms pmbok guide 6th edition tipsographic

Project Procurement Management Terms

by Project Management Process Group

1. Plan Procurement Management


  • Agreements. Any and all formal contracts defining intentions around the project or some component of the project.
  • Contract. A compulsory agreement between two or more parties with obligations, roles, and responsibilities clearly defined.
  • Contract Types. Three basic categories of contracts, with optional incentive fees:
    • Fixed price contract.
      • Firm fixed price (FFP)
      • Fixed price incentive fee (FPIF)
      • Fixed price with economic price adjustment (FP-EPA)
    • Cost-reimbursable contract
      • Cost plus fixed fee (CPFF)
      • Cost plus incentive fee (CPIF)
      • Cost plus award fee (CPAF)
    • Time and material (T&M) contract.
  • Make-or-Buy Analysis. A tool for assessing whether some or all of the work should be done by the project team or outsourced.
  • Make-or-Buy Decisions. The output from the make or buy analysis that decides whether an organization should contract the work or do it by itself.
  • Procurement. A formal process to obtain goods and services.
  • Procurement Documents. A range of documents produced by the procurement processes that describe to the seller what needs to be done to win the work and what the work involves. Namely:
    • Request for proposal (RFP)
    • Invitation for bid (IFB)
    • Request for quote (RFQ).
  • Procurement Management Plan. A subsidiary of the project management plan that describes how all facets of the procurement – planning, executing, controlling, and closing – are to be conducted.
  • Procurement Statement of Work. A narrative description of all the work and activities the seller is required to complete on each procurement. Three types of SOW: performance, functional, and design.
  • Source Selection Criteria. A tool for developing a range of approved criteria for evaluating every seller fairly and finding the right seller for a company.

2. Conduct Procurements


  • pmp exam 2018 rapid review free online course tipsographicBidder Conference. A meeting between buyer and all prospective sellers to ensure that everyone bidding on a procurement request has all the information needed to compete in a fair, unbiased way.
  • Contract Negotiations. Negotiations between buyer and potential sellers, performed with the goal of reaching mutual agreement on contractual terms and conditions. While the project manager is involved in the negotiations, generally the process is lead by the procurement manager.
  • Independent Estimates. A technique that uses an independent third-party to provide advice on what the work should cost, to evaluate whether or not a seller is quoting a fair price.
  • Procurement Negotiations. A technique for negotiating terms of a contract with prospective sellers that results in a contract both buyer and seller commit themselves to.
  • Proposal Evaluation Technique. A technique for analyzing and rating all proposals received as part of a procurement process.
  • Selected Sellers. The group of sellers chosen to provide the goods or services required for the project, either by being pre-qualified or by completing a stage in the procurement process.
  • Seller Proposals. A formal response to a procurement request received from an interested seller. Also known as Price Quote or Bid.

3. Control Procurements


  • Alternative Dispute Resolution (ADR). A technique for reaching a fair settlement – mediation, arbitration, or litigation – in the event of a disagreement that the contracted parties cannot resolve via direct negotiation.
  • Claim. A dispute about the amount charged or the work done against the contract brought by one party against another.
  • Claims Administration. A tool for documenting, monitoring, and managing any disputed cost or change made by either party to the contract.
  • Closed Procurements. A formal written notice that the contract has been completed and closed out,  sent by the contract administrator to the seller.
  • Constructive Change. An undocumented change to the contract ordered by the buyer – through either action or inactions – without issuing a formal change order.
  • Contract Administration. A technique for using the internal systems to maintain contract compliance.
  • Early Termination of Contracts. Three main reasons for a buyer to terminate a contract before deliverables completion:
    • Termination by mutual agreement – both parties agree that the contract should be canceled
    • Termination for cause – the seller has breached or is about to breach the contract
    • Termination for convenience – the buyer no longer wants the work done.
  • Procurement Audits. A formal review of how both buyer and seller have carried out procurement processes and contracts as per approved documentation, to collect lessons learned.
  • Procurement Performance Reviews. A quality management process that compares the seller’s performance and progress against the agreed contract, to evaluate the seller’s ability to meet the requirements of the contract.
  • Records Management System. A tool used to record, store, and distribute contract documentation, including correspondence.

Click here for a detailed analysis of each project management process group and knowledge area.

SOURCES: Project Management Institute (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). 6th ed. Newtown Square: Project Management Institute.

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