Procurement contract type is a vital instrument that formalizes the relationship between the buyer and the seller legally. Most of the PMP® Certification aspirants get confused in the middle of the study of Procurement contract which reduces their chances of clearing the PMP® exam with a good score.
“When we talk about procurement, we are required to think like a buyer even though we are a seller”
“Procurement Contract type is a topic which forms the base for procurement knowledge areas in all the process books excluding initiation.”
Most of the attendees in the webinar are PMP® Certification aspirants and the session turned out to be the most learning and knowledge sharing event. All the doubts were resolved on the spot with logical explanations.
“The contract defines a relationship and is legally enforceable.”
The decision, which type of Procurement contract would be drafted for your particular project is driven by two factors:
1. What kind of good/services you are buying/selling?
2. The level of uncertainty- how certain is the scope of your work is. The uncertainty will take you to the contracts where there is flexibility of changing the scope. And, on the other hand, more certain you are about the services/goods, more you will have formal contract that can be defined or estimated upfront.
Three types of base contract types plus their variants are discussed in detail and exemplified. Pros and cons of each type of Procurement Contract had been provided with a comprehensive understanding so that no doubts are left when you come up with the related question in your exam.
1. Fixed price- having a fixed scope upfront
2. Cost reimbursable- it is a type of contract where in buyer has to pay the cost involved in their service or goods plus any fee- whatever is the seller spending is reimbursable
3. Time and material- where a seller provides timely and professional service or some goods at a specified rate
For a detailed knowledge and study of the contract types do watch the webinar recording on our YouTube channel.
Here is the link for the webinar on Procurement contract Type
Some of the interesting discussion revolves around the following questions:
• How many questions in PMP® exam we get on the formulas related to the Procurement management (like Ceiling fees and all)?
• In which type of fixed price contract, does the seller have to take up the cost once it has crossed the agreed price? Is it FFP or FPIF?
• If scope gets changed after approval through Change management, will fixed cost contract change in value?
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