Chapter 12 – Project Supply Chain Management
TRUE/FALSE
1. Supply chain management focuses exclusively upon the parties directly involved in providing supplies
to the project team.
2. Supply chain operations require managerial processes that span across functional areas within
individual organizations, and link trading partners and customers across organizational boundaries.
3. During procurement planning, the project team determines which needs can best be met by acquiring
products and services from an outside provider, and which can be accomplished by the team.
4. Buying from an outside supplier to meet project needs is a practice that is rarely used, because it
invariably proves to be more expensive than obtaining materials and services internally.
5. Among the disadvantages associated with outsourcing is the gradual loss of special skills for doing
some specific activities that have been outsourced.
6. Outputs of Plan Procurement Management include the procurement management plan and
procurement statement of work.
7. The evaluation criteria developed during procurement planning should guide the vendor evaluation
and selection.
8. On complex projects, despite the importance of factors such as technical capability, managerial
capability and previous experience; the selection decision is made mostly or entirely on price.
9. Extensive supplier evaluation approaches such as surveys, facility visits and financial analysis should
be applied to first-tier suppliers only.
10. In many cases, the proposal prepared by the vendor becomes a part of the final contract.
11. A contract is a unilateral document that obligates the seller to provide specified products and services
under terms agreeable to the buyer.
12. A project organization can serve as either the buyer or the seller in a project related contract.
13. Contract incentives are often used when the buyer wants to maximize some aspect of performance,
such as finishing the project early or providing a higher level of quality.
14. Fixed price contracts provide low risk for the seller, since the buyer will pay a fixed price, regardless
of how much the project actually costs the seller.
15. One of the important factors that should influence the selection of contract type is the degree of risk
for the seller and the buyer that each contract type contains.
16. Effective project partnerships generally require shared responsibilities, shared resources, shared
information, shared rights and shared risks between suppliers and customers.
17. Traditional project procurement was characterized by win / lose adversarial relations between owner
and contractor, whereas contemporary project partnering fosters a relationship of trust and
collaboration.
18. Lean purchasing refers to a manufacturing context where just-in-time (JIT) tools are used to ensure
that every step in the supply process adds value, while costs are kept to a minimum.
19. Project partnerships can be advantageous to both the client and the vendor, in terms of improved
project execution, flexibility, and reduced bid administration.
20. Logistics is the work required to move and position inventory throughout a supply chain.
21. Supply chains use a combination of modes of transportation including: air, rail, water, pipeline and
truck.
22. Information is a key ingredient at each stage of the project supply chain, as well as within each phase
of supply chain decision making.
MULTIPLE CHOICE
1. All of these are factors that could lead to a decision to buy or outsource rather than make or perform
in-house, EXCEPT:
a.
flexibility in procurement
b.
ability to use specialized suppliers
c.
inadequate capacity
d.
more control over quality and time
2. All of the following entities are typically included in the supply chain EXCEPT:
a.
suppliers
b.
public relations
c.
consumers
d.
project team
3. All of the following statements accurately describe supply chain management EXCEPT:
a.
It is a closed-loop system solely within the project organization’s boundaries
b.
It spans across suppliers, resellers, project organizations and consumers.
c.
It addresses the flow of products, information and funds.
d.
It is a system approach to managing the entire flow of physical products.
4. Which of the following is one of the PMBOK Guide’s four project procurement management
processes?
a.
Conduct procurements
b.
Perform configuration management
c.
Conduct contract reviews
d.
Perform value engineering
5. The PMBOK process of documenting project procurement decisions, specifying the approach and
identifying potential sellers is known as:
a.
Define supply chain.
b.
Plan procurement management.
c.
Schedule procurements.
d.
Negotiate contracts
6. The procurement management plan:
a.
describes how the procurement division will be managed.
b.
describes how supply chain partners will be managed.
c.
describes how a project team will acquire goods and services from outside the performing
organization.
d.
describes how sellers will be audited by the procurement team.
7. A description of the procurement item in sufficient detail to allow prospective sellers to determine if
they are capable of providing the products, services or results is known as:
a.
the contract clauses and special provisions
b.
the procurement statement of work
c.
the supply invoice
d.
the purchase order
8. Which of the following factors should be considered when a project team evaluates a “make or buy”
decision to procure services?
a.
prevailing public opinion regarding the economic impact of outsourcing
b.
only the direct costs associated with the decision, excluding consideration of indirect costs
c.
advantages and disadvantages of outsourcing in terms of time, cost and performance
control
d.
project manager’s or sponsor’s preference
9. Often a project team will start the selection process by establishing a list of potential suppliers. All of
the following information sources are frequently used to identify these potential suppliers EXCEPT:
a.
supplier catalogs or websites
b.
sales personnel
c.
stakeholder register
d.
trade shows
10. Evaluations of prospective suppliers by project teams often involve all of the following approaches
EXCEPT:
a.
financial condition analysis
b.
facility visits
c.
supplier surveys
d.
prototyping
11. All of the following factors are commonly used to assess potential suppliers pursuant to a source
selection decision EXCEPT:
a.
supply quality
b.
personal relationships with senior management
c.
inbound transportation cost
d.
replenishment lead time
12. All of the following accurately describe the features and characteristics of a contract EXCEPT:
a.
A contract binds both the seller and the buyer.
b.
A contract obligates the seller to provide a specified product or service.
c.
A contract obligates the buyer to pay for a specified product or service.
d.
The project organization is always a buyer in a contract arrangement
13. Which of the following contract types is most appropriate when costs are NOT well known and the
buyer absorbs all of the cost risk?
a.
Firm-Fixed-Price (FFP)
b.
Fixed-Price-Incentive-Firm (FPIF)
c.
Cost-Plus-Fixed-Fee (CPFF)
d.
Time and Material (T&M)
14. Which party to a contract absorbs the preponderance of cost risk when a Firm-Fixed-Price (FFP)
contract is used?
a.
the seller
b.
the buyer
c.
the cost risk is equally shared.
d.
the insurer
15. Which of the following types of contracts involves payment to the seller for the seller’s actual costs
plus a fee typically representing the seller’s profit?
a.
fixed-price contract
b.
cost-reimbursable contract
c.
equitable adjustment contract
d.
direct cost contract
16. All of the following items are generally considered when selecting the right type of contract EXCEPT:
a.
extent of price competition
b.
overall degree of cost and schedule risk
c.
urgency of requirements
d.
project organization’s accounting system
17. Which of the following terms describes a method for transforming contractual arrangements into a
cohesive, collaborative project team with a single set of goals and established dispute resolution
procedures?
a.
a contract unification plan
b.
partnering
c.
arbitration
d.
conflict resolution
18. Project partnerships offer all of the following advantages to vendors EXCEPT:
a.
there is a more dependable stream of work
b.
the expected outcome is clearly stated
c.
the buyer gains at the vendor’s expense
d.
greater potential profit
19. Project partnerships offer which of the following advantages to both clients and vendors?
a.
shared motivation
b.
potential of lower cost for client
c.
potential of greater profit for vendor
d.
opportunity for vendor to prove oneself
ESSAY
1. Project managers must frequently decide whether to obtain needed products and services from internal
sources or from external sources. This decision is often referred to as the “make or buy” decision.
Briefly identify and explain at least three reasons that support the decision to “make” the products and
at least three reasons that support the decision to “buy” the products.
2. According to the PMBOK Guide, the project procurement management knowledge area includes four
processes. Identify and briefly describe each of these processes.
3. Contract types are often associated with two broad categories: fixed-price contracts and
cost-reimbursable contracts. Briefly identify the factors to consider when determining which type is
most appropriate for a planned contract.
4. Compare and contrast traditional project procurement management with the more contemporary
approach – project partnering. What are the conditions or sharing requirements for effective project
partnerships?
