vb.net barcode scanner programming 12: Project Procurement Management NOTE in Software

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12: Project Procurement Management NOTE
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A purchase order (PO) is the simplest form of a fixed-price contract This type of contract is considered to be unilateral (signed by the buyer) as opposed to bilateral (signed by both parties)
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Fixed price incentive fee (FPIF) Gives the buyer and seller some flexibility in that it allows for variations in performance, with financial incentives tied to any agreed-upon results For example, if the house is completed in time to move in before school starts, the seller gets an incentive fee based on a pre-negotiated amount Here s an example: Contract = $100,000 + $5,000 for each month the project is completed ahead of schedule (Two months early = $10,000 + $100,000 = $110,000 total contract value)
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Fixed price with economic price adjustment (FP-EPA) Used when the seller s performance period spans a considerable number of years, allowing for changes in labor and material costs It is a fixed-price contract, but with a special provision allowing for predefined annual or final adjustments to the total price of the contract Here s an example: Two-year contract = $100,000 ($50,000/year) + $5,000-per-year cost of living adjustment (COLA) starting year two for the added cost of labor (Year 1 = $50,000, year 2 = $55,000 Total contract value = $105,000)
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Cost-Reimbursable Contracts This contract category is advantageous to the seller and is commonly referred to as a cost plus (CP) contract It involves payments (cost reimbursements) for all legitimate actual costs incurred for the work performed and includes some type of incentive (or added profit) if the seller exceeds predefined objectives (such as schedule, cost, or performance targets) Cost-reimbursable contracts tend to pass the risk to the buyer They also allow flexibility in the contract if the scope is not clear or if there s a high number of expected changes This contract type is commonly used with research and development (R&D) projects Here are three of the more common cost-reimbursable contracts:
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Cost plus fixed fee (CPFF) The seller is reimbursed for all allowable costs for performing the agreed-to work of the contract plus a fixed fee usually identified as a percentage Here s an example: Actual cost (for example, labor and materials) = $100,000 + $5,000 (5%) fixed fee = $105,000
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Cost plus incentive fee (CPIF) The seller is reimbursed for allowable costs for performing the contract work and receives a predetermined incentive fee based on achieving certain performance objectives, such as completing the project on time (similar to FPIF) Here s an example: Actual cost = $100,000 + $10,000 incentive at completion = $110,000 total contract value
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Cost plus award fee (CPAF) The seller is reimbursed for all legitimate costs, but the majority of the fee is earned based on the satisfaction criteria preapproved by the seller and the buyer (for example, the software application performs to requirements) Here s an example: Actual cost = $90,000 + $20,000 award fee (if preapproved deliverables are met) = total contract value (if approved) = $110,000
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Cost-reimbursable contracts often include direct and indirect costs (see 7 for details on cost management) A contract of this type is beneficial when the scope of the project is not clearly or easily defined, or there are a high number of changes expected
Time and Materials Contract Time and materials (T&M) contracts (sometimes called unit price contracts) are considered to be a hybrid type of contractual arrangement in that they have certain aspects of both fixed-fee and cost-reimbursable contracts They are often viewed as risk neutral, meaning the burden of risk is shared by both parties Sometimes the T&M contract is left open-ended to allow flexibility in the terms and conditions (T&Cs) of contract delivery T&M contracts can resemble fixed-price contracts when specific parameters are set in the contract s T&Cs Here s an example:
Time = 1,000 labor hours * the approved hourly rate ($50 per hour) = $50,000 + costs of materials (actual = $58,255) = total contract value of $108,255
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