vb.net barcode scanner programming Things to Consider in Contract Selection in Software

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Things to Consider in Contract Selection
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A number of factors need to be considered when it comes to the type of contract you (or your organization) selects for your project
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As a PM, you may not always be directly involved with, or be the decision-maker in, the selection of which contract type will be used on your project (especially if you operate in a centralized procurement organization) However, for the purposes of the PMP exam, you need to be able to put yourself in the procurement manager s shoes and answer questions on the exam as if you are making these decisions as the PM from the buyer s perspective
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12: Project Procurement Management
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Here are some things you need to consider as part of the contract selection process:
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Contract type (sometimes predetermined by your company or organization) Relationship with the seller/vendor/supplier Vendor s reputation and past performance For example, do they deliver on time, with skilled responsible people Do they invoice in a timely manner Are the invoices accurate Do they stand behind their work Do they comply to industry standards Vendor s willingness to adjust schedule, skills, cost, and so on to meet project needs Competition (How does the seller compare to their competition ) Degree of risk on both parties (ideal is shared risk) Contract terms and conditions (Are they rigid or flexible ) Other specific considerations unique to your project
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Advantages/Disadvantages by Contract Type
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Table 12-2 provides a comparison of the contract types in the three primary categories and the advantages and disadvantages of each
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There will be a few questions on the PMP exam regarding contract types, so I recommend you become familiar with the types, who bears the burden of risk between them, and the advantages/disadvantages of each contract type
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Keep in mind that contracts can be complex, even if the project is not This can be exacerbated when you are managing multiple projects or subcontracts at the same time Each project life cycle can end at different times With this in mind, it is important to keep a keen eye on the way one project may affect another when it comes to procurements You may require certain skills, equipment, or other resources across many projects, and keeping everything organized by project may be a challenge This is where strong organizational skills are essential (for example, don t fall into a trap by signing a one-year lease for equipment on a six-month project)
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Risk-Related Contract Decisions
Contract decisions should be based on the related risk The main purpose of a contract is to protect you and the other party From a PMI perspective, contacts are arranged according to the level of risk to the project manager (buyer) The sliding scale in Figure 12-1 shows how risk shifts between the buyer and seller You should be able to recognize who bears the burden of risk for each of the seven contract types typically used and recognized in the world of project management
PMP Certification: A Beginner s Guide
Fixed-price (Lump Sum) Contracts Advantages
Very common and easy to understand Buyer knows the total price at the start of the project
Disadvantages
Can be more expensive than cost-reimbursable contract to help cover added risk to the seller
Buyer has less risk and less work to manage (or audit) Seller may underprice the bid and overprice the invoices FP contracts work well when the scope is add-on services, features, or upgrades for clearly defined higher profit Seller is responsible to control the costs Quality of work may suffer or the seller may cut corners if costs run higher than estimated Also, there s little flexibility for change
Cost-Reimbursable (CP) Contracts Advantages
Typically less work to write the contract/SOW CP contracts work well when additional or critical skills are needed to augment your staff Seller has less contract risk Generally lower cost than FP contracts because of cost reimbursement instead of having to add in for unknown contingency
Disadvantages
Buyer has higher involvement to audit seller invoices closely Additional procurement and administrative uplift (burden) Seller is not motivated to control costs Total price is unknown
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