Zip Cars Inc. is working on building a low-cost automobile, which is targeted at lower economic groups. The research engineers overshoot their budgets and schedule when designing the engine and the rest of the structure of the automobile. However, the design is ready and now Zip Cars Inc. is ready to conduct procurements. To compensate for the money and time lost due to the delay in the design phase, the head of engineering has called all of his trusted advisors for a brainstorming session to generate ideas for reducing the costs of the project from now on. The following are some of the suggestions made during the brainstorming session:
- Give more weight to the cost element while negotiating with the vendors for the plastic spares which are less critical
- Give more weight to preferred vendors while negotiating with the vendors for all spares
- Offer a percentage of profit to the vendors instead of payments for the spares
In which phase of the project and knowledge area of the PMBOK Guide will these ideas be implemented?
A.) Project Planning/Procurement Management
B.) Project Monitoring and Controlling/Procurement Management
C.) Project Execution/Procurement Management
D.) Project Monitoring and Controlling/Cost Management
Question provided by The PM Exam Simulator: www.pm-exam-simulator.com
Answer & Explanation
Correct Answer: C)
During the execution phase of project, procurement of raw materials, services and utilities is performed based on predefined criteria. These criteria could also be used to establish a preferred vendor list, which is later used to procure proposals and negotiate contracts. To manage the project timelines and costs, vendor negotiation is performed; this sometimes involves revision of evaluation criteria, payment terms etc. All of these activities are performed in the Project Execution phase and are included in the Procurement Management knowledge area.
The question contains a red herring; it talks about procurement planning but asks for the process name in execution. The actual question is in the last line: "In which phase of the project and knowledge area of the PMBOK Guide will these ideas be implemented?" Changes to the procurement management approach will be done during the planning process; however these changes will be implemented during the execution process. The project can go from executing process to planning process if a change in procurement approach is required, but the changed approach will be implemented (or carried out) during the executing process.
Reference: PMBOK Guide Fifth Edition, page 377
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