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Faculty of Management Sciences - BUKC

General Information:
Course Title Project Procurement and Procurement Management

Course ID Section: MS(PM) 2A

Course Pre-requisite
-
Course Schedule SUNDAY: 3:00 pm to 6:00 pm

Instructor’s information:
Name DR. M ASGHAR MUGHAL Phone 03026640855
Email
Muhammadasghar.bukc@bahria.edu.pk

Name: Muhammad Taimoor (02-398231-033)

Program: MS (PM)

Section: 2A

Project Procurement & Contract

Course Title:
Management

Assignment Title: Assignment 2

Assignment #2

As a part of Assignment # 1, choose best possible procurement contract type with

reasons. Write down advantages and disadvantages of your choose contract type for
your type of industry. If possible, add bid for tender for government project.Marks:5
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For the Health and Fitness Tracking App project in the Technology/Health and Fitness
industry, the most suitable procurement contract type is the Fixed Price Incentive Fee
contract. Here are the advantages and disadvantages of using this contract type in this
context:

Advantages:

1. Cost Control: The fixed price nature of the contract provides cost predictability, which
is essential for a project with a set budget.

2. Incentive for Cost Savings: The incentive fee component encourages subcontractors
to manage costs efficiently. If they come under budget, they can receive a portion of the
savings, promoting cost-conscious behavior.

3. Risk Sharing: Risk is shared between the client and subcontractors. If there are cost
overruns, the client is protected by the fixed price, but if the subcontractors can save
costs, they benefit from the incentive fee.

4. Quality Assurance: Subcontractors have an incentive to maintain high-quality

standards, as the incentive fee can also be tied to quality metrics.

5. Clear Performance Metrics: The contract should define clear performance metrics
and criteria for earning the incentive fee, ensuring that subcontractors meet specific
project objectives.

Disadvantages:

1. Complex to Administer: The administration of FPIF contracts can be complex

because it involves both a fixed price and an incentive fee, which requires careful
monitoring and evaluation.

2. Overemphasis on Cost Reduction: Subcontractors might focus too much on cost-

cutting to earn the incentive, potentially compromising quality or long-term project goals.

3. Potential for Disputes: Disputes can arise if there are disagreements about the
achievement of performance metrics or the calculation of incentive fees.

4. Limited Flexibility: The fixed price aspect can limit flexibility in cases where there are
significant scope changes or unforeseen events, potentially leading to contract
modifications.
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Tender Bid for Government Project - Health and Fitness Tracking App

Project Description: We propose to develop a Health and Fitness Tracking App,

integrating wearable devices for the government project.

Contract Type: Fixed Price Incentive Fee contract (FPIF)

Bid Amount: $3,000,000

Advantages of Our Proposal:

1. Cost Efficiency: We offer a fixed price to ensure cost predictability, while our incentive
fee structure motivates us to save costs where possible.

2. Quality Commitment: Our incentive fee is tied to specific quality metrics, guaranteeing
the government a high-quality app

3. Risk Sharing: We are willing to share the project risk, and we're committed to staying
within the agreed budget.

4. Experience: We have a track record of successful app development projects and a

team of experts in the health and fitness technology industry.

Deadline: We commit to delivering the project within 6 months.