Project Procurement Management

Arti Singh 10th June 2008

Project Procurement Management

The processes required to acquire goods and services, to attain project scope, from outside the performing organization Discussed from the perspective of the buyer in the buyer-seller relationship

Procurement Planning

The process of identifying which project needs can be met by procuring products or services outside the project organization

Procurement Planning - Inputs

Scope Statement

Describes the current project boundaries, needs, and strategies Provides important information about technical issues and concerns Either a formal contracting group or project team supplied resources and expertise

Product Description

Procurement Resources

Procurement Planning Inputs (continued)

Market Conditions

What product and services are available in the marketplace such as preliminary cost, schedule estimates, identified risks, planned staffing, ect. such as funds availability

Other Planning Outputs

Constraints - Factors that limit the buyers options

Assumptions

Procurement Planning Techniques

Tools &

Make or Buy Analysis

Technique to determine whether a product can be produced cost effectively by performing organization. Should include both direct and indirect costs. Should reflect the perspective of buyers organization, not just the needs of the project

Procurement Planning Techniques (cont.)

Tools &

Expert Judgement

Expertise will often be required to assess the needs of the project Groups or individuals with specialized knowledge can be consulted can include:

Consultants Professional and technical associations Industry groups Other units within the buyers organization

Procurement Planning Techniques (cont.)

Tools &

Contract Type Selection

Contracts fall into three broad categories:

Fixed-price or Lump-sum Cost-reimbursable Time and Material (T&M)

Procurement Planning Techniques (cont.)

Tools &

Contract Type Selection

Fixed-price (FP) or Lump-sum Contracts

Involves fixed total price for a well defined product Buyer and seller are at risk if product is not well defined. Buyer may receive undesired product. Seller can incur additional cost. Incentives for meeting or exceeding defined project objectives can be included in FP contracts.

Procurement Planning Techniques (cont.)

Tools &

Contract Type Selection

Cost-reimbursable Contracts

Involves payment to the seller for its costs, plus a fee representing seller profit. Direct costs are costs exclusively for the benefit of the project. Indirect costs or overhead costs are allocated to the project as a cost of doing business and are usually calculated as a % of direct costs. Can include incentives for meeting or exceeding selected project objectives.

Procurement Planning Techniques (cont.)

Tools &

Contract Type Selection

Time and Material (T&M) Contracts

A hybrid arrangement that includes aspects of costreimbursable and fixed-price contracts Like fixed-priced when buyer & seller agree on unit rates. Like cost-reimbursable because they are open-ended and can grow in value.

Procurement Planning - Outputs

Procurement Management Plan

Describes how the remaining procurement processes will be managed. Describes the procurement item in sufficient detail to allow sellers to determine if they are capable of providing the item

Statement(s) of Work

Solicitation Planning

Involves preparing the documents needed to support solicitation

Solicitation Planning - Inputs

Procurement Management Plan Statement(s) of Work Other Planning Output

Solicitation Planning Tools & Techniques

Standard Forms

May include standard contract, standard descriptions of procurement items, standardized versions of needed bid documents Described as before in procurement planning

Expert Judgement

Solicitation Planning - Outputs

Procurement Documents

Used to solicit proposals from prospective sellers. Bid, quotation, or proposal are general terms used in describing procurement documents. Document types include: Invitation for Bid (IFB), Request for Proposal (RFP), Request for Quotation (RFQ), Invitation for Negotiation, and Contractor Initial Response.

Solicitation Planning Outputs (continued)

Evaluation Criteria

Used to rate score proposals of potential sellers. Often included as part of the procurement docs. Criteria can included:

Purchase Price Understanding of need Overall or life-cycle costs Technical capability Management approach Financial capacity

Solicitation Planning Outputs (continued)

Statement of Work Updates

Modifications to one or more of the statements of work may be identified during solicitation planning.

Solicitation

Involves obtaining responses (bids and proposals) from prospective sellers on how project needs can be met.

Solicitation - Inputs

Procurement Documents

As defined earlier
Some organizations maintain lists with information of sellers. If not, project teams will need to develop their owns lists.

Qualified Seller Lists

Solicitation Tools & Techniques

Bidder Conferences

Are meetings with prospective sellers prior to preparation of a proposal. Used to ensure that sellers have a clear, common understanding of the procurement. Sellers remain on equal standing. As the term describes.

Advertising

Solicitation - Outputs

Proposals

Are seller-prepared documents that describe the sellers ability and willingness to provide the requested product. Are prepared in accordance with the requirements of the relevant procurement documents. Can be supplemented with a presentation

Source Selection (Pick One)

Involves the receipt of bids or proposals and the application of the evaluation criteria to select a provider

Source Selection - Inputs

Proposals Evaluation criteria Organizational policies

Source Selection - Tools and Techniques

1) Contract Negotiation

involves clarification and mutual agreement on the structure and requirements of the contract prior to the signing of the contract
a method for quantifying qualitative data to minimize the effect of personal prejudice on source selection

2) Weighting System

Source Selection - Tools and Techniques (cont.)

3) Screening System

involves establishing minimum requirements of performance for one or more of the evaluation criteria

4) Independent Estimates

Source Selection - Outputs

1) Contract - a mutually binding agreement that obligates the seller to provide the specified product and obligates the buyer to pay for it - other names are:
agreement subcontract purchase order memorandum of understanding

Contract Administration (Admin)

The process of ensuring that the sellers performance meets contractual requirements Project management processes to be applied:

Project Plan execution Performance reporting Quality control Change control

Contract Administration - Inputs

Contract Work Results Change Requests

may include modifications to the terms of the contract or to the description of the project or service to be provided

Seller Invoices

Contract Administration - Tools and Techniques

1) Contract Change Control System
- Changes - all contracts, like projects, have changes
- first, analyze the impact of the change - follow change procedures - make all changes formally

Contract Administration - Tools and Techniques

- Contract Interpretation
- based on an analysis of intent of the parties to the contract based on guidelines - the contract supercedes any memos, conversations or discussions

2) Performance Reporting 3) Payment System

Contract Administration - Outputs

Correspondence Contract Changes Payment Requests

Contract Closeout (Finish)

Similar to administrative closure involves both product verification and administrative closeout a contract is complete when:

a contract ends a contract is terminated before the work is complete

Contract Closeout - Inputs

1)

Contract Documentation includes

the contract itself approved contract changes seller-developer technical documentation seller performance reports financial documents results of any contract-related inspections

Contract Closeout - Inputs

Activities

Product verification Financial closure Update records Final contract performance reporting Contract file

Contract Closeout - Tools and Techniques

Procurement Audits
- a structured review of the procurement process from procurement planning through contract administration - similar to a Lessons Learned

Contract Closeout - Outputs

Contract File Procurement Audit Results* Formal Acceptance and closure

- the person of organization responsible for contract administration should provide the seller with formal written notice that the contract has been completed

Questions ??

Thank you !