Project Procurement

Management
 Procurement management activities
 Plan Purchases and Acquisitions: determining what to purchase or
acquire and determining when and how
 Plan Contracting: documenting products, services, and results
requirements and identifying potential sellers
 Request Seller Responses: obtaining information, quotations, bids,
offers, or proposals, as appropriate
 Select Sellers: reviewing offers, choosing among potential sellers,
and negotiating a written contract with each seller
 Contract Administration: managing the contract and relationship
between the buyer and seller
 Contract Closure: completing and settling each contract, including
the resolution of any open items, and closing each contract
applicable to the project or a project phase
 Plan Purchases and Acquisitions
The Plan Purchases and Acquisitions process identifies which project
needs can best be met by purchasing or acquiring products, services, or
results outside the project organization, and which project needs can be
accomplished by the project team during project execution.
Plan Purchases and Acquisitions:
tools & techniques
 Make-or-Buy Analysis
 Determine whether a particular product or service can be
produced by the project team or can be purchased
 Contract Types: different types of contracts are more or
less appropriate for different types of purchases
 Fixed-price or lump-sum contracts
 Cost-reimbursable contracts
 Cost-Plus-Fee (CPF) or Cost-Plus-Percentage of Cost (CPPC)
 Cost-Plus-Fixed-Fee (CPFF)
 Cost-Plus-Incentive-Fee (CPIF)
 Time and Material (T&M) contracts
Plan Purchases and
 Procurement Management Plan:
Acquisitions : output
 Types of contracts to be used
 Who will prepare independent estimates
 Coordinating procurement with other project aspects, such as scheduling and
performance reporting
 Standardized procurement documents, if they are needed
 Constraints and assumptions that could affect planned purchases and
acquisitions
 Handling the make-or-buy decisions and linking them into the Activity Resource
Estimating and Schedule Development processes
 Setting the scheduled dates in each contract for the contract deliverables and
coordinating with the schedule development and control processes
 Establishing the direction to be provided to the sellers on developing and
maintaining a contract work breakdown structure
 Identifying pre-qualified selected sellers, if any, to be used
 Procurement metrics to be used to manage contracts and evaluate sellers
Plan Contracting
Plan Contracting: output
 Procurement Documents
 Procurement documents are used to seek proposals from prospective
sellers
 Evaluation Criteria: Evaluation criteria are developed and used to
rate or score proposals and the criteria could include
 Understanding of need
 Technical capability and approach
 Overall or life-cycle cost
 Management approach
 Financial capacity
 Production capacity and interest
 Business size and type
 Reference
 Intellectual property rights
 Proprietary rights
Request Seller Responses
 The Request Seller Responses process obtains responses, such
as bids and proposals, from prospective sellers on how project
requirements can be met
Select Sellers
 Factors used to select sellers:
 Price or cost can be the primary determinant
 Technical, commercial and management part of the
proposal
 Sources of delivering on time or mitigating risk
 Tools and techniques
 Select a single seller that will be asked to sign a standard
contract
 Establish a negotiating sequence by ranking all proposals
by the weighed evaluation scores assigned to each
proposal
 Generally selecting sellers depend on the proposal
Select Sellers
Select Sellers: tools and techniques
 Weighting System: a weighting system is a method for quantifying
qualitative data to minimize the effect of personal prejudice on seller
selection
 Independent Estimates: for many procurement items, the procuring
organization can either prepare its own independent estimates or have
prepared an independent estimate of the costs as a check on proposed
pricing
 Screening System: a screening system involves establishing
minimum requirements of performance for one or more of the
evaluation criteria, and can employ a weighting system and
independent estimates
 Contract Negotiation: contract negotiation clarifies the structure and
requirements of the contract so that mutual agreement can be reached
prior to signing the contract. Final contract language reflects all
agreements reached
Select Sellers: tools and techniques
 Seller Rating Systems: seller rating systems are developed by
many organizations and use information such as the seller’s
past performance, quality ratings, delivery performance, and
contractual compliance
 Expert Judgment
 Proposal Evaluation Techniques: many different techniques
can be used to rate and score proposals, but all will use some
expert judgment and some form of evaluation criteria. The
evaluation criteria can involve both objective and subjective
components
Contract Administration
 Both the buyer and the seller administer the contract for
similar purposes
 Each party ensures that both it and the other party meet
their contractual obligations and that their own legal rights
are protected
 Ensures that the seller’s performance meets contractual
requirements and that the buyer performs according to the
terms of the contract
 Because of the legal considerations, many organizations
treat contract administration as an administrative function
separate from the project organization
Contract Administration
 Include other project management process
 Direct and Manage Project Execution
 Performance Reporting
 Perform Quality Control
 Integrate Change Control
 Risk Monitoring and Control
 Involves monitoring of payments to the seller
 Generally, it reviews and documents how well a seller is
performing or has performed based on the contract and
established corrective actions
Contract Administration
Contract Closure
 The Contract Closure process supports the Close Project
process since it involves verification that all work and
deliverables were acceptable
 Involves administrative activities, such as updating
records to reflect final results and archiving such
information for future use
 Early termination of a contract is a special case of contract
closure, and can result from a mutual agreement of the
parties or from the default of one of the parties
 The rights and responsibilities of the parties in the event
of an early termination are contained in a terminations
clause of the contract
Contract Closure