Project Procurement Management WorkshopProject Management PMP Boot Camp : Project Procurement Management WorkshopProject Management PMP Boot Camp 1
Slide 2 : 2 Learning Goals . The Meaning of Project Procurement Management
The Process
Plan Procurement
Conduct Procurements
Administer Procurements
Close Procurements
Inputs
Tools and Techniques
Outputs
Slide 3 : 3 Project Procurement Management It includes processes necessary to purchase or acquire products, services
, or results needed from outside the project team. The organization can be either
The buyer or seller of the products, services, or results of a project.
The Processes under procurement management are
Plan Procurements: It is the process of documenting project purchasing
decisions, specifying the approach, and identifying potential sellers.
Conduct Procurements: The process of obtaining seller responses, selecting a seller,
and awarding a contract.
Administer Procurements: The process of managing procurement relationships,
monitoring contract performance, and making changes and corrections as needed.
Close Procurements: The process of completing each project procurement
Slide 4 : 4 Plan Procurements Plan out what you’ll purchase, and how and when you will need the contracts to
be negotiated for your project. Procurement is pretty intuitive, and the four Procurement Management processes
follow a really sensible order. First you plan what you need to contract; then you
plan how you’ll do it.
Next, you send out your contract requirements to sellers. They bid for the chance
to work with you. You pick the best one, and then you sign the contract with them.
Once the work begins, you monitor it to make sure the contract is being followed.
When the work is done, you close out the contract and fill out all the paperwork. Plan Procurements- Inputs Scope Baseline
Requirements Documentation
Teaming Agreement
Risk Register
Risk-Related Contract Decisions
Slide 5 : 5 Plan Procurements- Inputs (contd) 6. Activity Resource Requirements
7. Project Schedule
8. Activity Cost Estimates
9. Cost Performance Baseline
10. Enterprise Environmental Factors
11. Organizational Process Assets Plan Procurements- Tools and Techniques Make- or- buy Analysis: means figuring out whether or not you should be
contracting the work or doing it yourself. It could also mean deciding whether to
build your own solution to your problem or buy one that is already available.
2. Expert Judgment: means asking someone who’s made the same kind of
decision before to help you look at all the information you have for your
project and make the right decision.
Slide 6 : 6 3. Contract Types
Fixed price contracts Fixed price (FP) means that you are going to pay one amount regardless of how
much it costs the contractor to do the work. A fixed price contract only makes
sense in cases where the scope is very well known. If there are any changes to the
amount of work to be done, the seller doesn’t get paid any more to do it.
Fixed price plus incentive fee (FPIF) means that you are going to pay a fixed price
for the contract and give a bonus based on some performance goal. You might set
up a contract where the team gets a $50,000 bonus if they manage to deliver an
acceptable product before the contracted date.
If the fixed-price contract does not include a fee, it’s often referred to as
a firm fixed price (FFP) contract. It is the most commonly used contract type,
because the price for goods is set at the onset and not subject to changes unless
the scope of work changes.
Slide 7 : 7 Cost-reimbursable contracts Costs plus fixed fee (CPFF) means what it says. You pay the seller back for the
costs involved in doing the work, plus you agree to an amount that you will pay
on top of that.
Costs plus award fee (CPAF) is similar to the CPFF contract, except that instead
of paying a fee on top of the costs, you agree to pay a fee based on the buyer’s
evaluation of the seller’s performance.
Costs plus incentive fee (CPIF) means you’ll reimburse costs on the project and
pay a fee if some performance goals are met. An example is Kate could set up
her project using this contract type by suggesting that the team will get a $50,000
bonus if they keep the average wait time for the calls down to seven minutes per
customer for over a month. If she were on a CPIF contract, she would pay the
team their costs for doing the work, and also a $50,000 bonus when they
met that goal.
Slide 8 : 8 Time and Materials (T&M) is used in labor contracts. It means that you will pay a
rate for each of the people working on your project plus their materials costs.
The “Time” part means that the buyer pays a fixed rate for labor—usually a certain
number of dollars per hour. And the “Materials” part means that the buyer also pays
for materials, equipment, office space, administrative overhead costs, and anything
else that has to be paid for. Time and Materials Plan Procurement: Output Procurement Management Plan
Procurement Statement of Work: The Procurement SOW describes the
procurement item in sufficient detail to allow prospective sellers to determine
if they are capable of providing the products, services, results. Information
included in a SOW can include specifications, quantity desired, quality level
performance data, work location, and other requirements.
3. Make or Buy Decisions: It documents the conclusions reached regarding
what project products, services, and results will be acquired from outside the
project organization or will be performed internally be the project team.
Slide 9 : 9 4. Procurement Document Procurement documents will have all of the information that you’ll actually give to
potential sellers to help them bid on your contract. Two of the most commonly
used procurement documents are the RFI and the RFP.
RFI - Request for information documents are sent to potential sellers to
ask for information about their capability to do the work.
RFP - Request for Proposal is when you give a seller the opportunity to
examine your procurement documents and write up a proposal of how they’d do
the work.
5. Source Selection Criteria: Use the Source Selection Criteria to evaluate the
sellers that respond to you. By evaluating all of your sellers using the same criteria,
you’ll be sure that you evaluate everyone fairly and find the right seller for your
company.
6. Change Request.
(Read the PMBOK Guide learn more about the various outputs)
Slide 10 : 10 Conduct Procurement The process of obtaining seller responses, selecting a seller, and awarding a contract.
You’ve figured out what services you want to procure, and you’ve gone out and
found a list of potential sellers. Now it’s time to choose one of them to do the
project work—and that’s exactly what you do in Conduct Procurements. Conduct Procurement - Inputs Project Management Plan
Procurement Documents
Source Selection Criteria
Qualified Seller list
Seller Proposal
Project Document
Make or Buy Decisions
Teaming Agreements
Organizational Process Assets
Slide 11 : 11 Conduct Procurement - Tools and Techniques Bidder Conferences: Meetings between the buyers and all prospective sellers
prior to submittal of a bid or proposal. It’s really important that you make
sure all of the bidders can compete in a fair, unbiased way. And the best way
to do that is to get them all in a room together, so that they can ask questions
about your contract.
2. Proposal Evaluation Techniques: working closely with the seller to figure out if
their proposal really is appropriate for the work.
3. Independent Estimates: A lot of the time, you don’t have the expertise in your
company to figure out whether or not a seller is quoting you a fair price. That’s why
you’ll often turn to a third party to come up with an estimate of what the
work should cost.
4. Expert Judgment: It is when you bring in someone with a lot of specific
expertise in the work being done to make sure the seller is up to the job.
5. Advertising: Sometimes the best way to get in touch with sellers is to place
an ad.
6. Internet Search: Companies will often use an Internet search to get in idea of the
price range for the things they’ll need to buy as part of the proposal. The more
complex the procurement process, though, the less helpful this tool is.
Slide 12 : 12 7. Procurement Negotiations: This is one of those times where your company’s
lawyers will probably do most of the talking—but that doesn’t mean you’re
not a critical part of the process. Conduct Procurements: Outputs
Selected Sellers: The most important output. The sellers selected are those
sellers who have been judged to be in a competitive range based on the outcome
of the proposal or bid evaluation, and who have negotiated a draft contract
that will become the actual contract when an award is made.
2. Procurement Contract Award : A procurement contract is awarded to each
selected seller. It is a mutually binding legal agreement that obligates the seller
to provide the specified products, services, or results, and obligates the buyer to
compensate the seller. It is a legal relationship subject to remedy in the courts.
3. Resource Calendars: The quality and availability of contracted resources
and those dates on which specific resource can be active or idle are documented.
4. Change Request
5. Project Management Plan updates
6. Project Document Updates
Slide 13 : 13 Administer Procurements Administer Procurements- Inputs The process of managing procurement relationships,
monitoring contract performance, and making changes and corrections as needed. Procurement Documents
Project Management Plan
Contract
Performance Reports
5. Approved Change Requests: The approved change requests are the way
that you change the terms of the contract if something goes wrong.
6. Work Performance Information: The seller puts these together for you so that
you have the information you need to judge how well the project work is going Administer Procurements- Tools and Techniques 1. Contract Change Control System: It’s a set of procedures that are set up to
handle changes in the contract. You might have a different one for every contract
in your project.
Slide 14 : 14 2. Procurement Performance Reviews: Most contracts lay out certain standards for
how well the seller should do the job. Is the seller doing all the work that was agreed
to? Is the work being done on time? The buyer has the right to make sure this is
happening, and the way to do this is to go over the performance of the seller’s team.
3. Inspections and Audits: This tool is how the buyer makes sure that the product
that the seller produces is up to snuff. This is where you’ll check up on the
actual product or service that the project is producing to make sure that it meets your
needs and the terms of the contract.
4. Performance Reporting: You will use them to monitor the project work
and report on the progress to your company’s management.
5. Payment System: The payment system is how your company pays its sellers.
It’s usually established by an Accounting or Accounts Receivable department.
6. Claims Administration: When there’s a dispute between a buyer and a seller, that’s
called a claim. Most contracts have some language that explains exactly how
claims should be resolved—and since it’s in the contract, it’s legally binding, and both
the buyer and seller need to follow it.
7. Records Management System: There are a lot of records produced by a typical contract:
invoices, receipts, communications, memos, emails, instructions, clarifications, etc.
You’ll need to put a system in place to manage them.
Slide 15 : 15 Administer Procurements: Outputs Procurement Documentation
Organizational Process Assets updates
Change Requests
Project Management Plan updates Close Procurements The process of completing each project procurement. It supports the Close
Project or Phase process. Close Procurements- Inputs Project Management Plan
Procurement Documentation
Slide 16 : 16 Close Procurements- Tools and Techniques Procurement Audits: Once you’ve closed out the contract, you go over everything
that happened on the project to figure out the lessons learned and look for anything
that went right or wrong.
2. Negotiated Settlement: You need to make sure that all of the terms of the
contract have been met and there are no outstanding claims on it. If the buyer
or the seller have outstanding claims from the relationship, they need to get
resolved, sometimes through legal arbitration or, in the worst-case scenario,
in court.
3. Records Management System: Past project managers stored their contracts
and other documents in the records management system. Close Procurements- Outputs Closed Procurements: The way you close out a contract is by giving notice—a
formal written one—that the contract is complete… and instructions for doing that
should be part of the contract terms.
2. Organizational Process Assets Updates: Any lessons you learned from the
procurement audits should be added here, along with any documentation and a
copy of the formal acceptance that you gave to the seller.