day 3 - project management methodology with pmp exam preparation ver 1

7/27/2019 Day 3 - Project Management Methodology With PMP Exam Preparation Ver 1

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ro ec anagemen e o o ogy w

Exam Preparation Day 3

PMP, Prince2 Practitioner, ITIL, CGEIT

July 14, 2012


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Recognizing Excellence in Project Management


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Agenda

Plan Risk Management

TEA BREAK

Perform Qualitative Risks

Perform Quantitative Risks

Risk Exercises

LUNCH BREAK

Recognizing Excellence in Project ManagementRecognizing Excellence in Project Management


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Agenda

Plan Risk Responses

Develop Human Resource Plan

TEA BREAK

Acquire Project Team

Develop Project Team

Manage Project Team

Plan Procurement

Day 3 Quiz

PMP Exam Tips and Tricks



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PROJECT RISK MANAGEMENT



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Project Risk Management

ro ec s anagemen

Processes of conducting risk management planning,identification, analysis, response planning, and monitoring and

control on the ro ect

Project Risk Management Objective

To increase the robabilit and

impact of positive events

(Opportunities)

Decrease the probability and impact

of negative events in the project

Risks



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Introduction to RiskRisk

Uncertain Events or Condition that may have positive ornegative effect on the project. Risks are Inherent in ProjectManagement.

Risk Key Features

Has im act on at least one ro ect

objective

(Time / Cost / Scope / Quality)

Should be approached and planned early

in the planning phase can help to,

positive risks

Minimize the consequences ofadverse risks



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Introduction to Risk

Types of Risk

Known Risks - Planning is possible

Unknown Risks - Cant be managed

proactively add contingencies

s o erance an u es

Amount or degree of risk acceptable

Influencing the way Risks are respondedby Individuals or Stakeholders.



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Project Risk Management

Monitoring &Controllin Processes

PlanningProcesses

Enter phase/Start project

Exit phase/End project

InitiatingProcesses

ClosingProcesses

Executing

Processes

Knowledge

Area

Process

Initiating Planning Executing Monitoring & Control Closing

Risk


Identify Risks

Perform Qualitative Risk Analysis

Perform Quantitative Risk Analysis

Plan Risk Responses

Monitor and Control Risks



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PLAN RISK MANAGEMENT


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an s anagemen

Process of deciding how to approach & plan the riskmanagement activities for a project. Planning also important to

rovide sufficient resources & time for risk mana ement

Risk Management Planning KeyPoints

activities

Ensure that the degree, type and

visibility of risk management arecommensurate with the si nificance

of the project.

Establish an agreed-upon basis for

evaluatin risk. This process should be initiated at the

early stages of project planning.



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Inputs

Project scopeStatement

Tools and Techniques

Planning Meetingsand anal sis

Outputs

Risk ManagementPlan

Cost Management Plan

Schedule Management

Communications

Management Plan

Enterpr se

environmental factors

Organizational process



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Inputs - Plan Risk Management

Attitude towards Risk and Risk Tolerance

Expressed in policy statements or Revealed in actions

Organizational Process Assets

Risk Categories

Common Definition of concepts and terminologies

Defined roles, responsibilities and authority levels fordecision-making

Lessons Learned Stakeholder Registers



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Inputs - Plan Risk Management

Deliverables and a common understanding amongstakeholders

r ves ramewor or s anagemen e or

Cost Management Plan

Describes how risk budgets, contingencies, andmanagement reserves will be communicated and accessed.

Schedule Management Plan

Describes how schedule contingencies will be

communicated and assessed.

Communication Management Plan

Hel s to determine who will be available to share information


on various risk and responses


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Tools & Techniques - Plan Risk Management

Project team hold planning meetings to develop riskmanagement plan.

Attendees include

ro ec anager

Project Team Leaders

Key Stakeholders nyone respons e or p ann ng an

executing activities

activities will be developed for inclusion in theproject budget and schedule respectively.



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Outputs - Plan Risk Management

The risk management plan is responsible for

determining

How quantitative analysis will becompleted

completed

How risk response planning willhappen

How risks will be monitored

How ongoing risk management activities

will happen throughout the project lifecycle

The Risk Management Plan does not detail the plannedres onses to individual risks within the ro ect : this is the


purpose of the risk response plan


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Risk Management Plan includes Methodology defines the approaches, tools, and data sources that

may be used to perform risk management. Roles & Responsibilities defines the lead, support, and risk

management team membership for each type of action in the plan. Budget Assigns resources and estimate costs needed for risk

management for inclusion in cost baseline. Timing Describes when and how often the risk management process

will be performed throughout the project life cycle. Risk Categories

Provide a structure that ensures a comprehensive process ofsystematically identifying risk to a consistent level of detail.

a structure.



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Risk Breakdown Structure - Example



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Risk Breakdown Structure - Example



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Risk Mana ement Plan includes


Definition of Risk Probability and Impact General definitions ofprobability levels and impact levels are tailored to individual projects.

Probability and Impact Matrix Risk prioritization using combination

of probability and impact.

ev se ta e o er s o erances ta e o ers to erances may

be revised in the Risk Management Planning process, as they apply to

the specific project.

Reporting formats Defines how the results of the risk management

processes will be documented, analyzed, and communicated to the

project team and stakeholders.

Tracking Documents how all facets of risk activities will be recorded.


audited.


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Probability and Impact Matrix - Example



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IDENTIFY RISKS

Id tif Ri k


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Identify Risks

Identif Risks

Iterative process for determining which risks are likely toaffect the project and documenting the characteristics of eachrisks.

s en ca on ey o n s

Types of Risks Internal risks Things that the project team

can control or influence

External risks Things beyond the control or

influence of the project team

Identify Risks is an iterative process because new risks evolve or

become know as the project progresses through its life cycle.

Triggers : Early warning signs or indications that a risk to your

project is about to occur.

Identify Risks is concerned with opportunities (positive


,


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Identify Risks

Project Manager, Project Team Members Customers , End Users Sub ect Matter Ex erts outside ro ect Risk Management Experts

External, unpredictable: Regulatory, etc.

External, predictable: Market risks

n erna , non- ec n ca : anagemen

Technical : Design

Legal : Contractual



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Identify Risks

Inputs

Risk Management Plan


Documentation

Outputs

Risk Register

Activity Cost estimates

Activity Duration estimate

Sco e baseline

ev ews

Information GatheringTechniques

Stakeholder register

Cost Management plan

Checklist analysis

Assumptions Analysis

DiagrammingSchedule Management plan

Quality Management Plan

Project Documents

Techniques

SWOT Analysis

Ex ert Jud mentEnterprise environmental

factors

Organizational process assets


Id if Ri k


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Identify Risks


Inputs Identify Risks


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Enterprise Environmental Factors


Published information including commercial databases

Academic studies or other industry studies. Published checklist, Benchmarking. Risk attitudes.

Organizational Process Assets Project files including actual data

Organizational and project process controls Lessons learned

Activity Cost Estimates

Indicative of likely cost to complete the scheduled activity expressed as a range

Width of range is indicative of degree of risk involved

Scope Baseline

Uncertainty in Project Assumptions


WBS

I t Id tif Ri k


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Schedule estimates risks

Stakeholder list/inputs

Customer interviews / participation in risk identification

Risk Management Plan Assignment of Roles and Responsibilities Provision of Risk Management Activities in the Budget and Schedule

Schedule Management Plan

Cost Management Plan Risk related to cost management approach


I t Id tif Ri k


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Quality management approach may generate or alleviate the risks.

Assumption log

Work Performance reports

Earned Value reports

Network Diagrams

Baselines

Other project information proven to be valuable in identifying risks


T l & T h i Id tif Ri k


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Documentation Reviews

Tools & Techniques Identify Risks

A structured review may be performed of project documentation.

Information Gathering Techniques

ra nstorm ng oa s to ent y compre ens ve st o pro ect r s s

using frameworks like RBS Delphi technique Way to reach a consensus of experts

Interviewing SME, Experienced project stakeholders

Root Cause analysis

Organized by Source of Risk

Not a complete and final list of Risk

Needs to be updated at the closure for future project use

Whats the big difference between Brainstorming and the DelphiTechni ue? Can ou think of a situation where one would be more


useful than the other?



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Examines the validity of assumptions

Identifies risks to the project from inaccuracy, inconsistency, or

Diagramming Techniques

Cause and Effect Diagrams also known as Ishikawa or Fishbone

diagrams




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agramm ng ec n ques

System or process flow charts - that

shows the relationship between

componen s an ow e overa process

works.

Influence diagrams graphical

represen a on o s ow ng causa

influences, time ordering events and

other relationships among variables


.



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Expert Judgment


Experts with relevant experience of similar projects can help identify risks.

SWOT Anal sis

Strengths, weaknesses, opportunities, and threats (also known as SWOT

analysis) is a technique that examines the project from each of theseperspectives to increase the breadth of identified risks by including

internally generated risks. Examples,

Strengths : The technology to be installed in the project has been.

Weakness : We have never installed this technology before.

time for time-to-market on new products.

Threats : The time to complete the training and simulation may overlap


, ,

technology portfolio.

Outputs Identify Risks


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Outputs Identify Risks

s eg s er

Document that identifies and categorizes risks, potential risk

responses, and their triggers, or warning signs.



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PERFORM QUALITATIVE RISK ANALYSIS



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Perform Qualitative Risk AnalysisPerform Qualitative Risk Analysis

by assessing and combining their probability of occurrence andthe Impact

Qualitative risk qualifiesthe risks that have been

identified in the project.

It examines and prioritizes the risks based on their

probability of occurring and the impact on the projectif the risks did occur.

Improves project performance by focusing on High-

Priorit risks.

Rapid and cost-effective means of establishing priorities

forPlan Risk Res onses and foundation forPerform


Quantitative Risk Analysis.

P f Q lit ti Ri k A l i


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Inputs


assets


Risk probability &

impact assessment

Outputs

Risk register updates.

Project scope

statement


Probability and impact

matrix

Risk data quality

Risk registerassessment

Risk categorization

assessment

Expert Judgment




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Inputs Perform Qualitative Risk Analysis


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Inputs Perform Qualitative Risk Analysis

Risk Database Information on prior, similar completed projects.

Project Scope Statement

Kind of work determines the amount of risk

Common or recurrent t e have less risk

State-of-the-art, first time technology, orhighly complex

projects have more uncertainty


s eg s er

Identified Risks Evaluation of risks identified during the

Identify Risks process and their potential impacts on the project


Tools & Techniques Perform Qualitative


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Tools & Techniques Perform QualitativeRisk Analysis

Risk Probability and Impact Assessment Risk probability - is the likelihood that a risk

. Probability and Impact are assessed for each

risk. Risk consequences is the effect on projectob ectives if the risk event occurs; done ateach risk level


Tools & Techniques Perform Qualitative Risk


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Tools & Techniques Perform Qualitative RiskAnalysis

Risk / Impact Risk Rating Matrix - Examples Risk Probability Scale falls between 0.0 (no probability) and 1.0 certainty) ,

Ordinal scale ranked-order scale, such as very low, low, moderate, high, and very

high Cardinal scale assign values to these impacts. These values are usually linear

(.1/ .3/ .5/ .7/ .9) or nonlinear (.05/ .1/ .2/ .4/ .8/)


Tools & Techniques Perform Qualitative


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Tools & Techniques Perform QualitativeRisk Analysis


Tools & Techniques Perform Qualitative Risk Analysis


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Risk Data Quality Assessment

Tools & Techniques Perform Qualitative Risk Analysis

ec n que o eva ua e e egree o w c e a a s use u

Extent of understanding of the risk Data available about the risk Quality of the data Reliability and integrity of the data

Risk Categorization

Sources of Risks Area of the project affected

Project Phase

Risk Urgency Assessment

Risks requiring near-term responses may need to be urgently addressed.

Expert Judgment



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ANALYSIS



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er orm uan a ve s na ys s

Measuring numerically the effect of identified risk on overallproject objectives.

Quantitative Risk Analysis Key Points

Performed on risks that have been prioritizedb the Perform Qualitative Risk Anal sis

process as substantially impacting project

objectives.

Analyzes the effect of risk events and assignsnumerical rating to those risks individually

or to evaluate the aggregate effect of all risks

affecting the project.

Perform Quantitative analysis is a more time-consumingprocess as compared to Qualitative analysis, and is therefore


also more expensive.



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Quantitative Risk Analysis Goals

To ascertain the likelihood of reaching projectsuccess.

To ascertain the likelihood of reachin a articular

project objective.

To determine the risk exposure for the project.

To determine the likel amount of the contin enc

reserve needed for the Project.

To determine the risks with the largest impact on the

ro ect.

To determine realistic time, cost, and scope targets.

This process should be repeated afterPlan Risk

if overall project risk has been satisfactorily decreased.

Generally this is done afterPerform Qualitative Risk

Anal sis rocess. In some cases this rocess ma not


be required to develop effective risk responses.

P f Q tit ti Ri k A l i


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Inputs

Risk register


Data gathering and

Outputs

Risk register updates.


Cost management plan

Schedule mana ement

techniques

Quantitative risk

plan


techniques

Expert Judgment


P f Q tit ti Ri k A l i


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Inputs Perform Quantitative Risk Analysis


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Inputs Perform Quantitative Risk Analysis

Risk Database Information on prior, similar completed projects.

Risk Management Plan discussed earlier

Schedule Mana ement Plan discussed earlier

Cost Management Plan discussed earlier

Risk Register

Identified Risks Evaluation of risks identified durin theIdentify Risks process and their potential impacts on the project


Tools & Techniques Perform Quantitative Risk Analysis


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Data Gathering and Representation Techniques

q y

Interviewing

With project stakeholders and subject-matter experts to quantify

the probability and consequences of risks on project objectives.

Refers to Historic data too.

The information needed depends upon the type of probability distributionsthat will be used.

.

Probability Distributions

Continuous probability distributions represent the

uncertainty in values, such as durations of schedule

activities and costs of project components.

Discrete distributions can be used to represent uncertain events, such as

e ou come o a es or a poss e scenar o n a ec s on ree.




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Quantitative Risk Anal sis and Modelin Techni ues

q Q y

Sensitivity Analysis

Helps to determine which risks have the most

potential impact on the project.

Tornado Diagram is one typical display ofsensitivity analysis, useful for comparing

re a ve mpor ance an mpac o var a es.

Calculates the average outcome when the future includesscenarios that may or may not happen.

EMV calculates the expected monetary value of a decisionbased on its risk event probability and monetary value

EMV = probability ( in %) X consequences or impact

EMV ofopportunities are expressed as positive values, while


.


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Decision Tree / EMV Example




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Modeling and Simulation

Uses a model or copy of the system to analyze the behavior orperformance of the system.

Monte Carlo Simulation

Perform project many times to provide a statistical distribution of

calculated results Uses results to quantify the risk of various schedule alternatives, different

pro ec s ra eg es, eren pa s roug e ne wor .

Can be used to assess the range of possible cost options




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Modeling and Simulation Example




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Ex ert Jud ment

Subject matter experts internal or external to theorganization, such as engineering or statisticalexperts, validate data and techniques.

Interpretation of data.

Tools evaluation for performing quantitative analysisgiven organization culture.


Outputs Perform Quantitative Risk Analysis


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Risk Re ister U dates

Probabilistic Analysis of the project Forecasts potential project schedule and cost results

Lists the ossible com letion dates or ro ect duration and costswith their associated confidence levels

Probabilit of achievin cost and time ob ectives

Under the current project plan and with the current knowledge of therisks facing the project

Prioritized list of quantified risks

Risks that pose greatest threat or present the greatest opportunityto the project together with a measure of their impact

Trends in Quantitative Risk Analysis results

As anal sis is re eated a trend of results ma become a arent



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Plan Risk Responses


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p

an s esponses

Process of developing options and determining actions toenhance opportunities and reduce threats to the projects

ob ectives

Plan Risk Responses Key Points

.

Cost effective in meeting the challenge

Timely to be successful. Realistic within the project context.

Agreed upon by all parties involved.

Owned by a responsive person.


Plan Risk Responses


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Plan Risk Responses

Inputs

Risk management planTools and Techniques

Strategies for negative

Outputs

Risk register updates

Strategies for positive

risks or opportunities

decisions

Project managementlan u dates

ont ngent response

strategies

Expert Judgment

Project documentupdates


Plan Risk Responses


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Plan Risk Responses


Inputs Plan Risk Responses


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p p

Risk Management Plan (described earlier)

Risk Register Identified Risks

Evaluation of risks identified during theIdentify Risks process and their potential

impacts on the project



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Tools & Techniques Plan Risk Responses


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Avoidance

eliminate the threat posted by an adverse risk.

To isolate the ro ect ob ectives from the risksimpact, or to relax the objective that is in

jeopardy.

Examples:

Change the Implementation strategy

Do it ourselves (do not subcontract)

Reduce scope to avoid high risk deliverables

Adopt a familiar technology or product



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q p

Mitigate

impact of an adverse risk event to an

acceptable threshold.

Be proactive: Take early actions to reduceimpact/probability and dont wait until the

risk hits your project

Examples:

Staging - More testing Prototype

Redundancy planning

Use more qualified resources


Implementing new course of action



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Response Strategies for Threats

Accept This strategy indicates that the project team has decided not to change

,

any other suitable response strategy. Used when project plan cannot

be changed & other risk response strategy cannot be used

Develop a contingency plan to execute if the risk occur

Contingency plan = be ready with Plan B

Passive Acceptance

Deal with the risks as they occur = No Plan B prepared

Established amount of reserve (e.g.: time and/or money) to account for

the identified known risks.


moun s ec e ase on pro a y an mpac .


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Outputs Plan Risk Responses


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Risk Re ister U dates

A description of the risk, what area of the project it mayaffect, the causes of the risk, and its impact on project objectives

The outputs of qualitative and quantitative analysis

Agreed upon response strategy

The budget and schedule for risk responses

Both the contingency and fallback plans

Contingency Reserves

Risk related Contractual Decisions

Such as agreements for insurance, services, and other items asappropriate, can be prepared to specify each partys responsibility for


spec c r s s, s ou ey occur.

Outputs Plan Risk Responses


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Pro ect Mana ement Plan u dates

All sections of project management plan needs to be revisited andupdated as applicable as per changes required as per risk response

lannin or information that was made available as art of risk

response.

Schedule, Cost and quality management plans Procurement and Human resource management plans

Work breakdown structure

Cost performance baseline

Schedule baseline

Project Document Updates

Assum tion lo u dates As new information is available as art of riskresponse, assumption log needs to be revisited.

Technical documentation update - technical approaches and physical

deliverables might change as per risk response planned., so this needs to


be updated.

Plan Risk Response


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Plan Risk Response


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Plan Risk Response


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Plan Risk Response


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Monitor & Control Risks


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Tools & Techniques Monitor & Control Risks


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Identification of new risks and reassessment of identified risks and

closing of outdated ones.

Examine and document the effectiveness of risk responses

Examine and document the effectiveness of the Risk management

Variance and Trend Analysis Earned Value Analysis (discussed later)

Compares technical accomplishments during project execution

to the project plan schedule of technical achievement



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Project Human Resource ManagementMonitoring &


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Monitoring &Controllin Processes

Planning

Processes

Enter phase/

Start project

Exit phase/

End project

Initiating

Processes

Closing

Processes

ExecutingProcesses

Knowledge Area

Process

Initiating Planning ExecutingMonitoring &

ControlClosing

Human

ResourceDevelop Human

Resource Plan


Develop Project Team

Manage Project Team



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DEVELOP HUMAN RESOURCE PLAN



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Develop Human Resource Plan


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oo s an ec n ques

Organization charts

and position

u pu s

Human resource plan

npu s

Activity resource

requirements

Networking

Organizational theory

Enterprise

environmental factors

Organizational processasse s



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Tools & Techniques Develop Human Resource Plan


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Role and responsibility definitions or reporting relationship formats Hierarchical

Text oriented

Project Management Responsibilities from

Communication Plan

Quality Plan

Whatever methods are used, the objective is to Ensure that each work package has an unambiguous owner


responsibilities


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Human Resource Plan

Outputs Develop Human Resource Plan


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Roles & Responsibilities

Define roles and responsibilities clearly using the following four elements

Role

Authority

Responsibility

Competency

Graphic display of project reporting relationships

Staffing Management Plan Describes

Staff Acquisition Internal ,External or contracted,

Staff Locations, Cost associated with the acquisition

Resource Calendars - Resource On-boarding andOff-boarding criteria and timelines Resource Histogram

Staff release Plan & Training needs


ecogn on an ewar s

Compliance strategies and safety related policies and procedures


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cqu re ro ec eam

Process of confirming Human Resource availability andobtaining human resources required to complete the project

Acquire Project Team Key Points

Effective negotiation to obtain required.

Identifying risks on the availability of

human resources and update of

.

Identifying alternative resources in case

of constraints.

The project management may or may not have control overteam members selected for the project based on various

factors such as organizational structure, collective bargaining


agreemen s ,ex erna env ronmen a ac ors e c


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Pro ect Mana ement Plan described

Inputs Acquire Project Team


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Pro ect Mana ement Plan described

earlier) Human Resource Plan

Identifying, staffing, managing

controlling and release criteria Roles and Responsibilities

Project organization charts

Staffing management plan with resource

histo ram

Identifies the time periods eachproject team member will be needed

Re uires use of ro ect schedule

information also to determine theabove

A graphical representation of the time periods each project


team member will be needed is known as Resource Histogram


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Virtual Teams

Tools & Techniques Acquire Project Team


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Virtual Teams

Groups of people with a sharedgoal with no time spent

meetin face to face.

Increased importance for

communications plan.

Setting up expectations

Developing protocols for

conflict resolution Including people in decision-

making

Sharing credit for successes



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DEVELOP PROJECT TEAM



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Tools & Techniques Develop Project Team


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Soft skills such as empathy,influence, creativity and group

.

Training

All activities for improvement of teammembercompetencies &

performance.

Scheduled training as per the project

plan.

Unplanned training as a result of

observation, conversation


and project performance appraisals.

Ground Rules



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Clear expectations regarding acceptable behaviorby project team

members.

Responsibility lies with team members for enforcing the rules once

they are established.

Co-location

temporarily or for the full project duration.

Rewards and Recognition Recognizing and rewarding the desirable behaviors

Plans to reward are developed during the Develop HR Plan process.

Award decisions are made while managing the project team by using

the performance

Only desirable behavior should be rewarded. Win-Lose rewards


Rewarding win-win behavior tends to increase the cohesiveness

Team Building Activities



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Activities that enhance the cohesiveness

amongst the team members.

Could be an informal 5 minute item or a well

planned offsite experience.

Five stages of development that teams may gothrough:

Forming

Storming

Normin Performing

Adjourning



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Tools & Techniques Manage Project Team


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ForcingCollaborating

Pushing ones viewpoint at theexpense of others; Offers only win-

lose solutions.

Incorporating multiple viewpointsand insights from differing

perspectives; Leads to consensus

and commitment.at

self

Compromising

Searching for solution that bringsome degree of satisfaction to allB

ehaviorst

focused

on

Confronting & Problem Solving

Treating conflict as problem to besolved by examining alternatives;Withdrawing/Avoiding Smoothing/Accommodating

.

Requires a give and take attitudeand open dialogue.

Retreating from an actual orpotential conflict situation. Emphasizing areas of agreementrather than areas of difference.


focused on others


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Conflict Management Techniques

Tools & Techniques Manage Project Team

Collaborating I win, you win


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Co abo at g , you

Incorporating multiple viewpoints and insights from differing perspectives;leads to consensus and commitment.

Fundamental premise: Teamwork and cooperation help everyone achievetheir goals while also maintaining relationships

on ron ng ro em o v ng o v ng e rea pro em

It seems to me that the real problem here is not a lack of communication, buta lack of knowledge of what each activity costs. Here is a copy of the WBS

.know.

Problem Solving Process:

Define the cause of the roblem not ust the s m toms

Analyze the problem

Identify solutions


Review the decision and confirm that the decision solved the problem


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Outputs Manage Project Team


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Items such as Staffing changes

ona ra n ng sc p nary ac ons

Rewards and Recognitions etc.

Cross-training

ona ro e c ar ca on

Added personal time in anticipation ofextra work



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Plan Procurements

Tools and TechniquesInputs Inputs


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oo s d ec ques

Make or Buy Analysis

p

Scope baseline

p

Procurement

Expert Judgment

Contract Types

Requirements documentation

Teaming agreements

Risk re istr

Procurement Statement

of Work (SOW)

Risk-related contract decisions

Activity resource requirements

Procurement

documents

Project schedule

Activity cost estimates

Cost erformance baseline

Source Selection

criteria

Change requests

Enterprise environmental factors

Organizational process assets



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Inputs - Plan Procurements

Scope Baseline


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Scope Baseline

Scope Statement

, ,deliverables, acceptance criteria

WBS

project deliverables.

WBS Dictionary

within each WBS

equ remen s ocumen a on Information about Project requirements that is

considered during procurement planning


Requirements with contractual and legal implications


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Inputs - Plan Procurements


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To evaluate the rationale of the bids or proposals

Cost Performance Baseline

Detail on the Planned budget over time

Enterprise Environmental Factors

Conditions of market place

Products, services or results that are available in the market place

Suppliers, including past performance or reputation.

Terms and conditions

Unique local requirement



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Tools & Techniques Plan Procurements

Make or Buy Analysis


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Make or buy results

Purchase or rent

Should consider Life cycle costs for the analysis

Budget constraints influence make-or-buy decisions

Expert Judgment

Expert technical judgment

Ex ert urchasin ud ment

Expert legal judgment



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Cost plus Incentive Fee (CPIF) contracts This is the type of contract in which the buyer reimburses the seller

or e se er s a owa e cos s an nc u es an ncen ve or exceeding the performance criteria laid out in the contract.

Contract = Cost + Incentive Fee

Example : Suppose you have a CPIF contract with the incentive feepegged on the final cost of the contract. The pre negotiated savings

share of the incentive bonus formula is 85/15 85 ercent for thebuyer and 15 percent for the supplier).The expected cost of a projectis $100,000 and the fee is $10,000. Suppose the final cost of theproject is $80,000. What would be the total payment to the

con rac orThe final payment to the contractor will be:


, , - , ,


160/169


161/169



162/169

Time and Material contracts

(i.e. costs not to exceed and time limits) andCost reimbursable (value of agreement not

defined).

Priced on per hour or per item basis plus afixed price for materials

e uyer ears e gges r s n s ype ocontract.



.


163/169

Fixed Price

FFP

HighLow

FPIF

Time and Materials

SELLER

RISK

BUYER

RISK

Cost Reimbursable

CPIFT&M can be a high risk for buyer

if contract does not include atotal not-to-exceed (NTE)

CPF

CPPC

LowHigh




164/169


Outputs - Plan Procurements

Procurement Management Plan


165/169

Describes how the procurement processes will be

. ,

Types of contracts to be used

Estimate preparation and evaluation

Coordinating procurement with scheduling andperformance reporting

Identifying performance bonds or insurance

contracts to mitigate project risks

Format to be used for contract statement of work

Procurement metrics to be used to managecontract and evaluate sellers



Procurement Statement of Work


166/169

Describes the procurement items in

determine if they are capable of providing

the item ,

to be supplied by seller

Includes specifications, quantity desired,

Should include a description of any

collateral services required for the procured

item



Make-or-Buy decisions


167/169

What project products, services or results

by project team.

Make-or-buy decisions document includes.


Outputs - Plan Procurements Procurement Documents

Used to seek proposals from prospective sellers.,


168/169

Bids, tender, quotation when sellerselection decision is based on price.

Proposal When seller selection is done

based on technical skill or approach

Common names for different types of procurement

documents are

Invitation for bid (IFB)

Request for proposal (RFP) / quotation (RFQ)

Tender notice

Invitation for negotiation

Contractor initial response Procurement Contract T e

Procurement documents should include: The relevant statement of work

Descri tion of the desired res onse

document

RFP CR

IFB FP


Required contractual provisions RFQ T&M

Outputs - Plan Procurements Exercise Contract Calculation

In this cost plus incentive fee contract, the cost is estimated at $210,000


169/169

and the fee at $25,000. The project is over, and the buyer has agreed thatthe costs were, in fact, $200,000. Because the seller's costs came in lower

an e es ma e cos s, e se er s ares n e sav ngs: percen o

the buyer and 20 percent to the seller. Calculate the final fee and final

price.

Target cost

Target fee

Tar et rice

210,000

25,000

235 000Sharing Ratio

Actual cost

80/20

200,000

na ee , , = ,10,000 x 20% = 2,000