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Project ProcurementManagement
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Topics
v Procurement Plan
vArjay Dela Cruz
v Solicitation PlanningvAndrea Ramos
v Solicitation
v Michelle Rose Hernal
v Source Selection
v Ma. Gella Monancillo
v Contract Administration
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Project ProcurementManagement Overview
PROJECT PROCUREMENT MANAGEMENT
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PROCUREMENTPLANNING
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PROCUREMENTPLANNING
Procurement planning is the processof identifying which project needscan be best met by procuring
products or services outside theproject organization. It involvesconsideration of whether to procure,
how to procure, what to procure,how much to procure, and when toprocure it.
Procurement planning should also
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Inputs to ProcurementPlanning
Scope statement
The scope statement describes the
current project boundaries. It providesimportant information about projectneeds and strategies that must beconsidered during procurement
planning.Product description
The description of the product of the
project provides important information
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Inputs to ProcurementPlanning
Procurement resources
If the performing organization does not
have a formal contracting group, theproject team will have to supply boththe resources and the expertise tosupport project procurement activities.
Market conditions
The procurement planning process mustconsider what products and services are
available in the marketplace, from
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Inputs to ProcurementPlanning
Other planning outputs
To the extent that other planning
outputs are available, they must beconsidered during procurementplanning. Other planning outputs whichmust often be considered include
preliminary cost and scheduleestimates, quality management plans,cash flow projections, the workbreakdown structure, identified risks,
and planned staffing.
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Inputs to ProcurementPlanning
Constraints
Constraints are factors that limit the
buyers options. One of the mostcommon constraints for many projects isfunds availability.
Assumptions
Assumptions are factors that, forplanning purposes, will be considered tobe true, real, or certain.
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Tools and Techniques forProcurement Planning
Make-or-buy analysis
This is a general management
technique which can be used todetermine whether a particular productcan be produced cost-effectively by theperforming organization. Both sides of
the analysis include indirect as well asdirect costs.
A make-or-buy analysis must also reflectthe perspective of the performingorganization as well as the immediate
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Tools and Techniques forProcurement Planning
Expert judgment
Expert judgment will often be required
to assess the inputs to this process.Such expertise may be provided by anygroup or individual with specializedknowledge or training and is available
from many sources including: Other units within the performing
organization.
Consultants.
Professional and technical associations.
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Tools and Techniques forProcurement Planning
Contract type selection
Different types of contracts :
Fixed price or lump sumcontracts: involve afixed total price for a well-defined product orservice.
Cost reimbursablecontracts: involve payment
to the seller for direct and indirect costs. Time and materialcontracts: hybrid of both
fixed price and cost reimbursable contracts, oftenused by consultants
Unit pricecontracts: require the buyer to paythe seller a predetermined amount per unit of
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Outputs from ProcurementPlanning
Procurement management plan
The procurement management planshould describe how the remainingprocurement processes (from solicitationplanning through contract close-out) willbe managed.
A procurement management plan maybe formal or informal, highly detailed orbroadly framed, based on the needs ofthe project. It is a subsidiary element of
the overall project plan described in
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Outputs from ProcurementPlanning
Statement(s) of work (SOW)
A statement of workis a description
of the work required for theprocurement.
If a SOW is used as part of a contract todescribe only the work required for thatparticular contract, it is called acontract statement of work.
A SOW is a type of scope statement.
A good SOW gives bidders a better
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Statement Of Work(SOW) Template
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Solicitation Planning
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Solicitation Planning
Solicitation planning involvespreparing the documents needed tosupport solicitation.
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Inputs to SolicitationPlanning
Procurement management plan
Statement(s) Of Work (SOW)
Other planning outputsThis have been modified from when they were
considered as part of procurement planning,should be reviewed again as part ofsolicitation. In particular, solicitation planningshould be closely coordinated with the projectschedule.
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Tools and Techniques forSolicitation Planning
Standard forms
Standard forms may include standard
contracts, standard descriptions ofprocurement items, or standardizedversions of all or part of the needed biddocuments. Organizations that do
substantial amounts of procurementshould have many of these documentsstandardized.
Expert judgment
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Outputs from SolicitationPlanningProcurement documents.
Procurement documents are used tosolicit proposals from prospective
sellers. The terms bid and quotationare generally used when the sourceselection decision will be price-driven(as when buying commercial items),
while the term proposal is generallyused when non-financial considerationssuch as technical skills or approach areparamount (as when buying professional
services).
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A bid, also called a tender or quote(short for quotation), is a documentprepared by sellers providing pricingfor standard items that have beenclearly defined by the buyer.
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A proposal is a documentprepared by a seller when there aredifferent approaches for meetingbuyer needs.
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Outputs from SolicitationPlanning
Procurement documents may consist of:
Information for sellers
Background information
Procedures for replying
Guidelines for preparation of the proposal
Evaluation criteria
Pricing forms
SOW
Proposed T&C in the contract.
The seller must be aware of all the work
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Outputs from SolicitationPlanning
Well designed procurement documentshave the following effects:
Easier comparison of sellers response
More complete proposals
More accurate pricing
Decrease in the amount of changes to the
project.
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Outputs from SolicitationPlanningEvaluation criteria
Evaluation criteria are used to rate orscore proposals.
Evaluation criteria are often included aspart of the procurement documents.
Selection criteria may include:
Understanding of needs
Overall or life-cycle cost
Technical capability
Management approach
f li i i
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Outputs from SolicitationPlanning
Statement of work updates
Modifications to one or more statements
of work may be identified duringsolicitation planning.
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Solicitation
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Solicitation
Solicitation involves obtaininginformation (bids and proposals)from prospective sellers on howproject needs can be met. Most ofthe actual effort in this process isexpended by the prospective sellers,
normally at no cost to the project.
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Inputs to Solicitation
Procurement documents
Procurement Documents are used tosolicit proposals from prospective
sellers. Common names for differenttypes of procurement documentsinclude: Invitation for Bid (IFB), Requestfor Proposal (RFP), Request for
Quotation (RFQ), Invitation forNegotiation, and Contractor InitialResponse.
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Inputs to Solicitation
Qualified seller lists
Some organizations maintain lists or
files with information on prospectivesellers. These lists will generally haveinformation on relevant experience andother characteristics of the prospective
sellers. If such lists are not readilyavailable, the project team will have todevelop its own sources.
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Qualified seller lists
T l d T h i f
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Tools and Techniques forSolicitation
Bidder conferences
Bidder conferences are meetings with
prospective sellers prior to preparationof a proposal. They are used to ensurethat all prospective sellers have a clear,common understanding of the
procurement (technical requirements,contract requirements, etc.). Responsesto questions may be incorporated intothe procurement documents as
amendments.
T l d T h i f
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Tools and Techniques forSolicitation
Advertising
Existing lists of potential sellers can
often be expanded by placingadvertisements in general circulationpublications such as newspapers or inspecialty publications such as
professional journals. Some governmentjurisdictions require public advertising ofcertain types of procurement items;most government jurisdictions require
public advertising of subcontracts on a
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Outputs from Solicitation
Proposals
Proposals are seller-prepared
documents that describe the sellersability and willingness to provide therequested product. They are prepared inaccordance with the requirements of the
relevant procurement documents.
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Source Selection
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Source Selection
Source selection involves the receiptof bids or proposals and theapplication of the evaluation criteria toselect a provider. This process isseldom straightforward:
Price may be the primary determinant
for an off-the-shelf item, but the lowestproposed price may not be the lowestcost if the seller proves unable to deliverthe product in a timely manner.
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Source Selection
Inp ts to So rce
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Inputs to SourceSelection
Proposals
Evaluation criteria
Organizational policies
Any and all of the organizationsinvolved in the project may have formal
or informal policies that can affect theevaluation of proposals.
Tools and Techniques for
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Tools and Techniques forSource SelectionContract negotiation
Contract negotiation involves clarificationand mutual agreement on the structure and
requirements of the contract prior to thesigning of the contract. To the extentpossible, final contract language shouldreflect all agreements reached. Subjects
covered generally include, but are notlimited to, responsibilities and authorities,applicable terms and law, technical andbusiness management approaches,contract financing, and price.
Tools and Techniques for
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Tools and Techniques forSource Selection
Weighting system
A weighting system is a method forquantifying qualitative data in order tominimize the effect of personal prejudiceon source selection. Most such systemsinvolve :
Assigning a numerical weight to each of theevaluation criteria.
Rating the prospective sellers on eachcriterion.
Multiplying the weight by the rating.
Tools and Techniques for
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Tools and Techniques forSource Selection
Screening system
A screening system involvesestablishing minimum requirements ofperformance for one or more of theevaluation criteria. For example, aprospective seller might be required to
propose a project manager who is aProject Management Professional (PMP)before the remainder of their proposalwould be considered.
Tools and Techniques for
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Tools and Techniques forSource Selection
Independent estimates
For many procurement items, theprocuring organization may prepare itsown estimates as a check on proposedpricing. Significant differences fromthese estimates may be an indication
that the SOW was not adequate or thatthe prospective seller eithermisunderstood or failed to respond fullyto the SOW. Independent estimates are
often referred to as should cost
Outputs from Source
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Outputs from SourceSelection
Contract
A contract is a mutually bindingagreement which obligates the seller to
provide the specified product andobligates the buyer to pay for it.
A contract is a legal relationship subject
to remedy in the courts. The agreementmay be simple or complex, usually (butnot always) reflecting the simplicity orcomplexity of the product. It may be
called, among other names, a contract,
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Contract Administration
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Contract Administration
The Contract Administrationprocess helps to assure the projectsgoals and needs are on track and on
schedule and the seller is behavingappropriately. The ContractAdministration process is a part of
the Monitoring and ControllingProcess Group.
Inputs to Contract
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Inputs to ContractAdministration
Contract - A contract is an agreementbetween the buyer and the seller which detailstheir legal requirements and obligations.
Contract Management Plan - The ContractManagement Plan utilizes the existing contractrequirements to provide the buyer and theseller with guidelines for administering and
monitoring contracts for significant purchasesor acquisitions.
Selected Sellers - The selected sellers aresellers that the buyer deems the best
candidates for the project and that have
Inputs to Contract
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Inputs to ContractAdministration
Performance Reports - Performancereports are more detailed than workperformance information, they use
methods such as bar charts and S-curves to organize and summarizeinformation such as earned valuemanagement and project work progress.
Approved Change Requests -Approved change requests verify which
changes to contracts or procurement
e oo s a ec ques
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e oo s a ec quesfor the Contract
AdministrationOnce you have been able to get throughthe selection/acquisition phase, the projectmanager needs to track administrative
issues, contract changes, and the seller'sprogress and quality of work to assure thatthe project is running smoothly. The toolsand techniques for the Contract
Administration process are:
Contract Change Control System -
A contract change control system
e oo s a ec ques
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e oo s a ec quesfor the Contract
Administration Buyer-conducted PerformanceReview - A buyer-conductedperformance review tracks the vendors
progress in execution and productdelivery within contractual parameters.Hopefully, your organization is includingthe cost and project schedule in the
contract. The purpose is to managecontract performance by recognizingperformance success and failures,anticipated completion on the contract
statement of work, and finally identify
e oo s a ec ques
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e oo s a ec quesfor the Contract
Administration Performance Reporting -Performance reporting involvesgathering the vendors performance
data and distributing it to stakeholders.Performance Reporting can help to alertmanagement on whether the vendor ismeeting contractual objectives.
Payment System - Payment systemsare tools and claims administrationprocesses used for Contract
Administration. The buyer uses a
e oo s a ec ques
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e oo s a ec quesfor the Contract
Administration Records Management System - Arecords management system is a set ofprocesses, related control functions,
and automation tools which are used tomanage contract documentation andrecords. Project managers use recordsmanagement systems to manage
contract documentation and records; tokeep an index of contract documentsand correspondence; and for help withretrieving, accessing, and archiving that
documentation.
Outputs from Contract
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Outputs from ContractAdministration
Contract Documentation -Contract documentation includes thecontract, schedules, requestedunapproved contract changes,approved change requests, anyseller-developed technical
documentation, and workperformance information.
Requested Changes - Requested
changes to the Project Management
e o rac
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e o racAdministration process
outputsOrganizational Process Assets(Updates) - Updates toorganizational process assets consistof the buyers' and vendors' writtenrecords of all contractadministration, including actions
taken and decisions made, results ofbuyer audits and inspections,payment schedule updates, and
seller performance evaluation
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Contract Close-out
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Contract Close-out
Contract close-out is similar toadministrative closure in that itinvolves both product verification (Was
all work completed correctly andsatisfactorily?) and administrativeclose-out (updating of records to
reflect final results and archiving ofsuch information for future use). Thecontract terms and conditions mayprescribe specific procedures forcontract close-out. Earl termination of
Inputs to Contract Close-
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Inputs to Contract Close-out
Contract documentation
Contract documentation includes, but isnot limited to, the contract itself alongwith all supporting schedules, requestedand approved contract changes, anyseller-developed technical
documentation, seller performancereports, financial documents such asinvoices and payment records, and theresults of any contract-related
inspections.
Tools and Techniques for
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Tools and Techniques forContract Close-out
Procurement Audits
A procurement audit is a structuredreview of the procurement process fromprocurement planning through contractadministration. The objective of aprocurement audit is to identify
successes and failures that warranttransfer to other procurement items onthis project or to other projects withinthe performing organization.
Outputs from Contract
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Outputs from ContractClose-outContract file
A complete set ofindexed records
should be preparedfor inclusion with thefinal project records.
Formalacceptance andclosure