Download - Project Procurement Management Project Procurement Management

Project Procurement ManagementProject Procurement Management

Presented by:

Michael G. Judd, Ph.D., M.P.A., PMPAdjunct Professor of Project Management

Computer Information Systems DepartmentBrigham Young University- Idaho

22JuddJudd--PMIPMI--EICEIC--Spring 2007Spring 2007

Michael G. Judd Michael G. Judd EducationEducation

Post Doctoral Diploma in Defense Program ManagementPost Doctoral Diploma in Defense Program ManagementPh.D. Engineering ManagementPh.D. Engineering ManagementMasters of Public AdministrationMasters of Public AdministrationBachelors of Science in Criminal JusticeBachelors of Science in Criminal Justice

Professional CertificationsProfessional CertificationsCertified Project Management ProfessionalCertified Project Management ProfessionalMember of the Army Acquisition CorpsMember of the Army Acquisition CorpsCertified Project Manager with U.S. Department of EnergyCertified Project Manager with U.S. Department of Energy

Professional RecognitionProfessional RecognitionOutstanding Young Men of AmericaOutstanding Young Men of America--19871987United WhoUnited Who’’s Who in Executives & Professionalss Who in Executives & Professionals-- 20032003--20072007

ExperienceExperienceRetired from Federal Government after 27 yearsRetired from Federal Government after 27 yearsSenior level positions includes:Senior level positions includes:

Executive Office of the President (U.S.) Executive Office of the President (U.S.) –– Department of AdministrationDepartment of AdministrationDOE Liaison to the Under Secretary Defense (Environmental SecuriDOE Liaison to the Under Secretary Defense (Environmental Security)ty)DOE Principle Investigator and member of the DOE Principle Investigator and member of the ““PaldiskiPaldiski International Expert Reference GroupInternational Expert Reference Group”” PIERGPIERGProgram AnalystProgram Analyst-- Air , Space, and Land Combat SystemsAir , Space, and Land Combat Systems-- U.S. Department of ArmyU.S. Department of ArmyProgram ManagerProgram Manager-- DOE Environmental Security OfficeDOE Environmental Security OfficeVice President (Education and Certification) Project Management Vice President (Education and Certification) Project Management InstituteInstitute’’ss--College of Performance College of Performance ManagementManagementProject ManagerProject Manager-- National and Environmental Security SystemsNational and Environmental Security SystemsProject Control ManagerProject Control Manager-- Multiple Major System Acquisition ProjectsMultiple Major System Acquisition ProjectsProfessor of Program Management Professor of Program Management –– U.S. Department of DefenseU.S. Department of Defense-- Defense Acquisition UniversityDefense Acquisition UniversityProfessor of Project Management (Adjunct Faculty) Brigham Young Professor of Project Management (Adjunct Faculty) Brigham Young UniversityUniversity--IdahoIdaho

Introduction


Procurement Terms & ConceptsProcurement Terms & Concepts

Review Review PMBOKPMBOK’’ss Procurement Procurement Process GroupsProcess Groups

Current Issues in Procurement Current Issues in Procurement ManagementManagement

Questions and AnswersQuestions and Answers

OutlineOutline


Procurement Terms and Concepts


The fancy word for "The fancy word for "purchasingpurchasing." The ." The procurement department within an procurement department within an organization manages all the major organization manages all the major purchases.purchases.

ProcurementProcurement

Source: www.answer.com


““The document that describes how procurement The document that describes how procurement processes from developing procurement processes from developing procurement documentation through contract closure will be documentation through contract closure will be managed.managed.””

Procurement PlanProcurement Plan

Source: PMBOK 3rd Edition, P. 367


““A business decision that compares the A business decision that compares the costs and benefits of manufacturing a costs and benefits of manufacturing a product or product component against product or product component against purchasing itpurchasing it…”…”

MakeMake--oror--Buy DecisionBuy Decision

Source: www.answer.com


““The process of managing the contract and the The process of managing the contract and the relationship between the buyer and seller, relationship between the buyer and seller, managing contract related changes and, when managing contract related changes and, when appropriate, managing the contractual relationship appropriate, managing the contractual relationship with the outside buyer of the project.with the outside buyer of the project.””

Contract AdministrationContract Administration

Source: PMBOK 3rd Edition, p.355


“…“…Refers to a method of soliciting offers Refers to a method of soliciting offers and are used when and are used when negotiations are not negotiations are not anticipatedanticipated. Bids are typically read aloud in . Bids are typically read aloud in public at the time and place specified in the public at the time and place specified in the solicitation.solicitation.””

Invitation For BidInvitation For Bid

Source: U.S. Army Contracting Agency Customer Desk-side Dictionary


“…“… A type of solicitation that is used A type of solicitation that is used typically with large dollar contracts when typically with large dollar contracts when negotiations are anticipatednegotiations are anticipated. Offers in . Offers in response to response to RFPsRFPs can be accepted without can be accepted without negotiations and become legally binding.negotiations and become legally binding.””

Request For ProposalRequest For Proposal

Source: U.S. Army Contracting Agency Customer Desk-side Dictionary


AA contractcontract isis a mutually a mutually binding agreementbinding agreement that that obligates the obligates the sellerseller to provide the specified to provide the specified products products or or servicesservices -- obligating the obligating the buyer buyer to pay for them.to pay for them.

Contracts should Contracts should clarify responsibilitiesclarify responsibilities and define and define key deliverableskey deliverables..

Contracts are used because they are Contracts are used because they are legally legally bindingbinding, there is more , there is more accountabilityaccountability!!

There is aThere is a trendtrend to to outsourceoutsource work! work!

The The ““ContractContract””

Source: IT Project Management-Schwabe 2006


Fixed Price (Lump Sum) Contracts:Fixed Price (Lump Sum) Contracts:Firm Fixed PriceFirm Fixed Price

Fixed Price Incentive FeeFixed Price Incentive Fee

Cost ReimbursementCost ReimbursementCost Plus Award Fee (CPAF)Cost Plus Award Fee (CPAF)

Cost Plus Fixed Fee (CPFF)Cost Plus Fixed Fee (CPFF)

Cost Plus Incentive Fee (CPIF)Cost Plus Incentive Fee (CPIF)

Cost Plus Percentage of Cost (CPPC)Cost Plus Percentage of Cost (CPPC)-- [Feds don[Feds don’’t use]t use]

Time and MaterialsTime and Materials

Contract TypesContract Types

Source: PMBOK 3rd Edition, P. 277&278


““A narrative description of products, services, or A narrative description of products, services, or results to be supplied.results to be supplied.””

Statement of Work (SOW)Statement of Work (SOW)

Source: PMBOK, 3rd Edition, P. 376


PMI’s PMBOK: Procurement Process Groups

Copyright: JSPMCopyright: JSPMCopyright: JSPM---200720072007

Inputs Outputs

Tools & Techniques

12.112.1-- Plan Purchases Plan Purchases And Acquisitions And Acquisitions Process Group:

Enterprise environmental factorsEnterprise environmental factorsProcurement management planProcurement management plan

MakeMake--oror--buy analysisbuy analysis

WBS dictionaryWBS dictionary

Work breakdown structureWork breakdown structure

Project scope statementProject scope statement

Organizational process assetsOrganizational process assets

Requested changesRequested changes

MakeMake--oror--buy decisionsbuy decisions

Contract statement of workContract statement of work

Contract typesContract types

Expert judgmentExpert judgment

Project management planProject management plan

••Risk registerRisk register

••RiskRisk--related contractual related contractual agreementsagreements

••Resource requirementsResource requirements

••Project scheduleProject schedule

••Activity cost estimatesActivity cost estimates

••Cost baselineCost baseline


Inputs Outputs

Tools & Techniques

12.212.2-- Plan ContractPlan ContractProcess Group:

Procurement management planProcurement management plan Procurement documentsProcurement documents

Standard formsStandard forms

••Risk registerRisk register••RiskRisk--related contractual related contractual agreementsagreements••Resource requirementsResource requirements••Project scheduleProject schedule••Activity cost estimateActivity cost estimate••Cost baselineCost baseline

Project management plan Project management plan

MakeMake--oror--buy decisionsbuy decisions

Contract statement of workContract statement of work

Contract statement of work (updates)Contract statement of work (updates)

Evaluation criteriaEvaluation criteria


Inputs Outputs

Tools & Techniques

12.312.3-- Request Seller Request Seller ResponsesResponsesProcess Group:


Organizational process assetsOrganizational process assetsQualified sellers listQualified sellers list

Bidder conferencesBidder conferences

Procurement documentsProcurement documents

Procurement management planProcurement management plan

ProposalsProposals

Procurement document packageProcurement document package

Develop qualified sellers listDevelop qualified sellers list

AdvertisingAdvertising


Procurement management plan (updates)Procurement management plan (updates)

Inputs Outputs

Tools & Techniques

12.412.4-- Select SellersSelect SellersProcess Group:

Organizational process assetsOrganizational process assetsSelected sellersSelected sellers

ProposalsProposals

Procurement document packageProcurement document package

Evaluation criteria Evaluation criteria

Procurement management planProcurement management plan

Resource availabilityResource availability

Contract management planContract management plan

Contract Contract

Qualified sellers listQualified sellers list

Project management planProject management plan

••Risk registerRisk register

••RiskRisk--related contractual related contractual agreementsagreements

Contract negotiationContract negotiation

Screening systemScreening system

Independent estimatesIndependent estimates

Weighting systemWeighting system

Seller rating systemsSeller rating systems


Proposal evaluation Proposal evaluation techniquestechniques



Inputs Outputs

Tools & Techniques

12.512.5-- Contract Contract AdministrationAdministrationProcess Group:

ContractContractContract documentationContract documentation

Approved change requestsApproved change requests

Performance reportsPerformance reports

Selected sellersSelected sellers

Contract management planContract management plan

Organizational process assets (updates)Organizational process assets (updates)

Project management plan (updates)Project management plan (updates)

Recommended corrective actionsRecommended corrective actions


Work performance informationWork performance information

Claims administrationClaims administration

Payment systemPayment system

Inspections and adultsInspections and adults

BuyerBuyer--conducted performance reviewconducted performance review

Performance reportingPerformance reporting

Contract change control systemContract change control system

Records management systemRecords management system

Information technologyInformation technology

••Procurement management planProcurement management plan

••Contract management planContract management plan

12.612.6-- Contract ClosureContract Closure

Inputs Outputs

Tools & Techniques

Process Group:


Procurement management planProcurement management planClosed contractsClosed contracts

Procurement auditsProcurement audits

Contract closure procedureContract closure procedure

Contract documentationContract documentation

Contract management planContract management planOrganizational process assets (updates)Organizational process assets (updates)

Records management systemRecords management system


Current Issues in Procurement Current Issues in Procurement ManagementManagement


The National Contract The National Contract Management AssociationManagement Association

NCMA was formed in NCMA was formed in 19591959 to foster the professional to foster the professional growth and educational advancement of its members.growth and educational advancement of its members.NCMA is an membershipNCMA is an membership--based, professional society, based, professional society, whose whose LeadershipLeadership is composed of is composed of volunteer elected volunteer elected officers. officers. Offers Offers professional certificationprofessional certification program for contracting program for contracting professionalsprofessionalsNCMA is located at 21740 NCMA is located at 21740 BeaumeadeBeaumeade Circle, Suite 125, Circle, Suite 125, Ashburn, Virginia 20147. Ashburn, Virginia 20147.

Source: NCMA Website: www.ncma.org


Iraq contracting problemsIraq contracting problems

House appropriators on Thursday voiced dismay at the House appropriators on Thursday voiced dismay at the depth of contracting problemsdepth of contracting problems in Iraqin Iraq……BillionsBillions of reconstruction dollars of reconstruction dollars wastedwasted. . The Defense Department, spent The Defense Department, spent $151 billion$151 billion on service on service contracts in contracts in fiscal 2006fiscal 2006Problem CompaniesProblem Companies-- Parsons, DynCorp International, Parsons, DynCorp International, HaliburtonHaliburton (Kellogg, Brown and Root), Bechtel, Aegis (Kellogg, Brown and Root), Bechtel, Aegis Defense Systems, etc.Defense Systems, etc.

Source: NCMA Website Article with same title, Washington Post Wednesday, July 6, 2005; Page D01 & GAO Report- GAO-07-832T


Cost Reimbursement ContractingCost Reimbursement Contracting

Sector:Sector: National LaboratoryNational Laboratory-- EG&G, LockheedEG&G, Lockheed--Martin Martin Idaho and Bechtel Idaho and Bechtel Situation:Situation: CPAFCPAF’’ss used by DOE with AF ~5% of used by DOE with AF ~5% of allocable cost based on performance against award fee allocable cost based on performance against award fee criteriacriteria-- C.O. sole decisionC.O. sole decision--maker (theoretically).maker (theoretically).Observations:Observations:1.1. Work scope poorly defined in contract.Work scope poorly defined in contract.2.2. 95 % of work force remains the same.95 % of work force remains the same.3.3. Approximately 70% of award fee criteria were broad scope statemeApproximately 70% of award fee criteria were broad scope statements with no measurable nts with no measurable

objectives objectives –– yet specific requirements were known in advance by DOE staff. Ryet specific requirements were known in advance by DOE staff. R&D work had &D work had virtually virtually NONO measurable milestones.measurable milestones.

4.4. Most commercial companies could not afford to work with a 5% proMost commercial companies could not afford to work with a 5% profit margin.fit margin.5.5. Companies drawn to such contracts probably are motivate by spinCompanies drawn to such contracts probably are motivate by spin--off benefitsoff benefits

Results:Results: DOE Management compensated for DOE Management compensated for contracting deficiencies awarding maximum fee (despite contracting deficiencies awarding maximum fee (despite poor performance assessments) and profiting from poor performance assessments) and profiting from technology developed at taxpayer expense.technology developed at taxpayer expense.

Source: Personal views of M. Judd at Idaho National Laboratory


Fixed Priced ContractingFixed Priced Contracting

Sector:Sector: Residential Building ConstructionResidential Building ConstructionSituation:Situation: General development contractors prefer to General development contractors prefer to use fixed price subcontracts to control costs.use fixed price subcontracts to control costs.Observations:Observations:1.1. There are There are many variablesmany variables that subcontractors that subcontractors cancan’’t anticipatet anticipate (late material, weather, labor (late material, weather, labor

force, poor coordination, etc.).force, poor coordination, etc.).2.2. No enforceable knowledge and skill level metricsNo enforceable knowledge and skill level metrics have been established for some trades.have been established for some trades.3.3. UnderstaffingUnderstaffing, no , no credentialing of inspectorscredentialing of inspectors, , general corruptiongeneral corruption of the inspection processof the inspection process4.4. Motivation is to make Motivation is to make quick profitsquick profits then move to new area.then move to new area.5.5. Small subcontractorsSmall subcontractors lack the lack the sophistication or resourcessophistication or resources to protect themselves against to protect themselves against

unscrupulous General Contractors.unscrupulous General Contractors.6.6. Serious lack of Serious lack of knowledge based & ethical licensingknowledge based & ethical licensing requirements of General Contractors.requirements of General Contractors.

Results:Results: Many general contractors focus on windMany general contractors focus on wind--fall fall profits resulting in highly inflated residential property profits resulting in highly inflated residential property with poor workmanship and many failed subcontractor with poor workmanship and many failed subcontractor businessesbusinesses

Source: Personal views of M. Judd at Trademark Woodworks, LLC, Bozeman, MT


Questions & AnswersQuestions & Answers

Download - Project Procurement Management Project Procurement Management

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