project management project procurement & contract administration jiwei ma
TRANSCRIPT
Project Management
Project Procurement &
Contract Administration
Jiwei Ma
Content
Project procurement concept Planning of project procurement Source selection and solicitation Bid evaluation methods Contract administration Construction project procurement
Project Procurement Concept
Definition Project procurement and operation
procurement Project procurement categories Types of contract Basic procedure of project
procurement
Project Procurement Concept
Definition Project management tasks to deal with
part of the project's scope of work which will be bought from another organization, sometimes the result of company teaming arrangements, but most typically resulting from contracting or subcontracting project scope.
Project Procurement Concept Project procurement and operation
procurement Both purchase products and services from
another organization Usually through solicitation and competition bid
or negotiation Usually under the format of contract or mutual
agreement Sometimes form stable relationships, such as
alliance or partnering The process needs to be monitored, managed,
and finally audited
Project Procurement Concept Operation
procurement Continuous on-going
production environment
Mature organization with stabilized position
Long-term cooperation Mostly bulk quantity
purchase Minimized nonstandard
product
Project procurement Non-repetitive, progressive
environment Temporarily established
organization Short-term cooperation Mostly low-volume quantity Usually customized product or
service
Project Procurement Concept
Project procurement categories Materials or products Equipment or tools Labors Professional services Entirely engineered system
Project Procurement Concept
Types of contract Lump sum contract
Customized product or complicated system Unit price contract
Commodities or standard services without predefined quantity
Cost + fee contract Professional services or labors
Project Procurement Concept
Basic procedure of project procurement Define the project scope: produce or procure Draft of project procurement plan Source selection and solicitation Proposal evaluation and negotiation Supplier selection Mutual agreement or signing of contract Contract administration Close out of the contract
Planning of Project Procurement
Basic rules Clearly defined scope is the basis of procurement Different categories of procurement need different
types of procedures and methods Procurement itself costs time and money Items on critical path and long-lead items are critical
to project implementation Long-term relation with supplier makes difference Early supplier involvement is important to project’s
success Variations to contract might contain serious impact
on project
Planning of Project Procurement
Procedure Define the scope of procurement Categorize and list procurement items Select contract type, accordingly Determine principles of source selection Determine solicitation methods, respectively Determine proposal evaluation method,
respectively Define contract administration responsibilities and
tasks Define contract closeout procedures
Planning of Project Procurement
Content of project procurement plan Scope of procurement Procurement responsibilities of project team
members Procedure of procurement Source selection and solicitation Evaluation method or criteria Types of contracts or agreements Monitoring and managing of procurement
contract Closeout of contract
PROJECT PROCUREMENT PLAN
Project Name:
Prepared by:
Date (MM/DD/YYYY):
1. Procurement Definition
Describe, in specific terms, what items will be procured and under what conditions:
2. Contract Responsibility
Project Team members who are authorized to enter into contract agreements or purchase for the Team (insert rows as needed):
Name: Phone: Responsibility:
3. Vendor Selection
Describe what steps the project team will take to select a vendor (e.g. RFI, RFP)
4. Decision Criteria
Define the circumstances under which a contract may be initiated:
5. Contract Type
Document which types of contracts will be used and what actions need to be taken to initiate procurement.
PROJECT PROCUREMENT PLAN
6. Contract Standards
Provide the standards for documentation that will need to be initiated and maintained for each contract.
7. Vendor Management
Describe what steps the project team will take to ensure that the vendor provides all of the products and/or services (and only the products and/or services) that were agreed upon, and that appropriate levels of quality are maintained..
8. Project Procurement Plan / Signatures
Project Name:
Project Manager:
I have reviewed the information contained in this Project Procurement Plan and agree:
Name Role Signature Date
(MM/DD/YYYY)
The signatures above indicate an understanding of the purpose and content of this document by those signing it. By signing this document, they agree to this as the formal Project Procurement Plan.
Source Selection and Solicitation
Source selection Based on selection procedure
Open Invited Exclusive
Based on supplier category Domestic, joint venture or foreign company Company or individual
Based on supplier identification Vendor or service provider Distributor or dealer/agent
Source Selection and Solicitation
Solicitation Methods
Public announcement (media) Selected invitation (with prequalification) Selected invitation (without prequalification) Direct negotiation (long-term partners)
Principles Selection of the solicitation methods:
characteristics of products or services Public funded project: “selective” and “non-
discriminative” solicitation
Bid Evaluation Methods By evaluation criteria
Low price Cost effectiveness Performance
By procedure Competitive bid Negotiation Technical feasibility evaluation + price selection
By executive body Procurement management personnel Third party or consulting personnel
Contract Administration
Overall responsibilities Preparation and negotiation of contract Monitoring and managing contract Managing supplier communication Managing supplier relationship Managing procurement change
Contract Administration Key tasks
Set up contract administration team and working procedure
Plan for strategies and tactics to deal with suppliers based on their contract types
Identify and analyze risks associated with various types of contracts and plan for mitigation strategies
Develop and enforce key performance indicators Establish supplier reporting requirements
Contract Administration Key tasks
Monitor contract execution progress and find any variations to contract in a timely manner
Manage variations to contracts, including cost, quality, scope, delivery and any breaches of terms and conditions
Make payment schedule and monitor payment procedure
Deal with claims and find appropriate resolution Manage contract closeout and final auditing Select historical procurement file for
documentation
Construction Project Procurement
Overview
Scope of procurement
Procurement system
Procurement method
Construction Project Process Overview
Implementation
Decision Making
Design Preparation Design Construction Startup WarranteeDecision
Making
Project
Prop
osal
Feasib
ility Stu
dy
Design
S
pecification
Prelim
inary D
esign
Design
Develop
men
t
Con
struction
Docu
men
t
Con
struction
Accep
tance
TIME
Business Analysis
Technical Description
Technical and implementation planning
Input of labor, materials, equipment, services, etc.
Accounting, resolution of claims, etc.
Testing, inspection, evaluation, etc.
Construction Project Procurement Scope of procurement
Professional services Financial, technical feasibility analysis, project
management, technical consulting, geological survey, design, inspection, testing, legal services, etc.
Engineered system Entire system, part of a system, etc.
Material Bulk materials, special products, etc
Equipment leasing Equipment, tools, etc.
Labor supply Skilled, non-skilled, etc.
Construction Project Procurement
Procurement system Designer led competitive tender Designer led construction works
managed for fee Package deal Project manager/client’s representative-
led
Construction Procurement System
Construction Project
Procurement System
Designer Led
Competition Tender
Designer Led Construction
Managed for a Fee
Package
Deal
Project Manager/Owner’s Representative Led
Separate Contracts
General Contract
Management Contracting
Construction Management
Turnkey Design-Build
Owner
Designer Led Competitive Tender- Separate Contracts
Designer
Contractor 1
Contractor 2
Contractor m
Supplier 1
Supplier 2
Supplier n
Designer Led Competitive Tender- General Contractor
Owner
*Owner outsourced tasks
General Contractor
Design
er
Su
pp
lier
Su
bcon
tractor
* *
Su
bcon
tractor
Su
bcon
tractor
Su
bcon
tractor
TIME
Design
Construction
Bidding
Construction Project Procedure
Owner
MC/CMDesigner
SubcontractorS
ubcontractor 1
Subcontractor 2
Subcontractor m
Supplier 1
Supplier 2
Supplier n
Supplier
*Owner outsourced tasks
* *
Designer Led Construction Management for a Fee
- Managing Contractor/Construction Management
TIME
MC/CM Bidding 。。。
。。。
Construction Document
Conceptual Design
Preliminary Design
Construction Project Procedure
Subcontractor Bidding
Package Deal – Turnkey/Design-build
Owner
Design
er
Su
pp
lier
Su
bcon
tractorTurnkey/Design-build Contractor
TIME
Turnkey/D-B Bidding
。。。
。。。
Construction Document
Conceptual Design
Preliminary Design
Construction Project Procedure
Subcontractor Bidding
Construction Project Procurement
Procurement method
Competitive bid
Performance based procurement
Construction Project Procurement Competitive bid
The contractor is selected on the basis of competition
Detailed design has to be finished Low bidder preferred, in most cases Usually adopted for the selection of contractor,
subcontractor, material supplier, equipment vendor and special service provider
Not applicable for professional services, such as design, engineering, consulting, etc.
Not applicable for labors Mandatory for public funded project in some
countries
Scenario of Competitive BidOwner Designer
Subcontractor 1
Subcontractor 2
Subcontractor i
Service P
vd 1
Service P
vd 2
Service P
vd j
Supplier 1
Supplier 2
Supplier m
Vendor 1
Vendor 2
Vendor n
General Contractor m
General Contractor 1
General Contractor 2
General Contractor 3
Competitive Bid Advantages
Lowest bid price selected Simplified bid evaluation method Open and justified contract award procedure
Disadvantages Possible mistakes and missed items due to hasty bid
preparation Contradictory view on quality standard between owner
and contractor Quality of the work controlled only by project design
and specification Potential risks of project not identified Qualification of the contractor not evaluated Project experiences not used for future reference
Construction Project Procurement Performance based procurement
The contractor is selected on the combined basis of contractor’s performance and owner’s expectation
Contractor’s overall performance level has been evaluated based on the past performance and ability to minimize the project risks
Owner’s priority of objectives or perception of risks has been taken into account of contractor selection
Final output of contractor’s performance and owner’s satisfaction will be rated and utilized for future reference
Performance Based Procurement
Procedure Collection of the contractors’ past
performance information Request for and rating of risk assessment
plan with a final shortlist Interview with project team and the key
personnel with prioritized list Pre-award negotiation and contractor
selection Reporting and rating of contractor’s
performance in the project
PastPerformanceInformation
Risk Assessment Plan & Short List
Interview & Prioritization
Pre-AwardPeriod
Construction Reporting & Final
Rating
Performance Based Procurement Procedure
Time
Num
ber
of
Com
peti
tive F
irm
s
PastPerformanceInformation
Risk Assessment Plan & Short List
Interview & Prioritization
Pre-AwardPeriod
Construction Reporting & Final
Rating
Time
Performance Based Procurement Procedure
Num
ber
of
Com
peti
tive F
irm
s
Past Performance Information Past Performance Information will be collected on all
critical team components, which may include:
1. The Contractor2. Critical Individuals (Project Manager, Site
Superintendent)3. Critical Subcontractors (Mechanical, Electrical, Roofing,
etc)
The performance of ALL components will impact the overall value of the performance level.
The team components cannot be changed/modified after the proposal is submitted.
PastPerformanceInformation
Risk Assessment Plan & Short List
Interview & Prioritization
Pre-AwardPeriod
Construction Reporting & Final
Rating
Time
Performance Based Procurement Procedure
Num
ber
of
Com
peti
tive F
irm
s
Risk Assessment Plan Contents
The RA Plan should clearly address the following items: List and prioritize major risk items (areas that
may cause the project to not be completed on time, not finished within budget, generate any change orders, or may be a source of dissatisfaction for the owner).
Explain how the builder will avoid / minimize the risk.
Provide a general project schedule documenting general milestones.
Propose any options that could increase the value (expectation or quality) of their work.
Short List
All of the information collected will be inputted into a evaluation model Past performance information (all components) RA Plan rating
The model will prioritize the bidders based on the information and predetermined weights
The Owner will use the information to identify the firms to be shortlisted
PastPerformanceInformation
Risk Assessment Plan & Short List
Interview & Prioritization
Pre-AwardPeriod
Construction Reporting & Final
Rating
Time
Performance Based Procurement Procedure
Num
ber
of
Com
peti
tive F
irm
s
Interviews The Owner will interview all key personnel.
They will be interviewed separately and then as a group.
No substitutions will be allowed after proposals are submitted
Interview period is used to identify how well the personnel understand the project and potential risks.
Selecting the Best-Value The interview score (along with the RA Plan
Score and Past Performance Information), will be inputted into a final evaluation model
The owner will review and analyze the prioritization in the model
The owner may select the highest-ranked proposal, or another option based on perceived risk
The best-valued firm will be invited to the pre-award meeting
PastPerformanceInformation
Risk Assessment Plan & Short List
Interview & Prioritization
Pre-AwardPeriod
Construction Reporting & Final
Rating
Time
Performance Based Procurement Procedure
Num
ber
of
Com
peti
tive F
irm
s
Objective of Pre-Award Period Review all identified risks and develop a plan to
minimize all risks. Provide a detailed project schedule. Coordinate the requirements in detail with all
critical elements and client. Work out any conflicts. Answer any questions by client. Provide their QC/QA procedures (quality
measurements, housekeeping, etc). Identify what they will do if any problems arise.
Pre Award Meeting
The firm will be responsible for identifying how they will minimize all risks
The firm will provide the QA/QC document
If the best-valued firm cannot minimize all of the identified risks (without modifying their time proposal or exceeding the budget), the bidder may withdrawal without penalty
PastPerformanceInformation
Risk Assessment Plan & Short List
Interview & Prioritization
Pre-AwardPeriod
Construction Reporting & Final
Rating
Time
Performance Based Procurement Procedure
Num
ber
of
Com
peti
tive F
irm
s
Weekly Reporting & Post Construction Rating
Contractor will document relative information on a weekly basis
Accuracy and timeliness of contractor’s performance will be factored into the final close out rating of the firm
The owner will evaluate the performance of the project upon completion
The rating will be based on completing the project with no change orders ($$$ and time), and overall quality
All team components will receive the same rating The rating will be incorporated into the system and
used as reference for future projects