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  • 1.Project Procurement Management Presented by: Michael G. Judd, Ph.D., M.P.A., PMPAdjunct Professor of Project Management Computer Information Systems DepartmentBrigham Young University- Idaho

2. Introduction Michael G. JuddEducationPost Doctoral Diploma in Defense Program ManagementPh.D. Engineering ManagementMasters of Public AdministrationBachelors of Science in Criminal JusticeProfessional CertificationsCertified Project Management ProfessionalMember of the Army Acquisition CorpsCertified Project Manager with U.S. Department of EnergyProfessional RecognitionOutstanding Young Men of America-1987United Whos Who in Executives & Professionals- 2003-2007ExperienceRetired from Federal Government after 27 yearsSenior level positions includes: Executive Office of the President (U.S.) Department of Administration DOE Liaison to the Under Secretary Defense (Environmental Security)Security) DOE Principle Investigator and member of the Paldiski International Expert Reference Group PIERG Group Program Analyst- Air , Space, and Land Combat Systems- U.S. Department of ArmyAnalyst- Systems- Program Manager- DOE Environmental Security OfficeManager- Vice President (Education and Certification) Project Management Institutes-College of PerformanceInstitute Management Project Manager- National and Environmental Security Systems Manager- Project Control Manager- Multiple Major System Acquisition Projects Manager- Professor of Program Management U.S. Department of Defense- Defense Acquisition University Defense- Professor of Project Management (Adjunct Faculty) Brigham Young University-Idaho University- Judd-PMI-EIC-Spring 2007 Judd- PMI- EIC-2 3. OutlineProcurement Terms & Concepts Review PMBOKs Procurement Process Groups Current Issues in Procurement Management Questions and AnswersJudd-PMI-EIC-Spring 2007Judd- PMI- EIC-3 4. Procurement Terms and Concepts Judd-PMI-EIC-Spring 2007 Judd- PMI- EIC-4 5. Procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. Source: www.answer.comJudd-PMI-EIC-Spring 2007 Judd- PMI- EIC-5 6. Procurement PlanThe document that describes how procurement processes from developing procurement documentation through contract closure will be managed.Source: PMBOK 3rd Edition, P. 367Judd-PMI-EIC-Spring 2007Judd- PMI- EIC-6 7. Make-or-Buy Decision A business decision that compares the costs and benefits of manufacturing a product or product component against purchasing it Source: www.answer.com Judd-PMI-EIC-Spring 2007Judd- PMI- EIC-7 8. Contract AdministrationThe process of managing the contract and the relationship between the buyer and seller, managing contract related changes and, when appropriate, managing the contractual relationship with the outside buyer of the project. Source: PMBOK 3rd Edition, p.355 Judd-PMI-EIC-Spring 2007 Judd- PMI- EIC-8 9. Invitation For Bid Refers to a method of soliciting offers and are used when negotiations are not anticipated. Bids are typically read aloud in public at the time and place specified in the solicitation. Source: U.S. Army Contracting Agency Customer Desk-side Dictionary Judd-PMI-EIC-Spring 2007 Judd- PMI- EIC-9 10. Request For Proposal A type of solicitation that is used typically with large dollar contracts when negotiations are anticipated. Offers in response to RFPs can be accepted without negotiations and become legally binding.Source: U.S. Army Contracting Agency Customer Desk-side DictionaryJudd-PMI-EIC-Spring 2007 Judd- PMI- EIC-10 11. The ContractA contract is a mutually binding agreement that obligates the seller to provide the specified products or services - obligating the buyer to pay for them. Contracts should clarify responsibilities and define key deliverables. Contracts are used because they are legally binding, there is more accountability! There is a trend to outsource work!Source: IT Project Management-Schwabe 2006 Judd-PMI-EIC-Spring 2007Judd- PMI- EIC- 11 12. Contract TypesFixed Price (Lump Sum) Contracts: Firm Fixed Price Fixed Price Incentive Fee Cost Reimbursement Cost Plus Award Fee (CPAF) Cost Plus Fixed Fee (CPFF) Cost Plus Incentive Fee (CPIF) Cost Plus Percentage of Cost (CPPC)- [Feds dont use] Time and MaterialsSource: PMBOK 3rd Edition, P. 277&278Judd-PMI-EIC-Spring 2007 Judd- PMI- EIC- 12 13. Statement of Work (SOW) A narrative description of products, services, or results to be supplied. Source: PMBOK, 3rd Edition, P. 376 Judd-PMI-EIC-Spring 2007 Judd- PMI- EIC-13 14. PMIs PMBOK: Procurement Process GroupsJudd-PMI-EIC-Spring 2007Judd- PMI- EIC-14 15. 12.1- Plan PurchasesProcess Group:And AcquisitionsInputsOutputs Enterprise environmental factorsProcurement management planOrganizational process assets Contract statement of workProject scope statementMake-or-buy decisionsMake- or-Work breakdown structureRequested changesWBS dictionary Project management plan Risk registerRisk-related contractual Risk-agreementsResource requirements Make-or-buy analysis Make- or- Expert judgmentProject schedule Contract typesActivity cost estimatesCost baseline Tools & Techniques Copyright: JSPM--2007 Copyright: JSPM 2007 16. 12.2- Plan ContractProcess Group:InputsOutputsProcurement management plan Procurement documentsContract statement of workEvaluation criteriaMake-or-buy decisionsMake- or- Contract statement of work (updates)Project management plan Risk register Risk-related contractualRisk- agreements Resource requirements Project schedule Activity cost estimateStandard forms Cost baselineExpert judgment Tools & Techniques Copyright: JSPM--2007 Copyright: JSPM 2007 17. 12.3- Request SellerProcess Group: Responses Inputs Outputs Organizational process assetsQualified sellers list Procurement management plan Procurement document package Procurement documentsProposalsBidder conferencesAdvertisingDevelop qualified sellers list Copyright: JSPM--2007 Copyright: JSPM 2007Tools & Techniques 18. 12.4- Select SellersProcess Group: InputsOutputs Organizational process assets Selected sellers Procurement management plan Contract Evaluation criteria Contract management plan Procurement document packageProcurement management plan (updates) Resource availability Proposals Qualified sellers listRequested changes Project management plan Risk register Risk-related contractualRisk- Weighting system agreements Independent estimatesScreening system Contract negotiation Seller rating systemsExpert judgmentProposal evaluationtechniques Tools & Techniques Copyright: JSPM--2007 Copyright: JSPM 2007 19. 12.5- ContractProcess Group:Administration InputsOutputs Contract Contract documentation Contract management plan Requested changes Selected sellers Recommended corrective actions Performance reportsOrganizational process assets (updates) Approved change requestsProcurement management plan Project management plan (updates) Contract management plan Work performance information Contract change control system Buyer-conducted performance review Buyer-Inspections and adultsPerformance reportingPayment system Claims administration Records management systemInformation technologyTools & Techniques Copyright: JSPM--2007 Copyright: JSPM 2007 20. 12.6- Contract Closure Process Group: Inputs Outputs Procurement management planClosed contracts Contract management planOrganizational process assets (updates) Contract documentationContract closure procedureProcurement auditsRecords management systemTools & Techniques Copyright: JSPM--2007 Copyright: JSPM 2007 21. Current Issues in ProcurementManagementJudd-PMI-EIC-Spring 2007 Judd- PMI- EIC-21 22. The National ContractManagement Association NCMA was formed in 1959 to foster the professional growth and educational advancement of its members. NCMA is an membership-based, professional society, whose Leadership is composed of volunteer elected officers. Offers professional certification program for contracting professionals NCMA is located at 21740 Beaumeade Circle, Suite 125, Ashburn, Virginia 20147. Source: NCMA Website: www.ncma.orgJudd-PMI-EIC-Spring 2007 Judd- PMI- EIC-22 23. Iraq contracting problemsHouse appropriators on Thursday voiced dismay at the depth of contracting problems in Iraq Billions of reconstruction dollars wasted. The Defense Department, spent $151 billion on service contracts in fiscal 2006 Problem Companies- Parsons, DynCorp International, Haliburton (Kellogg, Brown and Root), Bechtel, Aegis Defense Systems, etc. Source: NCMA Website Article with same title, Washington Post Wednesday, July 6, 2005; Page D01 & GAO Report- GAO-07-832TJudd-PMI-EIC-Spring 2007Judd- PMI- EIC-23 24. Cost Reimbursement Contracting Sector: National Laboratory- EG&G, Lockheed-MartinIdaho and BechtelSituation: CPAFs used by DOE with AF ~5% ofallocable cost based on performance against award feecriteria- C.O. sole decision-maker (theoretically).Observations:1. Work scope poorly defined in contract.2. 95 % of work force remains the same.3. Approximately 70% of award fee criteria were broad scope statements with no measurable objectives yet specific requirements were known in advance by DOE staff. R&D work had virtually NO measurable milestones.4. Most commercial companies could not afford to work with a 5% profit margin.5. Companies drawn to such contracts probably are motivate by spin-off benefitsResults: DOE Management compensated forcontracting deficiencies awarding maximum fee (despitepoor performance assessments) and profiting fromtechnology developed at taxpayer expense. Source: Personal views of M. Judd at Idaho National LaboratoryJudd-PMI-EIC-Spring 2007Judd- PMI- EIC- 24 25. Fixed Priced Contracting Sector: Residential Building Construction Situation: General development contractors prefer to use fixed price subcontracts to control costs. Observations: 1. There are many variables that subcontractors cant anticipate (late material, weather, laborforce, poor coordination, etc.). 2. No enforceable knowledge and skill level metrics have been established for some trades. 3. Understaffing, no credentialing of inspectors, general corruption of the inspection process 4. Motivation is to make quick profits then move to new area. 5. Small subcontractors lack the sophistication or resources to protect themselves againstunscrupulous General Contractors. 6. Serious lack of knowledge based & ethical licensing requirements of General Contractors. Results: Many general contractors focus on wind-fall profits resulting in highly inflated residential property with poor workmanship and many failed subcontractor businesses Source: Personal views of M. Judd at Trademark Woodworks, LLC, Bozeman, MTJudd-PMI-EIC-Spring 2007 Judd- PMI- EIC- 25 26. Questions & Answers Judd-PMI-EIC-Spring 2007Judd- PMI- EIC-26