Proj Proc Mgt Chap5.Ppt
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Transcript of Proj Proc Mgt Chap5.Ppt
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Project Procurement
Management
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35
Objectives
Importance Of Project Procurement
Management
Project Procurement Management
Processes
Procurement Planning
Solicitation Planning
Solicitation Source Selection
Contract Administration
Contract Close-out
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Procurement means acquiringProcurement means acquiringgoods / services from an outsidegoods / services from an outside
source.source.
Other terms include purchasingOther terms include purchasing
and outsourcing.and outsourcing.
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Project Procurement Management
Summary
PlanningPlanning Process : Plan Purchases and acquisitionsProcess : Plan Purchases and acquisitions
Process : Plan ContractingProcess : Plan Contracting
ExecutingExecuting
Process : Request seller responsesProcess : Request seller responses
Process : Select SellersProcess : Select Sellers
Monitoring & ControllingMonitoring & Controlling
Process : Administer the contractProcess : Administer the contract
Closing : Contract ClosureClosing : Contract Closure
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Project Procurement Management
Process
Procurement Planning :determining what toProcurement Planning :determining what to
procure and when.procure and when.
Solicitation Planning :documenting productSolicitation Planning :documenting product
requirements and identifying potentialrequirements and identifying potential
sources or sellers.sources or sellers.
Solicitation :obtaining quotations, bids,Solicitation :obtaining quotations, bids,
offers, or proposals as appropriate.offers, or proposals as appropriate.
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Source Selection :choosing from amongSource Selection :choosing from among
potential sellers.potential sellers.
Contract Administration :managing theContract Administration :managing the
relationship with the seller.relationship with the seller.
Contract Close-outcompletion andContract Close-outcompletion and
settlement of the contract, includingsettlement of the contract, includingresolution of any open items.resolution of any open items.
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These processes interact with each otherThese processes interact with each other
and with the processes in the otherand with the processes in the other
knowledge areas as well.knowledge areas as well.
Each process may involve effort from oneEach process may involve effort from one
or more individuals or groups of individualsor more individuals or groups of individuals
based on the needs of the project.based on the needs of the project.
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Project Procurement Mgt. Process &
Key Outputs
Procurement
Planning
Source
Selection
Solicitation
Planning
Contract
Administration
Solicitation
Contract
Close Out
Make-or-buy
decisionIssue RFP
Receive
Proposals
Award
Contract
Complete
Substantial
Amt. of Work
Formally
Close
Contract
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PLANNING PURCHASES AND
ACQUISITIONS (PROCUREMENT
PLANNING) Procurement planning is the process ofProcurement planning is the process of
identifying which project needs can be bestidentifying which project needs can be best
met by procuring products or servicesmet by procuring products or servicesoutside the project organization.outside the project organization.
It involves consideration of whether toIt involves consideration of whether toprocure, how to procure, what to procure,procure, how to procure, what to procure,
how much to procure, and when to procurehow much to procure, and when to procure
it.it.
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Steps in procurement planning
Scope Statement
Product Description
Market
Condition
Other planning
Outputs
Constraints
Make-or-buy
Analysis
Expert
Judgment
Contract Type
Selection
Procurement
Management Plan
Statement(s) of
Work
Inputs Tools &Technique Outputs
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Procurement Planning Tools &
Techniques Make-or-buy AnalysisMake-or-buy Analysis : to determine: to determine
whether an organization should make orwhether an organization should make or
perform a particular product or serviceperform a particular product or serviceinside the organization or buy frominside the organization or buy from
someone else.someone else.
ExpertsExperts : Both internal and external, can: Both internal and external, can
provide Valuable inputs in procurementprovide Valuable inputs in procurement
decisions.decisions.
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Make-or-Buy Example:
Assume you can lease an item you need forAssume you can lease an item you need for
a project for $150/day. To purchase thea project for $150/day. To purchase the
item, the cost is $1,000 plus a dailyitem, the cost is $1,000 plus a daily
operational cost of $50/day.operational cost of $50/day.
How long will it take for the purchase costHow long will it take for the purchase cost
to be the same as the lease cost?to be the same as the lease cost?
If you need the item for 12 days, should youIf you need the item for 12 days, should youlease it or purchase it?lease it or purchase it?
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Make-or Buy Solution:
Set up an equation so the make is equal toSet up an equation so the make is equal tothe buythe buy
In this example, use the following equation.In this example, use the following equation.Let d be the number of days to use the item.Let d be the number of days to use the item.
$150d = $1,000 + $50d$150d = $1,000 + $50d
Solve for d as follows:Solve for d as follows:
Subtract $50d from the right side of theSubtract $50d from the right side of the
equation to get $100d = $1,000equation to get $100d = $1,000
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Divide both sides of the equation by $100Divide both sides of the equation by $100
d = 10 daysd = 10 days
The lease cost is the same as the purchaseThe lease cost is the same as the purchase
cost at 10 dayscost at 10 days
If you need the item for 12 days, it would beIf you need the item for 12 days, it would be
more economical to purchase itmore economical to purchase it
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Expert judgment
Expert judgment will often be required to assessExpert judgment will often be required to assess
the inputs to this process.the inputs to this process.
Such expertise may be provided by any group orSuch expertise may be provided by any group or
individual with specialized knowledge or trainingindividual with specialized knowledge or training
and is available from many sources including:and is available from many sources including: Other units within the performing organization.Other units within the performing organization.
Consultants.Consultants.
Professional and technical associations.Professional and technical associations. Industry groupsIndustry groups
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Contract type selection
Different types of contracts are more or lessDifferent types of contracts are more or lessappropriate for different types of purchases.appropriate for different types of purchases.
Contracts generally fall into one of threeContracts generally fall into one of threebroad categories:broad categories:
Fixed price or lump sum contractsFixed price or lump sum contracts ::involves a fixed total price for a well-involves a fixed total price for a well-
defined product.defined product.
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Cost reimbursable contractsCost reimbursable contracts : involves: involves
payment (reimbursement) to the seller forpayment (reimbursement) to the seller forits actual costs.its actual costs.
Time and material ContractsTime and material Contracts : Hybrid of: Hybrid ofboth fixed-price and cost-reimbursableboth fixed-price and cost-reimbursable
contracts.contracts.
Unit-pricing ContractsUnit-pricing Contracts : Require the buyer: Require the buyer
to pay the supplier a predetermined amountto pay the supplier a predetermined amount
per unit of product.per unit of product.
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Cost reimbursable contractsCost reimbursable contracts
With a cost plus incentive fee (CPIF)With a cost plus incentive fee (CPIF)
contract the buyer pays the supplier forcontract the buyer pays the supplier for
allowable performance cost along with aallowable performance cost along with a
predetermined fee and an incentive bonus.predetermined fee and an incentive bonus.
With a cost plus fixed fee (CPFF) contractWith a cost plus fixed fee (CPFF) contract
the buyer pays the supplier for the allowablethe buyer pays the supplier for the allowableperformance cost plus a fixed fee paymentperformance cost plus a fixed fee payment
usually based on a percentage of estimatedusually based on a percentage of estimated
costs.costs.
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With a cost plus percentage of costs(CPPC)With a cost plus percentage of costs(CPPC)
contract the buyer pays the supplier forcontract the buyer pays the supplier for
allowable performance costs along with aallowable performance costs along with apredetermined percentage based on the totalpredetermined percentage based on the total
costs.costs.
Contract Types Versus RiskContract Types Versus Risk
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Outputs from Procurement Planning
Procurement management planProcurement management plan. The. Theprocurement management plan shouldprocurement management plan should
describe how the remaining procurementdescribe how the remaining procurement
processes (from solicitation planningprocesses (from solicitation planning
through contract close-out) will bethrough contract close-out) will be
managed.managed.
What types of contracts will be used?What types of contracts will be used?
How will multiple providers be managed?How will multiple providers be managed?
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Statement(s) of work: SOW is a description of work required forSOW is a description of work required for
the Procurement.the Procurement.
Many Contracts, or mutually bindingMany Contracts, or mutually binding
agreements , include SOWs.agreements , include SOWs.
A good SOWs gives bidders a betterA good SOWs gives bidders a better
understanding of the buyers Expectations.understanding of the buyers Expectations.
The statement of work should be as clear, asThe statement of work should be as clear, as
complete, and as concise as possible.complete, and as concise as possible.
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Statement of Work (SOW) Template
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Solicitation Planning (PLANNINGCONTRACTING)
Solicitation planning involves preparing theSolicitation planning involves preparing the
documents needed to support solicitation.documents needed to support solicitation.
Procurement documents includeProcurement documents include
Request For Proposal (RFP) : used to solicitRequest For Proposal (RFP) : used to solicit
proposals from prospective suppliers.proposals from prospective suppliers.
Request For Quote (RFQ): used to solicitRequest For Quote (RFQ): used to solicit
quotes for well defined procurement.quotes for well defined procurement.
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Steps in Solicitation Planning
Procurement
ManagementPlan
Statement(s) of
Work
Standard Forms
Expert
Judgment
Procurement
Documents
Evolution
Criteria
Inputs Tools &Technique Outputs