Project management procurement

36
PROJECT MANAGEMENT PROCUREMENT & CONTRACT MANAGEMENT

Transcript of Project management procurement

Page 1: Project management  procurement

PROJECT MANAGEMENT –PROCUREMENT & CONTRACT

MANAGEMENT

Page 2: Project management  procurement

Project Management –

Procurement & Contract

Management

• Recap on Project Management

Fundamentals

• Procurement Management

• Contract Management

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PMI Processes Groups

KNO WLEDGE AREAS INITIATING PLANNING EXECUTIO NMO NITO RING

& CO NTRO L

CLO SE

O UT

INTEGRATIO N 1 1 2 2 1

SCO PE 4 2

TIME 6 1

CO ST 3 1

Q UALITY 1 1 1

HUMAN RESO URCES 1 3

CO MMUNICATIO N 1 1 1

RISK 5 1

PRO CUREMENT 1 1 1

STAKEHO LDERS 1 1 1 1

2 24 9 11 1

PRO CESS GRO UP

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Projects & Project Management -

PMI

Project:• A project is a temporary endeavor undertaken to

create a unique product, service, or result.

Project Procurement Management• Processes to purchase or acquire products,

services, or results needed from outside the project team.

• Includes contract management to develop and administer contracts / purchase orders issued as authorized.

Management - PDCA

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Triple Constraint – Pick Any Two

Time

Project

Scope

&RiskCostQuality

• Good & Cheap – Not Fast

• Cheap & Fast – Not Good

• Good & Fast – Not Cheap

Scope is specified, products/services are acquired, delivered and paid for through the procurement process.

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Food For Thought – Scope &

StakeholdersELEMENTS OF PROJECT MANGEMENT (after PMBOK, 1996)

INTERNAL CONTROL _________________________________________________________________________________________________________ EXTERNAL INFLUENCES

Increasing Risk

Decreasing Control

RISK

HUMAN

RESOURCES

COMMUNICATIONS

PROCUREMENT SCOPE

STAKEHOLDERS INTEGRATION

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Procurement- Influence on

Project

• WBS / CBS / RBS /OBS / TBS

• Procurement binds the organizations in the delivery of the scope to predetermined quality, time & cost.

• Procurement allocates risk to the party best suited to manage that element.

Risk Base

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Simple

Buyer (Customer)

Project Team (Buyer / Seller)

Seller / Provider (Contractors)

Sells

Buys

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Larson & ToubroLarson & Toubro

Complex

OWNER

PROGRAM TEAM

PROJECT TEAM

Larson & ToubroSub contractors Suppliers &

Sub Suppliers

CONTRACTORS

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Procurement Management

•Plan Procurement – documenting procurement

decisions, specifying approach, identifying potential

sellers (i.e. suppliers)

•Conduct Procurement – obtaining seller responses,

selecting a seller, awarding contracts

•Control Procurements – managing procurement

(contract) relationships, managing performance,

making changes as appropriate (not necessarily

‘required’)

•Close Procurement – completing each procurement

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PMI – Procurement

ManagementProcess Inputs Tools Outputs

Plan

Procurement

Management

PM Plan,

Requirements, Risk,

Resources,

Schedule, Cost

Estimate,

Stakeholder,

Organizational

Assets, Enterprise

(External) Factors

Make or buy analysis,

Expert Judgment, Market

Research, Meetings

Procurement Plan,

Procurement

statement of work,

procurement

documents, source

selection, make/buy

decisions, changes,

updatest

Conduct

Procurements

Procurement Plan,

Procurement

Documents,

selection criteria,

seller proposals,

statement of work,

organizational

assets,

Bidder conference,

evaluation techniques,

independent estimates,

expert judgment,

advertising, analytical

techniques, negotiations

Stakeholder

Management Plan,

Update documents

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PMI - Procurement

Process Inputs Tools Outputs

Control

Procurements

PM Plan,

Procurement

documents,

Agreements,

Approved

changes, Work

performance

reports / data

Contract change control,

procurement

performance reviews,

inspections and audits,

performance reporting,

payment systems,

claims, records

management

Work performance

information, change

requests, document

updates,

organizational

process updates.

Close

Procurements

PM Plan,

Procurement

Documents

Procurement audits,

procurement

negotiations, records

management system

Closed procurement,

Organizational

updates (Lessons

learned)

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Procurement

Management - PDCA

PDCA Cycle

PROCUREMENT

PLAN

PROCUREMENT

DOCUMENTATION

ANALYSE SELLERS

ENGAGE SELLERS

ISSUES ARISING

MONITOR

PROCUREMENT

PLAN

DO

DO

CHECK PLAN

ACTION

Page 14: Project management  procurement

Procurement Management –

PQ & Tendering

SAUDI LAND BRIDGE - PROCUREMENT PROCESS

PQ Route

Establish Procurement

Strategy

PQ Queries &

response

Prepare Procurement

Manual & Procedures

Market DiscussionsIssue PQ through

Journals/Media

Prepare Tender Documents

Possible Project

Briefing

Evaluate PQ

Submission

CoC, SCoC, ITT, FoT, GS, PS,

M&W, Dwgs, BOQ (*)

Tenderer Queries from

all

Tender documents issued /

collected

Prebid Conference / Site

Visit

Submission & Receipt of

Tenders (Offers)

Select Tenderers /

Advise Others

Prepare PQ

Documents

PQ Returned

Issue Addenda as

required to all

Responses to all

Tenderers

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Procurement Management –

Tender Evaluation

Technical Review

Further clarifications

(as required)

Opening of Technical

Submission

Further clarifications

(as required)

Tender Clarifications

(as required)

Tender Evaluation & Report

Commercial Financial

Review

Ensure fully complaint

offers/bids

Advise non-complaint bidder -

return financial bid

Tenderer Recommendation,

& Selection

Negotiations (as required)

Prepare wrap up letter (s),

contract documents

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Food For Thought – Lowest Bidder

John Ruskin (1819-1900)

It is unwise to pay too much, but it is worse to pay too little.

When you pay too much, you lose a little money - that is all.

When you pay too little you sometimes lose everything because the

thing you bought was incapable of doing the thing it was bought to do...

If you deal with the lowest bidder, it is well to add something for the

risk you run, and if you do that you will have enough to pay for

something better.

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Procurement Management –

Finalisation & Award

Advise Other Tenders of outcome /

return Bid BondContract Signing / Award

Tenderer Recommendation,

& Selection

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Food For Thought -

Contractors

FEASIBILITY - INITIATION - PLANNING - ADJUDICATION - NEGOTIATE

AWARD

Sales Decision

Process

Interviews and

clarifications with

Client / Customer

Initial Review of

Tender Docs,

Conditions, Risk,

Scope

Technical Planning

of scheme, Costing,

schedule, risks,

price.

Review of tender &

risks, price,

qualifications.

Decision 1 Decision 2 Decision 3 Decision 4

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Contractor

NEGOTIATE EXECUTION - CLOSE OUT -

AWARD

Interviews and

clarifications with

Client / Customer

Start up, execution

of works, reporting,

monitoring & control,

etc.

DLP Maintenance,

Admin Closure,

Contract Close out,

Final Account,

Acceptance.

Decision 4

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Procurement Management

Post Award Contract

Administration• Kick – Off Meeting

• Physical Work

• Compliance with Contract Deliverables

• Compliance with Specifications & Drawings

• Compliance with Quality

• Management of Interfaces

• Compliance with Programme

• Payment Applications

• &…problems, delays, slippage, errors, changes, etc

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Claims

• Claims

“Demands for something due, or believed to be due, as a

result of an action, direction, or change order against the

agreed terms and conditions of a contract that cannot be

(economically) resolved between the parties”

• Claims Management

Processes to prevent construction claims, to mitigate the

effects of those that may/do occur, and to handle claims

quickly and effectively”

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Claims

Management – PDCA

If you do not move claims along parts of the project may not move –

If you are in a hole - stop digging!

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Claims Identification

• Suddenly, a heated

exchange took place

between the king and the

moat contractor.

• AN EARLY

CONTRACTUAL

DISPUTE AS A RESULT

OF POOR

REQUIREMENTS, NO

FUNCTIONAL

SPECIFICATION & NO

DRAWINGS.

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Claims should be treated fairly

and reasonably

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Procurement Management

Claims• Delayed Drawings,• Right of access• Setting Out Errors• Unforeseeable Physical Conditions• Finding of fossils• Delays due to Engineer’s Instructions etc• Delays by authority• Delayed tests by Employer • Costs etc with Part Takeover• Change in Legislation• Employer's Risks• Insurances not in place by Employer• Variations• Any Delay caused by Contract Conditions• Exceptional Adverse Climatic Conditions• Unforeseeable shortages of labour

(epidemic)• Any delay attributable to Employer,

Employer’s personnel, other Contractors

NO

YES

NO

YES

Yes

No

No

Yes

CONTRACTOR PROVIDES

FINAL CLAIM AT 42 DAYS

CONTRACTOR PROVIDES MONTHLY

UPDATE

CONTRACTOR LODGES CLAIM PURSUANT

TO Cl 20.1

ENGINEER ADVISES OF CLAIM REFERENCE

+ ADD RECORDS

DISPUTE PROCESS

COMMENCESENGINEER REJECTS CLAIM

CONTRACTOR PROVIDES INTERIM CLAIM

AT 42 DAYS

FINAL CLAIM 28 DAYS AFTER CESSATION

ENGINEER DETERMINES AFTER 42 DAYS

FROM RECEIPT OF 'FINAL CLAIM'

PROCEED WITH DETERMINATION

(Rejected / Accepted)

CLAIM WITHIN 28 DAYS

IS CLAIM ONGOING?

Determination Accepted

IS CLAIM ONGOING?

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Claim Assessment - Delays

Impacted Programme

C2-1 (Pier 85 to 79)

C1A-6

C3-1

EOT = 75 days

(Phase C2)

Bored pile & king post

Excavation / underpining

Slab - B2, B1 & L1

Touch-up / cleaning / handover

C2-1 complete (- 162 days)

12/10

21/11 10/7

4/11

14/11

15/12

Instruction given (18 Feb 08)

Additional time to confirm design

upon instruction and to perform

the instructed works (75 days)

C1A-6 complete (- 203 days)

B2 slab / pour strip

Touch-up / cleaning / handover

22/8EOT = 75 days

(Phase C1A)

B2 slab / pour strip

C3-1 complete

(-113 days)

26/10

3/8

EOT = 63 days

(Phase C3)

C3-1 complete (- 50 days)

Excavation / underpining

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Claim Assessment – Source of

Costs

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Employer’s Claims

NO

YES

NO

YES

NO

YES

END PAYMENT RECOVERED

ENGINEER ADVISES CLAIM

WILL NOT BE PERSUED

DISPUTE

CLAIMABLE EVENT OCCURS & EMPLOYER

INCURS COSTS

ENGINEER ADVISES CONTRCATOR OF

EVENT (2.5)

ENGINEER RAISES WITH EMPLOYER

ENGINEER ADVISES OF CLAIM REFERENCE

& QUANTUM (3.5)

ENGINEER REQUESTS FOR

JUSTIFICATION (if req'd)

ENGINEER ADVISES HOW PAYMENT WILL

BE RECOVERED

CLAIM NOT SUBSTANTIATED -

END

EMPLOYER WISHES TO

PROCEED

CONTRACTOR ACCEPTS?

ACCEPTABLE?

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Claims Prevention / Mitigation

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Variations

VARIATIONS

NO

YES

NO

YES

Maybe YES YES More Data

NO NO

NO

YES

Cancel Confirm

Variation Req'd

NO VARIATION TO BE

INSTRUCTED

ENGINEER ADVISES NO VARIATION TO BE

INSTRUCTED

SEEK ALTERNATIVE CONTRACTUAL

MECHANISM FOR VARIED WORKS

ENGINEER ADVISES TO

PROCEED UNDER 13.1

ENGINEER RECEIVES & REVIEWS

ENGINEER RECEIVES & REVIEWS

PERFORM WORKS AS PER VARIATION ORDER

(Maintain records & Adjust)

REQUEST FURTHER

INFORMATION

ENGINEER ISSUES 'REQUEST FOR PROPOSAL'

(13.3)

CONTRACTOR SUBMITS PROPOSAL (Scope,

Programme, Cost)

ENGINEER RECEIVES & REVIEWS

NEED/DESIRE FOR VARIATION IDENTIFIED

ENGINEER ISSUES VARIATION ORDER (13.1)

ENGINEER RECEIVES & REVIEWS

CONTRACTOR SUBMITS 'VALUE

ENGINEERING PROPOSAL' (13.2)

VARIATION BY

EMPLOYER?

DEFINITIVE VARIATION?

ACCEPTABLE /

ADOPTABLE?ACCEPTABLE /

ADOPTABLE?

OK to Contractor?

Engineer's Decision?

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Beware the High Rate / Low

Quantity

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Procurement Management

Payment ProcessP A YM E N T P R O C ES S F L O W

YE S

N O

N O YE S

C O N T R A C T W O R K S E X E C U TE D

E N G IN E E R IS S U ES P ER F O R M A C E C E R T IF IC A TE

(1 1.9 )

C O N T R A C T O R R A IS E S IP C

A P P LIC A T IO N (1 4 .3 )

E N GIN E E R / C O N TR A C TO R A G R E E IP C

C O M M EN C E M E N T D A T E

C O N TR A C TO R P R O V ID E S S EC U R IT Y &

G U A R A N TE E (4 .2)

E N GIN E ER IS S U E S IP C (1 4.6 )

E M P L O YE R P A YS (14 .7 )

D E F E C TS N O T IF IC A TIO N P ER IO D E N D S (1 1 .3 / 4 )

EN G IN E ER C E R T IF IES & IS S U E S IP C

(1 4.6 ) (+ 28 d )

E N GIN E E R P A Y S C O N TR A C TO R (1 4 .7 )

(+ 56 d )

TA K IN G O V E R C ER TIF IC A T E IS S U ED (1 0 .1 )

E N G IN EE R IS S U ES IP C F O R R E TE N TIO N M O N EY

(5 0 % ) (14 .9 )

C O N T R A C T O R S U B M IT S C O M P L ET IO N

S T AT E M EN T (1 4 .10 )

EN G IN E ER / C O N T R A C TO R A GR EE S TA TE M E N T

E N GIN E E R C ER TIF IE S & IS S U E S IP C F O R

C O M P L ET IO N (1 4 .6 )

E M P L O YE R P A YS (14 .7 )

A D V A N C E

P A YM EN T ?

W O R K S

C O M P LE TE ?

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Payments

WORKS COMMENCE

(ADVANCE PAYMENT)

INTERIM PAYMENTS

• Contract Signed

• Advance payment

• Interim Payments

• Taking Over (50%

retention Released)

• Statement at Completion

• Performance Certificate

• Retention Released

• Bond Released

• Final Certificate

STATEMENT AT

COMPLETION

RETURN

BOND

FINAL CERT

&PAYMENT

Page 34: Project management  procurement

Conclusions

• Procurement is essential to project success and typically an early

decision

• Suppliers are selected to provide the required work/services during

project evolution and manage the risk apportioned to them

• Suppliers are paid in an efficient, objective and timely manner

• Administration ensures that variation/change is identified, captured

and controlled wrt impact on cost / time / quality / scope in a timely

and controlled manner

• Ensures claims are handled in an objective manner and impacts on

interfaces with other contracts / stakeholders is identified and

managed

• Closure finalises the buying/ selling process and ensures lessons

are learnt and there is formal / legal closure.

Page 35: Project management  procurement

Remember

•Procurement binds other companies, agencies and

sometimes people into the ‘project organisation’

•Roles and Responsibilities are effectively defined formally

and there are legal/contractual obligations that must be

fulfilled.

•Procurement processes depend on the agency carrying

out the work – there are two sides to each contract

•Claims happen

•BUT

•there are three sides to every coin

Page 36: Project management  procurement

Questions / Discussion