Project Procurement Management 2

8/2/2019 Project Procurement Management 2

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Project ProcurementManagement


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Topics

v Procurement Plan

vArjay Dela Cruz

v Solicitation PlanningvAndrea Ramos

v Solicitation

v Michelle Rose Hernal

v Source Selection

v Ma. Gella Monancillo

v Contract Administration


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Project ProcurementManagement Overview

PROJECT PROCUREMENT MANAGEMENT


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PROCUREMENTPLANNING


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PROCUREMENTPLANNING

Procurement planning is the processof identifying which project needscan be best met by procuring

products or services outside theproject organization. It involvesconsideration of whether to procure,

how to procure, what to procure,how much to procure, and when toprocure it.

Procurement planning should also


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Inputs to ProcurementPlanning

Scope statement

The scope statement describes the

current project boundaries. It providesimportant information about projectneeds and strategies that must beconsidered during procurement

planning.Product description

The description of the product of the

project provides important information


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Procurement resources

If the performing organization does not

have a formal contracting group, theproject team will have to supply boththe resources and the expertise tosupport project procurement activities.

Market conditions

The procurement planning process mustconsider what products and services are

available in the marketplace, from


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Other planning outputs

To the extent that other planning

outputs are available, they must beconsidered during procurementplanning. Other planning outputs whichmust often be considered include

preliminary cost and scheduleestimates, quality management plans,cash flow projections, the workbreakdown structure, identified risks,

and planned staffing.


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Constraints

Constraints are factors that limit the

buyers options. One of the mostcommon constraints for many projects isfunds availability.

Assumptions

Assumptions are factors that, forplanning purposes, will be considered tobe true, real, or certain.


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Tools and Techniques forProcurement Planning

Make-or-buy analysis

This is a general management

technique which can be used todetermine whether a particular productcan be produced cost-effectively by theperforming organization. Both sides of

the analysis include indirect as well asdirect costs.

A make-or-buy analysis must also reflectthe perspective of the performingorganization as well as the immediate


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Expert judgment

Expert judgment will often be required

to assess the inputs to this process.Such expertise may be provided by anygroup or individual with specializedknowledge or training and is available

from many sources including: Other units within the performing

organization.

Consultants.

Professional and technical associations.


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Contract type selection

Different types of contracts :

Fixed price or lump sumcontracts: involve afixed total price for a well-defined product orservice.

Cost reimbursablecontracts: involve payment

to the seller for direct and indirect costs. Time and materialcontracts: hybrid of both

fixed price and cost reimbursable contracts, oftenused by consultants

Unit pricecontracts: require the buyer to paythe seller a predetermined amount per unit of


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Outputs from ProcurementPlanning

Procurement management plan

The procurement management planshould describe how the remainingprocurement processes (from solicitationplanning through contract close-out) willbe managed.

A procurement management plan maybe formal or informal, highly detailed orbroadly framed, based on the needs ofthe project. It is a subsidiary element of

the overall project plan described in


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Outputs from ProcurementPlanning

Statement(s) of work (SOW)

A statement of workis a description

of the work required for theprocurement.

If a SOW is used as part of a contract todescribe only the work required for thatparticular contract, it is called acontract statement of work.

A SOW is a type of scope statement.

A good SOW gives bidders a better


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Statement Of Work(SOW) Template


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Solicitation Planning


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Solicitation Planning

Solicitation planning involvespreparing the documents needed tosupport solicitation.


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Inputs to SolicitationPlanning

Procurement management plan

Statement(s) Of Work (SOW)

Other planning outputsThis have been modified from when they were

considered as part of procurement planning,should be reviewed again as part ofsolicitation. In particular, solicitation planningshould be closely coordinated with the projectschedule.


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Tools and Techniques forSolicitation Planning

Standard forms

Standard forms may include standard

contracts, standard descriptions ofprocurement items, or standardizedversions of all or part of the needed biddocuments. Organizations that do

substantial amounts of procurementshould have many of these documentsstandardized.

Expert judgment


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Outputs from SolicitationPlanningProcurement documents.

Procurement documents are used tosolicit proposals from prospective

sellers. The terms bid and quotationare generally used when the sourceselection decision will be price-driven(as when buying commercial items),

while the term proposal is generallyused when non-financial considerationssuch as technical skills or approach areparamount (as when buying professional

services).


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A bid, also called a tender or quote(short for quotation), is a documentprepared by sellers providing pricingfor standard items that have beenclearly defined by the buyer.


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A proposal is a documentprepared by a seller when there aredifferent approaches for meetingbuyer needs.


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Outputs from SolicitationPlanning

Procurement documents may consist of:

Information for sellers

Background information

Procedures for replying

Guidelines for preparation of the proposal

Evaluation criteria

Pricing forms

SOW

Proposed T&C in the contract.

The seller must be aware of all the work


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Well designed procurement documentshave the following effects:

Easier comparison of sellers response

More complete proposals

More accurate pricing

Decrease in the amount of changes to the

project.


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Outputs from SolicitationPlanningEvaluation criteria

Evaluation criteria are used to rate orscore proposals.

Evaluation criteria are often included aspart of the procurement documents.

Selection criteria may include:

Understanding of needs

Overall or life-cycle cost

Technical capability

Management approach

f li i i


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Statement of work updates

Modifications to one or more statements

of work may be identified duringsolicitation planning.


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Solicitation


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Solicitation

Solicitation involves obtaininginformation (bids and proposals)from prospective sellers on howproject needs can be met. Most ofthe actual effort in this process isexpended by the prospective sellers,

normally at no cost to the project.


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Inputs to Solicitation

Procurement documents

Procurement Documents are used tosolicit proposals from prospective

sellers. Common names for differenttypes of procurement documentsinclude: Invitation for Bid (IFB), Requestfor Proposal (RFP), Request for

Quotation (RFQ), Invitation forNegotiation, and Contractor InitialResponse.


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Inputs to Solicitation

Qualified seller lists

Some organizations maintain lists or

files with information on prospectivesellers. These lists will generally haveinformation on relevant experience andother characteristics of the prospective

sellers. If such lists are not readilyavailable, the project team will have todevelop its own sources.


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Qualified seller lists

T l d T h i f


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Tools and Techniques forSolicitation

Bidder conferences

Bidder conferences are meetings with

prospective sellers prior to preparationof a proposal. They are used to ensurethat all prospective sellers have a clear,common understanding of the

procurement (technical requirements,contract requirements, etc.). Responsesto questions may be incorporated intothe procurement documents as

amendments.

T l d T h i f


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Tools and Techniques forSolicitation

Advertising

Existing lists of potential sellers can

often be expanded by placingadvertisements in general circulationpublications such as newspapers or inspecialty publications such as

professional journals. Some governmentjurisdictions require public advertising ofcertain types of procurement items;most government jurisdictions require

public advertising of subcontracts on a


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Outputs from Solicitation

Proposals

Proposals are seller-prepared

documents that describe the sellersability and willingness to provide therequested product. They are prepared inaccordance with the requirements of the

relevant procurement documents.


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Source Selection


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Source Selection

Source selection involves the receiptof bids or proposals and theapplication of the evaluation criteria toselect a provider. This process isseldom straightforward:

Price may be the primary determinant

for an off-the-shelf item, but the lowestproposed price may not be the lowestcost if the seller proves unable to deliverthe product in a timely manner.


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Source Selection

Inp ts to So rce


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Inputs to SourceSelection

Proposals

Evaluation criteria

Organizational policies

Any and all of the organizationsinvolved in the project may have formal

or informal policies that can affect theevaluation of proposals.

Tools and Techniques for


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Tools and Techniques forSource SelectionContract negotiation

Contract negotiation involves clarificationand mutual agreement on the structure and

requirements of the contract prior to thesigning of the contract. To the extentpossible, final contract language shouldreflect all agreements reached. Subjects

covered generally include, but are notlimited to, responsibilities and authorities,applicable terms and law, technical andbusiness management approaches,contract financing, and price.



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Tools and Techniques forSource Selection

Weighting system

A weighting system is a method forquantifying qualitative data in order tominimize the effect of personal prejudiceon source selection. Most such systemsinvolve :

Assigning a numerical weight to each of theevaluation criteria.

Rating the prospective sellers on eachcriterion.

Multiplying the weight by the rating.



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Screening system

A screening system involvesestablishing minimum requirements ofperformance for one or more of theevaluation criteria. For example, aprospective seller might be required to

propose a project manager who is aProject Management Professional (PMP)before the remainder of their proposalwould be considered.



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Independent estimates

For many procurement items, theprocuring organization may prepare itsown estimates as a check on proposedpricing. Significant differences fromthese estimates may be an indication

that the SOW was not adequate or thatthe prospective seller eithermisunderstood or failed to respond fullyto the SOW. Independent estimates are

often referred to as should cost

Outputs from Source


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Outputs from SourceSelection

Contract

A contract is a mutually bindingagreement which obligates the seller to

provide the specified product andobligates the buyer to pay for it.

A contract is a legal relationship subject

to remedy in the courts. The agreementmay be simple or complex, usually (butnot always) reflecting the simplicity orcomplexity of the product. It may be

called, among other names, a contract,


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Contract Administration


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Contract Administration

The Contract Administrationprocess helps to assure the projectsgoals and needs are on track and on

schedule and the seller is behavingappropriately. The ContractAdministration process is a part of

the Monitoring and ControllingProcess Group.

Inputs to Contract


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Inputs to ContractAdministration

Contract - A contract is an agreementbetween the buyer and the seller which detailstheir legal requirements and obligations.

Contract Management Plan - The ContractManagement Plan utilizes the existing contractrequirements to provide the buyer and theseller with guidelines for administering and

monitoring contracts for significant purchasesor acquisitions.

Selected Sellers - The selected sellers aresellers that the buyer deems the best

candidates for the project and that have

Inputs to Contract


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Inputs to ContractAdministration

Performance Reports - Performancereports are more detailed than workperformance information, they use

methods such as bar charts and S-curves to organize and summarizeinformation such as earned valuemanagement and project work progress.

Approved Change Requests -Approved change requests verify which

changes to contracts or procurement

e oo s a ec ques


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e oo s a ec quesfor the Contract

AdministrationOnce you have been able to get throughthe selection/acquisition phase, the projectmanager needs to track administrative

issues, contract changes, and the seller'sprogress and quality of work to assure thatthe project is running smoothly. The toolsand techniques for the Contract

Administration process are:

Contract Change Control System -

A contract change control system

e oo s a ec ques


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Administration Buyer-conducted PerformanceReview - A buyer-conductedperformance review tracks the vendors

progress in execution and productdelivery within contractual parameters.Hopefully, your organization is includingthe cost and project schedule in the

contract. The purpose is to managecontract performance by recognizingperformance success and failures,anticipated completion on the contract

statement of work, and finally identify

e oo s a ec ques


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Administration Performance Reporting -Performance reporting involvesgathering the vendors performance

data and distributing it to stakeholders.Performance Reporting can help to alertmanagement on whether the vendor ismeeting contractual objectives.

Payment System - Payment systemsare tools and claims administrationprocesses used for Contract

Administration. The buyer uses a

e oo s a ec ques


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Administration Records Management System - Arecords management system is a set ofprocesses, related control functions,

and automation tools which are used tomanage contract documentation andrecords. Project managers use recordsmanagement systems to manage

contract documentation and records; tokeep an index of contract documentsand correspondence; and for help withretrieving, accessing, and archiving that

documentation.

Outputs from Contract


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Outputs from ContractAdministration

Contract Documentation -Contract documentation includes thecontract, schedules, requestedunapproved contract changes,approved change requests, anyseller-developed technical

documentation, and workperformance information.

Requested Changes - Requested

changes to the Project Management

e o rac


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e o racAdministration process

outputsOrganizational Process Assets(Updates) - Updates toorganizational process assets consistof the buyers' and vendors' writtenrecords of all contractadministration, including actions

taken and decisions made, results ofbuyer audits and inspections,payment schedule updates, and

seller performance evaluation


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Contract Close-out


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Contract Close-out

Contract close-out is similar toadministrative closure in that itinvolves both product verification (Was

all work completed correctly andsatisfactorily?) and administrativeclose-out (updating of records to

reflect final results and archiving ofsuch information for future use). Thecontract terms and conditions mayprescribe specific procedures forcontract close-out. Earl termination of

Inputs to Contract Close-


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Inputs to Contract Close-out

Contract documentation

Contract documentation includes, but isnot limited to, the contract itself alongwith all supporting schedules, requestedand approved contract changes, anyseller-developed technical

documentation, seller performancereports, financial documents such asinvoices and payment records, and theresults of any contract-related

inspections.



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Tools and Techniques forContract Close-out

Procurement Audits

A procurement audit is a structuredreview of the procurement process fromprocurement planning through contractadministration. The objective of aprocurement audit is to identify

successes and failures that warranttransfer to other procurement items onthis project or to other projects withinthe performing organization.

Outputs from Contract


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Outputs from ContractClose-outContract file

A complete set ofindexed records

should be preparedfor inclusion with thefinal project records.

Formalacceptance andclosure

Project Procurement Management 2

Documents

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