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Lecture 10

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Page 1: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Lecture 10

Page 2: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Review of Lecture 9 – Project Risk• “…an uncertain event or condition that, if it

occurs, has a positive or a negative effect on a project objective.”

• Risks: positive and negative• Top risks in IT projects:

• Lack of top management commitment to the project

• Failure to gain user commitment• Misunderstanding the requirements• Lack of adequate user involvement• Failure to manage end user expectations

Page 3: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

• Risk Management Planning• Methodology or approach to risk management

• Roles and responsibilities of project members

• Risk management budget

• Integration of risk management activities into project life cycle

• Scoring and interpretation of risk analysis

• Risk thresholds

• Reporting formats

• Tracking

• Risk Identification – risk register• Risk response planning – project management

plan

Page 4: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Lecture 10

Managing Project Procurement

Page 5: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Two Perspectives

• Choices for information systems development

• Procurement process

Page 6: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Systems Development History• First wave

– In-house information systems development– More art than science– Limited talent pool– Most systems were custom-designed in-house– Slow and costly

• Second wave– Art became a science through better defined processes

(planning and documentation)– Technology assisted in development effort– Off-the-shelf software becomes an option

• Third wave– Need for faster development– Move to agile methodologies– Software development acquired outside the organization

Page 7: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Sources of Application Software

Page 8: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Five External Sources for Software Development

1. Information Technology Services Firms

• Lack of internal expertise

• Package software solution not feasible

• Service firm may also host hardware

• IBM/Computer Sciences Corp./Accenture

Page 9: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

2. Packaged Software Producers

• General to niche software package development

• Focus on business functions

• Hardware platform varies

• Office 2007/MS-Project/Quickbooks/Turnkey

• Microsoft/Oracle/SAP

Five External Sources for Software Development (cont.)

Page 10: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

3. Enterprise Solutions Software or Enterprise Resource Planning (ERP)

• Integrated modules

• Business process focus

• Single data repository

• Expensive and complex solution

• Sometimes required organization to change their business processes

• SAP/Oracle

Five External Sources for Software Development (cont.)

Page 11: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

4. On-Demand Computing Providers

• Rent or license software

• “Pay as you go”

• Could be the future trend

• IBM/HP

Five External Sources for Software Development (cont.)

Page 12: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

5. Open Source Software

• Software for free

• Maintained by independent members of the computing community

• Linux/mySQL

Five External Sources for Software Development (cont.)

Page 13: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Outsourcing• Outside organization develops or runs a

computer application for another company

– Off or on-site

– Rationale

• Economies of scale

• Access to larger talent base

• Enables company to better focus on core business

• Faster delivery

• Internal resources can be freed for other tasks

• Increased process efficiencies

• Potential for increased revenue

Page 14: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Outsourcing to Offshore

• Security issues

• Potential language/legal/cultural barriers

• 24/7 development

• Requires close monitoring

Page 15: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Project Procurement Management Processes (PMBOK)

1. Plan Purchases and Acquisitions

2. Plan Contracting

3. Request Seller Responses

4. Select Sellers

5. Contract Administration

6. Contract Closure

Page 16: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

1. Plan Purchases and Acquisitions

• Determination of which projects needs can best be met by obtaining services or products from outside organizations

Page 17: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Plan Purchases and Acquisitions Inputs

• Enterprise environmental factors– Assessment of available products and services; key

providers; and any acquisition requirements

• Organizational process assets– Organizational policies/procedures/guidelines

governing procurement

• Project scope statement– Boundaries of the project (requirements, constraints

and assumptions)

• WBS and WBS dictionary– Specific work; descriptions; and deliverables

• Project management plan

Page 18: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Plan Purchases and AcquisitionsTechniques

• Make or buy

• Expert judgment

Page 19: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Contract Types

• Fixed-price

– Bound by the price quoted

– Less problematic when product or service is well-defined

• Cost-reimbursable

– Reimbursement of costs + profit %

• Time-and-materials

– Hourly rate billing

Page 20: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Plan Purchases and AcquisitionsOutputs

• Procurement management plan

– Who prepares the evaluation criteria

– Plan for multiple vendor management

– Acquisition of procurement documents

– Procedures for coordinating the procurement process with other project tasks

• Statement of Work (SOW)

– Document detailing product or service requested from vendor

Page 21: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Service Contracts

• Incident-based

– The organization is charged per visit by the service contractor

• Subscription-oriented

– A single fee is charged by the service contractor for unlimited support

Page 22: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

2. Plan Contracting

• Creation of documents required to support the Request Seller Responses and Select Sellers processes

Page 23: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Plan Contracting – Inputs

• Statement of Work

• Make-or-by decisions

• Procurement management plan

Page 24: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Plan Contracting – Tools & Techniques

• Standard forms/templates

• Expert judgment

Page 25: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Plan Contracting – Outputs

• Request for Proposal (RFP)

– Document provided to vendors to ask them to propose a solution to a specific problem related to a specific project

• Evaluation criteria

– Used to rate responses from vendors to RFPs

• Statement of Work updates

Page 26: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

RFP Contents• Project overview and administrative

information section

• Technical requirements section

• Management requirements section

• Supplier qualifications and references section

• Suppliers’ section

• Pricing section

• Contract and license agreement section

• Appendices

Page 27: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

3. Request Seller Responses

• The process of obtaining responses to procurement documents produced during Plan Contracting

Page 28: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Request Seller Responses – Inputs

• Procurement documents

– RFP

• Organizational process assets

– List of qualified sellers

• Procurement management plan

Page 29: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Request Seller Responses – Outputs

• List of qualified vendors requested to submit a RFP

• Formal procurement documents

• Proposals

Page 30: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

4. Select Sellers

• Contract with a vendor to supply the desired product or service

Page 31: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Select Sellers – Inputs

• Organizational process assets

• Procurement management plan

• Evaluation criteria

• Procurement document package

• Qualified seller list

• Project management plan

Page 32: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Select Sellers – Tools & Techniques

• Weighing system

• Independent estimates

• Screening system

• Contract negotiations

• Seller rating systems

• Expert judgment

Page 33: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Weighing System Method to quantitatively compare vendor proposals

Company Alpha Company Beta Company Gamma

Weight Rating Score Rating Score Rating Score

Price 40 3 120 3 120 2 80

Vendor technical ability 10 4 40 4 40 4 40

Solution functionality 15 4 60 3 45 2 30

Vendor experience 10 3 30 3 30 4 40

Vendor financial resources 15 4 60 3 45 4 60

PMI certified project manager 10 5 50 1 10 1 10

TOTAL 100 360 290 260

Page 34: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

• Independent Estimates– Organization determines what they believe the

estimate should cost

• Screening System– Proposals are rejected if performance criteria do not

meet a minimum value/level

• Contract Negotiation

– Discussions between the buyer and vendor in order to reach agreement on contract structure and requirements prior to signing

Weighing System (cont.)

Page 35: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

• Seller Rating System

– Historical data on vendor delivery and past performance; quality ratings; and contractual compliance

• Expert Judgment

– Those either inside or outside the organization with expertise in the specific domain of the proposed contract

Weighing System (cont.)

Page 36: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

5. Contract Administration

• Procedures that enable the organization to compare what was contracted for and what has been delivered

Page 37: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Contract Administration – Inputs

• Selected sellers

• Contract management plan

• Performance reports

• Work performance information

• Approved change requests

– Contract terms

– Descriptions of work

Page 38: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Contract Administration – Tools & Techniques

• Contract change control

• Buyer-conducted performance reviews

• Inspections and audits

• Performance reporting

• Payment system

• Claims administration

• Records management systems

• Information technology

Page 39: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

• Contract change control– Agreed upon process through which the contract can

be modified

• Buyer-conducted performance reviews– Structured reviews of the vendor’s progress in fulfilling

contract terms

• Inspections and audits– Procedures to determine any shortcomings in

vendor’s work processes or deliverables

• Performance reporting– Progress reports on vendor/supplier contractual

obligations

Contract Administration – Tools & Techniques (cont.)

Page 40: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

• Payment system– Procedures to pay the vendor for work performed

• Claims administration– Process for handling disputes between buyer and

vendor on work performed and resulting value

• Records management systems– Automated record-keeping system to manage

contract documentation and results

• Information technology– Supports contract administrations operations

Contract Administration – Tools & Techniques (cont.)

Page 41: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Contract Administration – Outputs

• Contract documentation

• Organizational process asset updates

• Recommended correction actions

Page 42: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

6. Contract Closure

• Verification that all products and services contracted for are acceptable

Page 43: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Contract Closure – Inputs

• Procurement management plan

• Contract management plan

• Contract documentation of work performed

• Contract closure procedure

Page 44: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Contract Closure – Tools & Techniques

• Procurement audit

– A structured review of the procurement process from the Plan Purchases and Acquisition process through the Contract Administration process; including the records management system

Page 45: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Contract Closure – Outputs

• Closed contract

– Notification to vendor the contract has been completed

• Updates to organizational process assets

– Contract file

– Deliverable acceptance

– Lessons learned documentation

Page 46: Lecture 10. Review of Lecture 9 – Project Risk “…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project

Questions?