pmp 09 procurement management
DESCRIPTION
PMP 09 Procurement ManagementTRANSCRIPT
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Project Procurement ManagementBased on PMBOK 5th Edition
Abdelrahman Sheta, PMP,ITIL
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What is a Contract
12.1 Plan Procurement
Types of Contracts
12.2 Conduct Procurements
12.3 Control Procurements
12.4 Close Procurements
Agenda
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What is Procurement Management? Includes the processes required to
acquire goods or services from outside the project team.
It also includes Contract Management andChange Control Processes.
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What is a “CONTRACT”
A Contract is a Legally binding detailed
formal document that refers to an
entire agreement between 2 or more
parties.
All terms & conditions of a Contract must be
met.
Anything not mentioned in the Contract is not
Legally Binding to anyone.
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Identifies products or services that can be acquired from outside the project organization Vs needs that can be accomplished by the project team.
Involves consideration of potential sellers. Can influence project schedule, resource
estimating and make or buy decisions. Includes reviewing the risks involved and
type ofcontract to be used.
12.1 Plan Procurement
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1. Project Management Plan Project Scope Statement WBS WBS Dictionary
2. Requirements Documentation
Including legal and contractual requirements
3. Risk Register
4. Activity Resource Requirements
Plan Procurement - Inputs
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5. Project Schedule
6. Activity Cost Estimates (Internal Cost
Estimates for activities being procured)
7. Stakeholder Register
8. Enterprise Environmental Factors
9. Organizational Process Assets
Plan Procurement - Inputs
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1. Fixed Price (Lump Sum):
Well defined scope/ product.
Fixed total Price.
Risk is on the seller.
A. Firm Fixed Price (FFP)
B. Fixed Price Incentive Fees Contract (FPIF)
C. Fixed Price with Economic Price
Adjustment Contracts (FP-EPA)
Types of Contracts (1)
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2. Cost Reimbursable Contract:
Scope is not exactly defined.
Price is open based on the
final costs the product will
incur.
Risk is on the buyer.
A. Cost Plus Fixed Fees Contracts (CPFF)
B. Cost Plus Incentive Fees Contracts (CPIF)
C. Cost Plus Award Fee Contracts (CPAF)
Types of Contracts (2)
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3. Time and Material:
Cost is charged to
identified tasks of an on
going activity, ex. research.
Scope per unit is defined.
Risk is on the buyer.
(seller has no incentive to
control costs)
Types of Contracts (3)
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Fixed Price vs. Cost Reimbursable
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Contract Type SelectionHIGH
BUYER’S RISK
SELLER’S RISKLO
W
LOW
HIGH
CPFF
Cost
Plus
Fixed
Fee
CPIF
Cost
Plus
Incentiv
e Fee
FPI
Fixed
Price
Incentiv
e
FFP
Firm
Fixe
d
Pric
e
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1.Make or Buy Analysis: Determine whether a product or service
needs to be procured or can be produced by the project team.
Purchase or make - Purchase or
renting/leasing Reasons to Buy: Capacity and Capability Exploit Opportunity Shift risk (cost, time, or scope)
Reasons to Make: Idle resources Want to control Confidential information
Plan Procurement – T & T
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2. Expert Judgment
3. Market Research
4. Meetings
Plan Procurement – T & T
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1. Procurement Management Plan: includes but not
limited to: Types of contracts to be used Risk Management Issues Procurement Processes Standardized Procurement Documents Responsibilities Pre-qualified sellers Scheduled dates for deliverables Managing multiple providers
Plan Procurement – Outputs
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2. Procurement Statement of Work: includes Specifications, quality levels, quantity
desired and other requirements. Describes the procurement item in
sufficient detail to allow sellers to determine if they are capable of providing the item.
Plan Procurement – Outputs
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3. Procurement Documents: are used to solicit
proposals, quotes, and bids from sellers Request for Information
Request for Proposal (Tender), RFP: request a price and detailed proposal on how the work will be accomplished.
Request for Bid, RFB: Request price of all the work
Request for Quotation: price quote per item, hour, orfoot (T&M contracts).
Terminology may vary by industry.
Plan Procurement – Outputs
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4. Source Selection Criteria: The project team must be prepared to compare the proposals received in an unbiased manner based on identified & documented selection criteria to rate or score proposals.
Includes but not limited to: Past performance Understanding of need Overall or life cycle cost References Technical capability and approach Risk Management approach Financial stability and capacity
Plan Procurement – Outputs
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5. Make or Buy Decision
6. Change Requests
7. Project Document Updates
Plan Procurement – Outputs
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With a clear scope of work a seller completes work as specified, but the buyer is not pleased with the results. The contract is considered to be:
A. Cancelled (void)
B. Incomplete
C. Complete
D. Waived
Quiz
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At the start of a fixed price contract, the actualprofit is:
A. Unknown
B. Part of the negotiation involved in paying every invoice
C. Applied as a line item in every invoice
D. Determined at the end of the project
Quiz
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Obtaining seller responses, selecting a
seller, and awarding a contract.
The key benefit is to provide
alignment of internal and external
stakeholder expectations through
established agreements.
12.2 Conduct Procurement
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1. Procurement Management Plan
2. Procurement Documents
3. Source Selection Criteria
4. Seller Proposals
5. Project Documents
6. Make or Buy Decisions
7. Procurement Statement of Work
8. Organizational Process Assets
Conduct Procurement - Inputs
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1. Bidder Conferences
Also known as contractor, vendor, or pre-bid conferences.
The purpose of these conferences is to clarify any of the information not clearly stated in the RFP.
Creates a clear and common understanding of theprocurement.
Proposals received will be more clearly aligned with project requirements, due to the fact that bidder conferences make the requirements clear.
Conduct Procurements – T & T
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2. Proposal Evaluation Techniques
(agreed by Evaluation Committee)
3. Independent Estimates
(benchmark, help uncover SOW
deficiencies & ambiguities)
4. Expert Judgment
5. Advertising, Increase the number of
potential sellers
Conduct Procurements – T & T
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6. Analytical Techniques
7. Procurement Negotiations
Negotiations can cover the following areas:
Responsibilities and authorities
Applicable terms and law
Scope, technical & business management approaches
Contract financing (Payment Schedule)
Price
Conduct Procurements – T & T
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1. Selected Sellers
2. Agreements
Includes, but not limited to:
Conduct Procurement – Outputs
SOW
PricingChange
requests
Payment
Roles &
responsibilities
Acceptance criteria
Warrant
y
Penaltie
s
Schedul
e
product
support
Insurance
Incentives
Performance bonds
Termination mechanisms
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3. Resource Calendars
4. Change Requests
5. Project Management Plan Updates
(Scope, Cost, Schedule, Procurement
Management Plan…etc.)
6. Project Document Updates
(SOW and Requirements
Documentation)
Conduct Procurement – Outputs
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Bidder Conferences are part of :
A.Plan Procurements
B.Conduct Procurements
C.Control Procurements
D.Conduct Purchasing
Quiz
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The project team is arguing about whether they should complete a work package themselves or outsource the work. What part of the procurement process are they in:
A.Contract administrationB.Plan ProcurementsC.Conduct ProcurementsD.Select sellers
Quiz
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• Manage procurements relationships,
monitor contract performance and make
changes and corrections as needed.
12.3 Control Procurements
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1. Project Management Plan
2. Procurement Documents
3. Agreements
4. Work Performance Reports Technical documentation and other
deliverables information developed by the seller.
Seller Performance Reports.
Control Procurements - Inputs
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5. Approved Change Request.
6. Work Performance Information: Includes; The extent to which quality standards
are being met. Indicates which deliverables have been
completed. Identifies which costs have been
incurred. Seller invoices: submitted from time to
time to request payment for work
performed.
Control Procurements - Inputs
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1. Contract Change Control System Defines the process how the contract may be
modified. Includes the paperwork, tracking systems,
dispute resolution procedures, and approval levels necessary for authorizing changes.
Should be integrated with the integrated change controlsystem.
2. Procurement Performance Review; A structured review on the sellers’ progress to deliver as per planned scope– quality – schedule – quality, etc..
Control Procurements – T & T
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3. Inspections and Audits; required by the buyer and
supported by the seller to identify any weaknesses in
the seller’s work performance or deliverables.
4. Performance Reporting.
5. Payment Systems: Handled by the accounts
payable department of the performing
organization. Must include reviews and approvals
of seller invoices by the project team prior to
issuing a payment to a seller.
Control Procurements – T & T
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6. Claims Administration: (disputes or appeals))
Where buyer and seller cannot agree on
compensation for the change, or that a change
has even occurred.
Should be documented and managed in accordance with
the terms of the contract.
Might involve arbitration or litigation.
7. Record Management System:
A set of processes and automation tools consolidated
into the project Management Information System to
manage contract documentation and records.
Control Procurements – T & T
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1. Work Performance Information, includes but• not limited to:
Updated Schedules
Invoices
Technical documentation
Performance reports
2. Change Requests
Control Procurements – Outputs
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3. Project Management Plan Updates
4. Project Documents Updates
5. Organizational Process Assets Updates: including
Correspondence: communication between buyer & seller.
Payment Schedules and requests.
Seller performance evaluation documentation:
The buyer document s seller’s ability to continue
to perform work on the project or to be allowed
to work on future projects.
Basis for early termination
Update the qualified seller lists in the organization.
Control Procurement – Outputs
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All of the following statements about change control are
incorrect EXCEPT:
A. A fixed price contract will minimize the need for
change control.
B. Changes seldom provide real benefits to the project
C. Contracts should include procedures to accommodate
changes.
D. More detailed specifications eliminate the causes of changes.
Quiz
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The process of completing each
project procurement.
Involves verification that all of
the procurement work was
completed and accepted.
(Product Verification)
12.4 Close Procurements
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1. Project Management Plan
2. Procurement Documentation The contract. Supporting schedules Requested and approved
changes Technical documentation Performance reports Financial reports
Close Procurement - Inputs
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1. Procurement Audits: A structured review of the
procurement process from Plan Procurements to Control Procurements.
The objective is to identify the successes& failures that warrant recognition.
2. Procurement Negotiations
3. Records Management System.
Close Procurement – T & T
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Close Procurement – Output
1. Closed Procurements: Formal written notice• that the contract has been completed.
2. Organizational Process Assets Updates: Contract File:
A complete set of indexed contract documentation.
Deliverable Acceptance: A formal written notice from the buyer
that the contract has been accepted. Requirements should be defined in the
contract. Lessons Learned documentation
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Once signed, a contract is legally binding unless:
A.One party is unable to perform
B.One party is unable to finance its
part of the workC.It is in violation of applicable law
D.It is declared null and void by either party’s legal
council
Quiz
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All the following MUST be present to have a
contract EXCEPT:
A.Contract statement of work
B.Acceptance
C.Address of the seller
D.Buyer’s signature
Quiz
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Q. With which type of contract is the seller MOST
concerned about project scope:
A.Fixed price
B.Cost plus fixed fees
C.Time & Material
D.Purchase order
Quiz
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