procurement management slides

8/18/2019 Procurement Management Slides

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Project Procurement

ManagementSections of this presentation were adapted

from A Guide to the Project Management

Body of Knowledge 4th Edition, ProjectManagement nstitute nc!, " #$$%


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4

As Procurement

Contributes To ProfitabilityProcurement is Often

Centralized,-esults in !"tandardized

#ractices$-$%o&er Pa#er &ork Cost$


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Project 6uality Management

9-he processes to purchase or ac&uire the

products, ser(ices, or results needed from

outside the project team to perform the

wor2:


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1hy Procurement Management;

Most all projects will need to ac&uire some

resources from outside


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=ow /o 1e Manage Procurement;

8our processes Plan Procurements onduct Procurements Administer Procurements lose Procurements

onduct

Procurements

Administer

Procurements

Plan

Procurements

lose

Procurements


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Plan ProcurementsScope Baseline

>e&uirements/ocumentation

-eaming Agreements

>is2 >egister

>is2>elated ontract

/ecisions

Acti(ity >esource>e&uirements

Project Schedule

Acti(ity ost Estimates

ost Performance Baseline

Enterprise En(ironmental

8actors

?rgani7ational Process

Assets

Ma2e or Buy Analysis

E@pert udgment

ontract -ypesInputs

"utputs

Tools # TechniquesProcurement

Management Plan

Procurement

Statements of 1or2

Procurement

/ocuments

Source Selection

riteria

hange >e&uests

Ma2e or Buy

/ecisions

onduct

Procurements

Administer

Procurements

Plan

Procurements

lose

Procurements


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Ty#es of contract selectionbased u#on follo&ing:

5! ?(erall degree of Cost ' "chedule >is2#! -ype * comple@ity of >e&uirement )technical >is2+3! E@tent of Price ompetition4! ost'Price Analysis

C! Drgency of >e&uirements! Performance periodF! ontractors >esponsi0ility )and >is2+%! ontractors Accounting System )>eport Earn Halue

reporting;+

! oncurrent ontract )contract ta2e A 0ac2 seat to e@istingwor2;+

5$! E@tent of Su0contracting )how much wor2 contractor outsource;+


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ontract -ypes

8i@ed Price )Iump Sum+ ontracts

ost>eim0ursa0le ontracts ost Plus 8ee )P8+

ost Plus Percentage of ost )PP+

ost Plus 8i@ed 8ee )P88+ ost Plus ncenti(e 8ee )P8+

-ime and Material )-*M+ ontracts

$hich t%pe of contract is the hi&hest risk for the Bu%er' Seller'


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55

(O")OP

*escribe advantage anddisadvantage of each

ty#e as &ell as the bestscenery to use it


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5#

+irst Category

Fixed-price or

Lump-sum contract


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53

ontractor carefully !stimate

Target Cost$!ontractor re&uired to Perform

wor2 at negotiated Contractalue.


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54

/f !stimated target cost$ is

lo& then !Total Profitreduced$ * may (anish!

ontractor may not 0e a0le to!underbid com#etitors$ "o

ontractor assumes a Iargeris2!


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5C

Lump-sum

Pro(ides !0a1 Protection toO&ner$ for ultimate !Cost ofPro2ect$.

*isadvantage:

>e&uiring a Iong Period 8or

Preparation * Adjudications ofBids!


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5

3ecause of a %ack ofkno&ledge of

%ocal conditions,

all contractors /nclude

1cessiveContingency.


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5F

Chang e4uested

By owner after !A&ard ofcontract$ %ead to

Troublesome *Sometimes !Costly

e1tras$


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5%

2 nd Category

Cost-Plus- Fixed-Fee

(CPFF)


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5

Cost Plus Fixed Fee (CPFF)

f Accurate Pricing ewarded e&ually!


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#$

Total s56 Profit likely -o

Produce Iow !ate of eturn$reflects Small !Amount ofisk$ By contractor!

+i1ed +ee - small 7 Age ?f!Tot5true Cost$!

CP++ e4uired Com#any books 0e audited!


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#5

3: Cost-Plus-

Percentage – fee Contract


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##

Provides 0a1imum fle1ibility

to o&ner Permits !O&ner 'Contractor$ to &ork

together coo#eratively onAll !Technical, Commercial,+inancial Problems$.

-8o +inancial Assurance of!9ltimate Cost$.


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#3

!8o financial incentive to

contractor$ this because of !)ighbuilding cost$ Com#ared &ithother forms;.

Only meaningful /ncentive can be:


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#4

>th Category ofContracts

“uaranteed!aximum-"#are

"a$ings%


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#C

Contractor-Gets !+i1ed +ee$ for his

!Profit$ and eimbursed for the!Actual Cost$ of Engineering,Materials, onstruction Ia0or, all

Other ?ob Costs,

But only up to !Ceiling figure

established$ as !Guaranteedma1imum@


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#

"avings belo& the@ Guaranteed

0a1imum$ are Shared 0etween!O&ner ' Contractor$, &here

as Contractor Assumes thees#onsibility

8or any !Overrun beyond$Guaranteed !0a1imum Price$!


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#F

Contract form Combines

advantages as &ell asdisadvantages of 3oth !%um#"um$ ' !Cost-Plus

Contracts$.3est form for 8egotiated

Contract as it stablishes a0a1imum Price At arliestPossible *ate


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#%

Though contract a&arded

&ithout !Com#etitiveTenders$.

-et Protects o&nerAgainst beingOvercharged,


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#

9ni4ue in that !O&ner '

Contractor$ share +inancialisk ' 3oth have eal

incentive -o ompleteProject At lowest !Possible

Cost$.


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3$

Bth Category of Contract

Fixed-Price-

&ncenti$e-fee

Contracts


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3#

8ormula 9Agreed to$ in

ad(ance By !O&ner 'Contractor$!

To use this 3oth !Pro2ector Contract$ >e&uirementsMust 0e firmly esta0lished


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33

Provides An incentive to

Contractor To:a+ >educe ost

0+ ncrease profit

Both !O&ner ' Cost$ Share in

!isk ' "avings$!


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34

' t#

Cat“Cost-Plus-

&ncenti$e-

Fee C ontracts$


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3C

Same as. !Cost$ Plus Contracts, E@cept

ha(e 9Pro(ide for: Adjustment of !+eeas$ /etermined By a 8ormula.

ompares !Total Pro2ect Cost to Target

Cost$!8ormula agreed to in ad(ance by !O&ner

' Contractor$. Dsed for !%ong

*uration$ or !'* Ty#e Pro2ect$!


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3

B. Contract Admin Cycle

ontract Administrator ises#onsible for Com#liance

By the ontractor to ontracts9-erms * onditions:

-o Ma2e Sure 8inal Product is!+it for 9se$!


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3F

+unctions of contract administrator /nclude:

hange Management

Specification interpretation

Adherence to 6uality

1arranties

Su0contractor Management

Production sur(eillance1ai(ers

ontract 0reach

>esolution of disputes

Project -ermination

Payment 9Schedule:

Project loseout


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-ypes of Scopes of 1or2

Performance 1hat the project wants, how accomplished

and project needs defined 0y seller

8unctional or /etailed /efines what end product should 0e as well

as minimum re&uirements

/esign /efines e@actly what is re&uired and how to

accomplish it


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Procurement /ocuments

>e&uest for Proposal )>8P+ As2s for the price and how'who will do the

wor2

n(itation for Bid )8B+ ?ne simple price to do the wor2

>e&uest for 6uotation )>86+ Price per unit &uote


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Administer Procurements

Procurement

/ocuments

Project

Management Plan

ontract

Performance

>eports

Appro(ed hange

>e&uests

1or2 Performance

nformation

ontract change control

system

Procurement performance

re(iew

nspections and audits

Performance reporting

Payment systems

laims administration

>ecords management

system

Inputs "utputs

Tools # Techniques

Procurement

/ocumentation

?rgani7ational

Process Assets

Dpdateshange >e&uests

Project Management

Plan Dpdates

onduct

Procurements

Administer

Procurements

Plan

Procurements

lose

Procurements


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ontract losure

Project

Management Plan

Procurement

/ocumentation

Procurement audits

ecords management

system

Inputs "utputsTools # Techniques

losed Procurments

?rgani7ational

Process Assets

Dpdates

onduct

Procurements

Administer

Procurements

Plan

Procurements

lose

Procurements


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Procurement -erms

Ar0itration J -hird party dispute resolution

Breach'/efault J 1hen a contract pro(ision is notmet

8orce Majeure J >iots, wars, weather, or other 9Actsof God:

ndemnification J 1ho is lia0le

Ii&uidated /amages J Estimated damages forspecific types of defaults as defined in the contract

Material Breach J A (iolation of the contract ofsufficient magnitude that the contract cannot 0ecompleted


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Procurement -erms ontinued

>etainage J Monies withheld to ensure performance atthe end of the contract

-ermination J Stopping the wor2 0efore it is completed

1ai(er J Statements in the contract that indicate that

rights cannot 0e ignored or modified without writtenagreement 0etween the two parties

-ime is of the essence J Seller is placed on notice thatdeli(ery agreements are strictly 0inding

1or2 for =ire J At the end of the contract the wor2product generated will 0e owned 0y the 0uyer

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