Project Procurement Project Procurement ManagementManagement

Sections of this presentation were adapted Sections of this presentation were adapted from from A Guide to the Project Management A Guide to the Project Management

Body of KnowledgeBody of Knowledge 4 4thth Edition, Project Edition, Project Management Institute Inc., © 2008Management Institute Inc., © 2008

Project Quality ManagementProject Quality Management

““The processes to purchase or acquire the The processes to purchase or acquire the products, services, or results needed from products, services, or results needed from outside the project team to perform the outside the project team to perform the work”work”

Why Procurement Management?Why Procurement Management?

Most all projects will need to acquire some Most all projects will need to acquire some resources from outside resources from outside

Not understanding the different ways to Not understanding the different ways to contract could result in unnecessary risk for contract could result in unnecessary risk for the projectthe project

Note for Test Takers: PMI Procurement questions are from the BUYERS perspective unless noted otherwise

How Do We Manage Procurement?How Do We Manage Procurement?

Four processesFour processes Plan ProcurementsPlan Procurements Conduct ProcurementsConduct Procurements Administer ProcurementsAdminister Procurements Close ProcurementsClose Procurements

Conduct Procurements

Administer

ProcurementsPlan

ProcurementsClose

Procurements

Plan ProcurementsPlan ProcurementsScope Baseline

Requirements Documentation

Teaming Agreements

Risk Register

Risk-Related Contract Decisions

Activity Resource Requirements

Project Schedule

Activity Cost Estimates

Cost Performance Baseline

Enterprise Environmental Factors

Organizational Process Assets

Make or Buy Analysis

Expert Judgment

Contract TypesInputsOutputs

Tools & TechniquesProcurement Management Plan

Procurement Statements of Work

Procurement Documents

Source Selection Criteria

Change Requests

Make or Buy Decisions

Conduct Procurements

Administer

ProcurementsPlan

ProcurementsClose

Procurements

Contract TypesContract Types

Fixed Price (Lump Sum) ContractsFixed Price (Lump Sum) Contracts

Cost-Reimbursable ContractsCost-Reimbursable Contracts Cost Plus Fee (CPF)Cost Plus Fee (CPF)

Cost Plus Percentage of Cost (CPPC)Cost Plus Percentage of Cost (CPPC) Cost Plus Fixed Fee (CPFF)Cost Plus Fixed Fee (CPFF) Cost Plus Incentive Fee (CPIF)Cost Plus Incentive Fee (CPIF)

Time and Material (T&M) ContractsTime and Material (T&M) Contracts

Which type of contract is the highest risk for the Buyer? Seller?

Conduct ProcurementsConduct ProcurementsProject Management Plan

Procurement Documents

Source Selection Criteria

Qualified Sellers List

Seller Proposals

Project Documents

Make-or-Buy Decisions

Teaming Agreements

Organizational Process Assets

Bidder Conference

Proposal Evaluation Techniques

Independent Estimates

Expert Judgment

Advertising

Internet Search

Procurement Negotiations

InputsOutputs

Tools & Techniques

Selected Seller

Procurement Contract Award

Resource Calendars

Change Requests

Project Management Plan Updates

Project Document Updates

Conduct Procurements

Administer

ProcurementsPlan

ProcurementsClose

Procurements

Types of Scopes of WorkTypes of Scopes of Work

Performance Performance What the project wants, how accomplished What the project wants, how accomplished

and project needs defined by sellerand project needs defined by seller

Functional or DetailedFunctional or Detailed Defines what end product should be as well Defines what end product should be as well

as minimum requirementsas minimum requirements

DesignDesign Defines exactly what is required and how to Defines exactly what is required and how to

accomplish itaccomplish it

Procurement DocumentsProcurement Documents

Request for Proposal (RFP)Request for Proposal (RFP) Asks for the price and how/who will do the Asks for the price and how/who will do the

workwork

Invitation for Bid (IFB)Invitation for Bid (IFB) One simple price to do the workOne simple price to do the work

Request for Quotation (RFQ)Request for Quotation (RFQ) Price per unit quotePrice per unit quote

Negotiating TacticsNegotiating Tactics

Attacks – Argue a pointAttacks – Argue a pointPersonal Insults – Attack Personal Insults – Attack other sides negotiatorother sides negotiatorGood Guy/Bad GuyGood Guy/Bad GuyDeadline – The offer Deadline – The offer stands until…stands until…LyingLyingLimited Authority – I need Limited Authority – I need to check with ____to check with ____Missing Man – She is out Missing Man – She is out today, I will have to get today, I will have to get back tomorrowback tomorrow

Fair and ReasonableFair and ReasonableDelay – Tabling issues Delay – Tabling issues important to the other important to the other sidesideExtreme DemandsExtreme DemandsWithdrawal – Feigning Withdrawal – Feigning interestinterestFait Accompli – Done Fait Accompli – Done Deal, this is how we have Deal, this is how we have to do it….to do it….

These are all tactics, but not necessarily good tactics!

Administer ProcurementsAdminister ProcurementsProcurement Documents

Project Management Plan

Contract

Performance Reports

Approved Change Requests

Work Performance Information

Contract change control system

Procurement performance review

Inspections and audits

Performance reporting

Payment systems

Claims administration

Records management system

Inputs Outputs

Tools & Techniques

Procurement Documentation

Organizational Process Assets Updates

Change Requests

Project Management Plan Updates

Conduct Procurements

Administer

ProcurementsPlan

ProcurementsClose

Procurements

Contract ClosureContract ClosureProject Management Plan

Procurement Documentation

Procurement audits

Negotiated Settlements

Records management system

Inputs OutputsTools & TechniquesClosed Procurments

Organizational Process Assets Updates

Conduct Procurements

Administer

ProcurementsPlan

ProcurementsClose

Procurements

Procurement TermsProcurement Terms

Arbitration – Third party dispute resolutionArbitration – Third party dispute resolutionBreach/Default – When a contract provision is not Breach/Default – When a contract provision is not metmetForce Majeure – Riots, wars, weather, or other “Acts Force Majeure – Riots, wars, weather, or other “Acts of God”of God”Indemnification – Who is liableIndemnification – Who is liableLiquidated Damages – Estimated damages for Liquidated Damages – Estimated damages for specific types of defaults as defined in the contractspecific types of defaults as defined in the contractMaterial Breach – A violation of the contract of Material Breach – A violation of the contract of sufficient magnitude that the contract cannot be sufficient magnitude that the contract cannot be completedcompleted

Procurement Terms ContinuedProcurement Terms Continued

Retainage – Monies withheld to ensure performance at Retainage – Monies withheld to ensure performance at the end of the contractthe end of the contractTermination – Stopping the work before it is completedTermination – Stopping the work before it is completedWaiver – Statements in the contract that indicate that Waiver – Statements in the contract that indicate that rights cannot be ignored or modified without written rights cannot be ignored or modified without written agreement between the two partiesagreement between the two partiesTime is of the essence – Seller is placed on notice that Time is of the essence – Seller is placed on notice that delivery agreements are strictly bindingdelivery agreements are strictly bindingWork for Hire – At the end of the contract the work Work for Hire – At the end of the contract the work product generated will be owned by the buyerproduct generated will be owned by the buyer