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Ryerson UniversityProject Management Certificate

Procurement and Contracts Overview

presented to the

PMI-ISLIG

Nov 11, 2004

by

Desmond P. [email protected]

416 258 7178

Desmond Alvares CKPM 205 Procurement and Contracts

2

CORPORATEAND PROFESSIONALTRAINING SERVICES

Continuing Education DivisionRyerson University

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Introduction – Who Am IDesmond P. Alvares B. Eng., MBA, MBCS CITP, CMA Degree in Mechanical Engineering - UK MBA at Schulich School of Business, York University

Finance, Accounting and Strategy Certified Management Accountant - Ontario Chartered Information Systems Practitioner – UK (2001) Chartered IT Professional – UK (2004) 19 years Business Intelligence and Knowledge Management in

Canada, UK, US, Switzerland and Caribbean 10 years Investment Banking (Brokerage Houses, Private Banking

and Oil &Gas trading) 6 years Retail Banking (Technology Business Management,

Operational Risk, Electronic Banking and Mortgages, Finance and Treasury Systems)

3 years Property and Casualty Insurance (Finance and Actuarial Systems)


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Introduction – PM Background

• Financial Systems Implementations• Business, Training, Finance and Treasury Projects• Internal and Client Facing Projects• Internal Providers and Integration of Vendor Solution• Introduced and Developed Project Management

Methodology – UBS Private Banking (International locations base on Swiss framework) and CIBC Retail (PMP based on the PMI framework)

• Lecturer at Ryerson University – Project Management Certificate (Construction, IT and Financial Service students) and Architecture specialization in Project Management.


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Agenda• Introduction• The Certificate Program at Ryerson• The Procurement Process• Planning• Solicitation• Source Selection• Contract Administration• Close-out


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Other Offerings of Project Management Courses

• Athabasca University– Executive MBA in Project Management (on-line and residence)

• Centennial College– Project Management Certificate (6 courses)– Advanced Project Management Certificate (4 courses)

• Durham College– Intro, Scheduling Software, Statistics

• Humber College– Project Management Certificate (4 courses, 45hrs)

• University of Toronto– Project Management Certificate (4 courses, full day)

• York University– The Graduate Certificate in Project Management (8 courses)


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The Ryerson Offer (8 Courses)• Core Courses

– CKPM202 Fundamentals of Project Management– CKPM203 Planning and Scheduling– CKPM205 Procurement and Contracts– CKPM209 Project Risk and Quality Management– CKPM210 Project Leadership – CKPM211 Project Cost Management

• Electives– CKPM207 Project Management Systems– CKPM208 Analytical Decision Making– CCMN114 Short Management Reports– CCMN432 Technical Communications– CMHR405 Organizational Behaviour and Interpersonal Skills– CQMS102 Business Statistics I


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The Students View• 570 surveys distributed to students, 271 returned• 164 surveys to graduates, 24 returned

• Students select Ryerson first and then the Certificate Course 75% (Ryerson Website, Ryerson material)

• 44.6% in Project Manager or Project Coordinator positions• Experience 80% (> 5 Years), 25.1% (> 15 Years)• 85% interested in becoming professional in 2 years• 85.2% using certificate as preparation, but lack work experience• Graduates (61.9% PMI members, 25% PMP), 75% additional prep• Risk, cost and planning / scheduling – more theory than practice• Interest in PMO, Leadership and Communication• Common text book required, introduce PMP Preparation


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Definition of the Procurement Process

• Objectives– Technical & Quality– Schedule– Cost


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Basic Steps

• Define the Goods and Services to be procured

• Select bidders and Complete Request for Proposal

• Prepare Bids and Award Contract

• Contract Management

• Close out Contact


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Other Aspects

• Role of Project Management

• Interfaces with Other Project Processes

• Importance of Management

• Ethical Practices

• Principle Types – Standard, Material, Equipment & Services

• Definitions of Common Terms


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Organizations for Procurement

• Organization– Project Managers responsibility

– Procurement department – purchasing & materials

– Responsibilities

– Staffing – direct and matrix

– Procedures• Requests, Qualified Bidders, RFP, Contact Management

– Management Program


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Procurement Considerations

– What to Procure? – How much to procure?– When to procure? – Selecting an appropriate method of procurement.– Qualifying suppliers.– Developing a contracting strategy.– Establishing appropriate performance measures.– Documenting the procurement project plan.


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12.1 Plan Purchase and Acquisition(Procurement Planning)

Project Management Book of KnowledgeChapter 12

Project Procurement Management

12.1Plan Purchase and Acquisition

12.2Plan

Contracting

12.3Request Seller

Responses

12.4Select Sellers

12.5Contract

Administration

ContractClosure

14Desmond Alvares CKPM 205 Procurement and Contracts

Inputs

Project Charter

Project Scope Statement

Project Management Plan

WBS and Dictionary

Environment and Organization Factors

Organizational Process Assets

Risk Register

Tools &Techniques

Make-or-Buy Analysis

Expert Judgment

Contract Types

Outputs

Procurement Management Plan

Contract Statement of Work

Make or Buy Decision

Project Management Plan (Updates)

12.1 PLAN PURCHASE AND ACQUISITION


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12.1.1 Inputs to Plan Purchase and Acquisition

• .1 Project Charter– Business needs

• .1 Project Scope Statement– Project needs and strategies

• .2 Project Management Plan– Overall plan for the project


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• .3 Work Breakdown Structure and Dictionary– Relationship of all elements in plan

• .4 Environmental and Organizational Factors– What is available in the marketplace?– Procurement resources available


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• .5 Organizational Process Assets– Informal and formal procurement processes

• .6 Risk Register– Risks , categorization and their mitigation


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12.1.2 Tools & Techniques for Plan Purchase and Acquisition

• .1 Make-or-buy analysis

• .2 Expert judgment

• .3 Contract type selection


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12.1.2.1 Make or Buy Analysis

• Factors to analyze:• Cost (direct and indirect - lifecycle costs)

• Schedule

• Quality

• Capability & availability of in-house resources

• Supplier skills and abilities

• Degree of control needed by the performing organization


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12.1.2.2 Expert Judgement

• Other Departments

• Consultants

• Professional and Technical Associations

• Industry groups


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12.1.2.3 Contract Types• Three broad categories of contract

type:• Fixed price or lump sum

– FFP

– FPPI

• Cost reimbursable– CPFF

– CPPF

– CPIF

• Time and Materials (Unit Price)


Scope of WorkInformation

Very Little Partial Complete

Uncertainty

Degree ofRisk

Suggested RiskAllocation

Contract Types

HIGH

HIGH

MODERATE

MODERATE

LOW

LOW

Contract Type vs. Risk Allocation

CPPF: Cost + % FeeCPIF: Cost + Incentive FeeCPFF: Cost + Fixed Fee

FPPI: Firm Price + Incentive Fee

FFP: Firm Fixed Price

CPPF CPIF CPFF FPPI FFP

100%

0%Buyer100%

0% Seller


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12.1.3 Outputs from Plan Purchase and Acquisition

• .1 Procurement management plan

• .2 Contract Statement(s) of work

• .3 Make-or-Buy Decision

• .4 Project Management plan (update)


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12.1.3.1 Procurement Management Plan

• Defines procurement process• Basic requirements• Products/services list to procure• Roles and responsibilities• Budget• Schedule• Quality criteria• Specifications• Contract type to be used


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12.1.3.2 Contract Statements of Work

• A narrative description of the product

• Clear, concise and as complete as possible

• Sufficient detail

• Allows prospective sellers to determine whether they are capable of providing the product

• Could be revised and refined throughout the procurement process


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12.2 Plan Contracting(Solicitation Planning)




12.2Plan

Contracting

12.3Request Seller

Responses

12.4Select Sellers

12.5Contract

Administration

ContractClosure


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12.2 Plan Contracting

• Preparing the documents needed to support the solicitation process


Inputs

Procurement Management Plan

Contract Statements of Work

Project Management Plan

Make-or-Buy Decision

Tools &Techniques

Standard Forms

Expert Judgment

Outputs

Procurement Documents

Evaluation Criteria

Contract Statement of Work (Updates)

12.2 PLAN CONTRACTING


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12.2.1 Inputs to Plan Contracting

• .1 Procurement Management Plan

• .2 Contract Statement(s) of work

• .3 Project Management Plan

• .4 Make-or-buy Decision


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12.2.2 Tools & Techniques for Plan Contracting

• .1 Standard forms– Standard contracts, bid documents

• .2 Expert judgement


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12.2.3 Outputs from Plan Contracting

• .1 Procurement documents

• .2 Evaluation criteria

• .3 Contract Statement of work updates


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12.2.3.1 Procurement Documents• Documents used to solicit proposals

from prospective vendors• Request for Proposal (RFP), Quote(RFQ)

or Bid (RFB)• Instructions (e.g. desired form of

response)• Blank contract form• Product description or SOW• Contractual provisions• Terms and conditions


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12.2.3.2 Evaluation Criteria

• Criteria used to create or score proposals

• Objective vs. subjective

• Weigh the criteria in terms of importance


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12.3 Request Seller Responses (Solicitation)




12.2Plan

Contracting

12.3Request Seller

Responses

12.4Select Sellers

12.5Contract

Administration

ContractClosure


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12.3 Request Seller Responses

• Obtaining the information (bids and/or proposals) from the prospective sellers

• Most of the actual effort is done by the sellers


Inputs

Procurement Documents


Tools &Techniques

BiddersConference

Advertising

Outputs

Qualified Sellers List

Procurement Document Package

Proposals

12.3 REQUEST SELLER RESPONSES


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12.3.1 Inputs to Request Seller Responses

• .1 Procurement documents

• .2 Organizational Process Assets


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12.3.2 Tools & Techniques for Request Seller Responses

• .1 Bidder conferences• Used to ensure that all prospective sellers

have a common understanding of the procurement

• .2 Advertising• Used to expand the list of potential sellers• Sometimes required on public projects


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12.3.3 Outputs from Request Seller Responses

• .1 Qualified seller lists• Internally maintained lists• List developed by the project team

• .2 Procurement Documentation Package• .3 Proposals

• Seller-prepared documents that describe the seller’s ability and willingness to provide the requested product


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12.4 Select Sellers (Source Selection)




12.2Plan

Contracting

12.3Request Seller

Responses

12.4Select Sellers

12.5Contract

Administration

ContractClosure


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12.4 Select Sellers

• Receipt of bids or proposals

• Application of the evaluation criteria to select a provider

• Risk evaluation, lifecycle cost, independent estimates

• Contract negotiations

• Award the contract


InputsProposals

Evaluation Criteria


Risk Register

Risk-Related Contractual Agreements

Qualified sellers List

Procurement Document Package

Tools &Techniques

Weighting System

Independent Estimates

Screening System

Contract Negotiation

Outputs

Selected Sellers

Contract

Contract Management Plan

12.4 SELECT SELLERS


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12.4.1 Inputs to Select Sellers

• .1 Proposals• .2 Evaluation Criteria• .3 Organizational Process Assets• .4 Risk Register• .5 Risk Related Contractual Agreement• .6 Qualified Sellers List• .7 Procurement Documentation Package


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12.4.2 Tools & Techniques for Select Sellers

• .1 Weighing system– Method for quantifying qualitative data– Minimize the effect of personal prejudice

• .2 Independent estimates– Procuring organization may prepare its own

estimates as a check on pricing

• .3 Screening system– Establishing minimum performance

requirements for evaluation criteria


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12.4.2 Tools & Techniques for Select Sellers

• .4 Contract negotiation• Involves clarification and mutual

agreement on the structure and requirements of the contract

• Final contract to reflect all agreements reached

• Examples of subjects covered: responsibilities & authorities, terms and law, contract financing, price


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12.4.3 Outputs from Select Sellers

• .1 Select Sellers

• .2 Contract• Mutual agreement which obligates the seller to

provide the specified product and obligates the buyer to pay for it.

• Legal relationship subject to remedy in the courts

• Contract =agreement=subcontract=purchase agreement=memorandum of understanding

• .3 Contract Management Plan


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12.5 Contract Administration




12.2Plan

Contracting

12.3Request Seller

Responses

12.4Select Sellers

12.5Contract

Administration

ContractClosure


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12.5 Contract Administration

• Ensuring that the vendor’s performance meets contractual requirements

• Application of project management processes to the contractual relationship– Project plan execution– Performance reporting– Quality control– Change control– Communication management


Inputs

Contract

Approved Change Requests

Work Performance Information

Selected Sellers

Tools &TechniquesContract Change Control System

Buyer-Conducted Performance Reviews

Inspections and Audits

Performance Reporting

Payment System

Claims Administration

Records Management System

Outputs

Organizational Process Assets (updates)

Requested Changes

Recommended Corrective Actions

Contract Documentation

12.5 CONTRACT ADMINISTRATION


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12.5.1 Inputs to Contract Administration

• .1 Contract• .2 Performance Reports

• Which deliverables completed, not completed• To what extent quality standards are being met

• .3 Approved Change requests• Modifications to the terms of the contract or to the

description of the product or service• Contested changes where the seller and project

management team cannot agree on compensation for the change are also called claims, disputes or appeals

• .4 Work Performance Information• .5 Selected Sellers


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12.5.2 Tools & Techniques for Contract Administration• .1 Contract change control system

– the process by which the contract can be modified

• .2 Buyer-Conducted Performance Reports– Information about how effectively the seller

is achieving the contractual objectives

• .3 Inspection and Audits


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12.5.2 Tools & Techniques for Contract Administration• .4 Performance Reporting

• .5 Payments System

• .6 Claims Administration

• .7 Records Management System


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12.5.3 Outputs from Contract Administration

• .1 Organizational Process Assets (updates)– Correspondence

• Written documentation of certain aspects of buyer/seller communications

– Payment schedule and requests

• .2 Contract changes• .3 Recommended Corrective Actions• .4 Contract Documentation


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12.6 Contract Closure




12.2Plan

Contracting

12.3Request Seller

Responses

12.4Select Sellers

12.5Contract

Administration

12.6ContractClosure


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12.6 Contract Close-out• Product verification

– Was all work completed correctly and satisfactorily

• Administrative close-out– Updating records to reflect final results– Archiving of information for future use


Inputs

Contract Documentation

Contract Closure Procedure

Tools &Techniques

Procurement Audits

Records Management System

Outputs

Organizational Process Assets (updates)

12.6 CONTRACT CLOSE OUT


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12.6.1 Inputs to Contract Close-out

• .1 Contract documentation– Contract– Supporting schedules– Requested and approved contract changes– Seller-developed technical documentation– Seller performance reports– Financial documents– Results of contract related inspections

• .2 Contract Closure Procedure


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12.6.2 Tools & Techniques for Contract Close-out

• .1 Procurement audits– Structured review of the procurement

process– Identification of successes and failures

• .1 Records Management System


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12.6.3 Outputs from Contract Close Out

• .1 Organizational Process Assets (Updates)– Contract File

• Documentation for Archives and Future Use

– Formal acceptance and closure• Hand over of Project and acceptance by

authorized authority

– Lessons Learned Documentation• Process improvements recommendations


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Procurement Management Plan• The plan describes how the procurement process, from

solicitation to contract close out, is managed. Included in this plan are:

• The type(s) of contract(s) used.

• If independent estimates and cost proformas will be done and who will do them.

• If standard procurement documents will be used, and if so, who will prepare them.

• Who will manage & coordinate the procurement of these goods, services or products.

• Authority of the people involved in the process and defined lines of communication.


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Procurements and Contract Overview

Thank You to PMI - ISLIG

Any Questions?

Desmond P. Alvares

416 258 7178

[email protected]

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