procurment management
DESCRIPTION
TRANSCRIPT
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Presenter: Hazem Soliman, PMP.
PMPPMP ProcurementProcurement
M a n a g e m e n tM a n a g e m e n t
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Procurement weighs 7% in the Procurement weighs 7% in the PMP exam = 15 Questions!PMP exam = 15 Questions!
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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 and Change Control Processes.
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Project Procurement Management
Plan Procurements
Conduct Procurements
Administer Procurements
Close Procurements
Plan Procurements
Conduct Procurements
Administer Procurements
Close Procurements
Plan Procurements Administer Procurements
Conduct Procurements
Plan Procurements Administer Procurements
Close ProcurementsConduct Procurements
Plan Procurements Administer Procurements
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OUTPUTS1. Procurement Management Plan2. Procurement SOW3. Make or Buy Decisions4. Procurement Documents5. Selection Criteria6. Change Requests
INPUTS
1. Scope Baseline2. Requirements Documentation3. Teaming Agreements4. Risk Register5. Risk Related Contract Decisions6. Activity Resource Requirements7. Project Schedule8. Activity Cost Estimates9. Cost Performance Baseline10. Enterprise Environmental Factors11. Organizational Process Assets
TOOLS & TECHNIQUES
1. Make or Buy Analysis2. Expert Judgment3. Contract Types
1. PLAN PROCUREMENTS
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1. PLAN PROCUREMENTS - Inputs
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 of contract to be used.
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1. Scope Baseline2. Requirements Documentation
Project Requirements Legal and Contractual Requirements; health,
safety, warrantees, insurance, IPR, terms and conditions, KPIs, SLAs…etc.
3. Teaming Agreements (Contractual Agreements)
1. PLAN PROCUREMENTS - Inputs
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4. Risk Register5. Risk Related Contract Decisions
6. Activity Resource Requirements (People, equipment or location)
7. Project Schedule8. Activity Cost Estimates (Internal Cost
Estimates for activities being procured)9. Cost Performance Baseline (Planned Budget)
1. PLAN PROCUREMENTS - Inputs
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10. Enterprise Environmental Factors: Market place conditions: (Products and
services available in the market, from whom and under what terms and conditions.)
Suppliers and typical terms and conditions?
11. Organizational Process Assets: Procurement related policies and guidelines.
Centralized or Decentralized?
1. PLAN PROCUREMENTS - Inputs
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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
1. PLAN PROCUREMENTS – Tools & Techniques
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2. Expert Judgment
3. Contract types
The primary aim of considering which contract type is most suitable for the procurement situation is to distribute the risk between buyer and seller.
The three major types of contracts are:Fixed-PriceCost-ReimbursableTime and Material
1. PLAN PROCUREMENTS – Tools & Techniques
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A. Fixed Price: - Well defined scope/ product. - Fixed total Price. - Risk is on the seller.
B. Cost Reimbursable Contract:
- Scope and Product aren’t exactly defined. - Price is open based on the final costs the product will incur. - Risk is on the buyer.
FFP
FPIF
FP-EPA
CPFF
CPIF
CPAF
1. PLAN PROCUREMENTS – Tools & Techniques
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C. 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)
1. PLAN PROCUREMENTS – Tools & Techniques
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1. Procurement Management Plan: It includes;
Procurement Processes Risk Management Standardized Procurement Documents Types of contracts used Responsibilities Pre-qualified sellers Scheduled dates for deliverables Managing multiple providers
1. PLAN PROCUREMENTS –Outputs
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2.Procurement Statement of Work: includesSpecifications, 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.
3. Make or Buy Decisions: documented decisions.
4. Change Requests
1. PLAN PROCUREMENTS –Outputs
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1. PLAN PROCUREMENTS – Outputs
5. Procurement Documents: are used to solicit proposals, quotes, and bids from sellers
Bid / Tender / Quotation (IRB – RFT – RFQ)• Selection is mainly based on price.
Proposal• Selection will be based on price and other
factors; as technical capability, technical approach…etc.
Terminology may vary by industry.
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1. PLAN PROCUREMENTS –Outputs
6. Source Selection Criteria: The project team must be prepared to compare
the proposals received in an unbiased manner based on identified and documented selection criteria to rate or score proposals.
Includes: Past performance Understanding of need Overall or life cycle cost References Technical capability and approach Risk Management approach Financial stability and capacity
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Q: 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. Null and voidb. Incompletec. Completed. Waived
C. Complete
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Q. In a fixed price contract, the fee or profit is:
a. Unknownb. Part of the negotiation involved in paying every invoicec. Applied as a line item in every invoiced. Determined at the end of the project
a. unknown
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OUTPUTS1. Selected Sellers2. Procurement Contract Award3. Resource Calendars4. Change Requests5. Project Management Plan Updates6. Project Documents Updates
INPUTS
1. Project Management Plan2. Procurement Documents3. Source Selection Criteria4. Qualified Seller List5. Seller Proposals6. Project Documents7. Make or Buy Decisions8. Teaming Agreements9. Organizational Process Assets
TOOLS & TECHNIQUES
1. Bidder Conferences2. Proposal Evaluation Techniques3. Independent Estimates4. Expert Judgment5. Advertising6. Internet Search7. Procurement Negotiations
2. CONDUCT PROCUREMENTS
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Obtain sellers’ responses, select sellers and award contracts.
2. CONDUCT PROCUREMENTS
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1. Project Management Plan
2. Procurement Documents
3. Source Selection Criteria
4. Qualified Seller List (Approved Bidders List and new pre-qualified sellers)
5. Seller Proposals (obtained from sellers)
6. Project Documents (Scope, Schedule, Cost, Risk)
7. Make or Buy Decisions
8. Teaming Agreements
9. Organizational Process Assets (Past Experience, Bidders List)
2. CONDUCT PROCUREMENTS - Inputs
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2. CONDUCT PROCUREMENTS – Tools & Techniques
1. Bidder Conferences Are 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 the procurement.
Proposals received will be more clearly aligned with project requirements, due to the fact that bidder conferences make the requirements clear.
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2. CONDUCT PROCUREMENTS – Tools & Techniques
2. Proposal Evaluation Techniques (agreed by Evaluation Committee)
3. Independent Estimates (serves as a benchmark and help uncover SOW deficiencies and ambiguities misunderstanding of Scope)
4. Expert Judgment5. Advertising
- Is a tool that may be used to increase the number of potential sellers contacted via Newspapers, Professional journals or Websites
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2. CONDUCT PROCUREMENTS – Tools & Techniques
6. Internet Search7. Procurement Negotiations (Team)
Negotiations can cover the following areas:
Responsibilities and authorities Applicable terms and law Scope, technical and business management
approaches Contract financing (Payment Schedule) Price
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2. CONDUCT PROCUREMENTS – Outputs
1. Selected Sellers2. Procurement contract Award
A mutually binding agreement that obligates the seller to provide the specified product and obligates the buyer to pay for it.
Major components:SOW Schedule Roles and responsibilitiesPricing Payment Acceptance criteriaWarranty product support IncentivesPenalties Insurance Performance bondsChange requests Termination mechanisms
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2. CONDUCT PROCUREMENTS Outputs
3. Resource Calendars4. Change Requests5. Project Management Plan Updates (Scope,
Cost, Schedule, Procurement Management Plan…etc.)
6. Project Document Updates (SOW and Requirements Documentation)
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Q: Bidder Conferences are part of :
a. Plan Procurementsb. Conduct Procurementsc. Administer Procurementsd. Conduct Purchasing
Answer B
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Q. 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
Answer B
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OUTPUTS
1. Procurement Documentation2. Organizational Process Assets Updates3. Change Requests4. Project Management Plan Updates
INPUTS
1. Procurement Documents2. Project Management Plan3. Contract4. Performance Reports5. Approved Change Requests6. Work Performance Information
TOOLS & TECHNIQUES
1. Contract Change Control System2. Procurement Performance Reviews3. Inspections and Audits4. Performance Reporting5. Payment Systems6. Claims Administration7. Records Management System
3. ADMINISTER PROCUREMENTS
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3. ADMINISTER PROCUREMENTS
Manage procurements relationships,monitor contract performance and makechanges and corrections as needed.
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3. ADMINISTER PROCUREMENTS -Inputs
1. Procurement Documents2. Project Management Plan3. Contract
4. Performance Reports Technical documentation and other
deliverables information developed by the seller.
Seller Performance Reports.
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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.
3. ADMINISTER PROCUREMENTS - Inputs
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3. ADMINISTER PROCUREMENTS – Tools and Techniques
1. Contract Change Control System Defines the process by which the contract
may be modified. It includes the paperwork, tracking systems,
dispute resolution procedures, and approval levels necessary for authorizing changes.
Should be integrated with the integrated change control system.
2. Procurement Performance Review; A structured review on the sellers’ progress to deliver as per planned scope – quality – schedule – quality, etc..
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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: Provides information to management about how effectively the seller is achieving the contractual objectives.
5. Payment System: 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.
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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.
To maintain an index of contract records, and correspondences for archiving and future use.
3. ADMINISTER PROCUREMENTS – Tools and Techniques
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1. Procurement Documentation: A complete set of indexed records regarding the contract. Includes;
Schedules Approved and unapproved change requests Technical documentation Work performance information Performance reports Financial docs (invoices ad payment records)
2. Change Requests
3. ADMINISTER PROCUREMENTS – Outputs
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3. Updated Organizational Process Assets:
including Correspondence: communication between buyer
and seller.Payment Schedules and requests; if the project is
using an external payment system.Seller performance Evaluation documentation:
performed by the buyer to document seller’s ability to continue to perform work on the project or to be allowed to work on future projects.Basis for early terminationCan be included in qualified seller lists in the
organization.
4.Updated Project Management Plan
3. ADMINISTER PROCUREMENTS – Outputs
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Answer C
Q. 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 projectc. Contracts should include procedures to accommodate changes.d. More detailed specifications eliminate the causes of changes.
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OUTPUTS
1. Closed Procurement2. Organizational Process Assets Updates
INPUTS
1. Procurement Documentation2. Project Management Plan
TOOLS & TECHNIQUES
1. Procurement Audits2. Negotiated Settlements3. Records Management System
4. CLOSE PROCUREMENTS
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4. CLOSE PROCUREMENTS
The process of completing each project procurement.
Involves verification that all of the procurement work was completed and accepted. (Product Verification)
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4. CLOSE PROCUREMENTS - Inputs
1. Project Management Plan2. Procurement Documentation
The contract. Supporting schedules Requested and approved changes Technical documentation Performance reports Financial reports
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4. CLOSE PROCUREMENTS – Tools and Techniques
1. Procurement Audits: A structured review of the procurement process
from Plan Procurements to Administer Procurements.
The objective is to identify the successes and failures that warrant recognition.
2. Negotiated Settlements3. Records Management System.
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4. CLOSE PROCUREMENTS – outputs
1. Closed Procurements: Formal written notice that the contract has been completed.
2. Updated Organizational Process Assets: 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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Q&A