42! session - SUS GS eed ene eutaieeeeeotacUuaig Cer 12 Training session uN HIN + Project Procurement Management = 12.1 Pan Purchases an Acmustions (came farsi) = 122 Pan Contacting (J tux auogpuyeat al ab = 123 Request Sele esporses | = 124 Select Seters = 12:5 Contract Adminitraon = 126 Contract Closure Aritehy)12th session — Objectives it + To daine and understand al 6 processes of procurement management ~ To deni elaions of tis process with other processes ~ To present and use al recommended inputs, outputs, tools and techniques = To apply communication techniques in project and in exam situations + Tose specie terminology Project Procurement Management BUN + Processes required to purchase or aoguire the products, services, o results needed from outside {he project team to perform the work ~ + Project Procurement Management includes the contract management and the change control, processes required fo administer contracts or purchase orders issued by authorized project team members comms Pl seu — Managent ai puorvetete fa pelBira ele cuntProject Procurement Management | Perspective ih IN + Project Procurement managements discussed within the perspective ofthe buyer-seller relationship, Depending on the application area = Buyer = client. customer, prime contractor, acquiring coiganizaton, government agency, service requestor, purchaser ~ Seller = contractor, subcontractor, vendor, service provider, supplier + Products = Goods and services Project Procurement Management MA Perspective iN N + The seller will typically manage the work of the project (ifthe acquisition is not just for material, {goods or common products). In such cases ~ Buyer becomes the customer ..key stakeholder for the toler Terms and conor ofthe contact bob Rey HPT to many of the seller's management processes12.1 Plan Purchases and Acquisitions A co Plan Purchases and Acquisitions Nt Process of identiying which project needs can be best met by procuring Whether to procure jow to procure What to procure iow much to procure ' When to procure it ecoTat Ww Plan Purchases and Acquisitions BUN ‘aMake-or-buy analysis "A general management technique to determine whether a particular product can be produced ‘mare cost-effectively by the performing cerganization ‘= Analyis includes both direct and indirect costs (Dexpert Judgment “Assess the inputs / outputs to this process. Also used to develop o modiy the cfteria Used to ‘evaluat eels offers or proposals Tat Plan Purchases and Acquisitions YAAE + Cont - mutvaly binding agreement between pares + Contac Types (acorn PMI Five peor up sum contracts cost reimbursable contacts = Time and Material (F&M) contracts = Purchase order — used only for simple commodity procurementsCost reimbursable contract {All seller's cost are reimbursed by the buyer ‘The costs unknown at the beginning “The buyer has the most cost risk Itis used when precise description of goods or services cannot be developed ‘The seller is responsible for detaling the scope of work que Forms of CR type of contract uN BUN (CPFF ~ Cost Plus Fixed Fee = The most common form of CR contracts The fixed fo represents the seller's profit (CPPC ~ Cost Plus Percentage of Cost ~ Mlegal for US government and generally bad for any buyer Soller is not ancouraged to control cost onir—couriainaaieree > Ce fica = Similar with CPFF, phi BOGS Tor beating the incantve GP AF — Cost Plus Award Fee = Similar with CPIF, bl} the bonus is based on the performanceFixed Price contract + The most common form of contract + Appropriate when buyer can describe the scope of work + Has the least cost risk forthe buyer Has two forms: _ FPIF fied price Incentive Fee _ FPEPA~ Fined Price Economic Price Adjustment Time & Material contract + Sometimes called Unit Price +The price is per hour or per item + Usually used for small amounts + Accombination of FP and CR = Fheed price peritem ~The total costs unknown, varying with the amount of materials or me QeContract Types Versus Risk it ise (Calculating Contracts + Individual Exercise: ~ The estimated costis $210,000 and the fee is $25,000. seller beats costs, savings willbe shared: 80% tothe ‘buyer and 20% tothe sel. If the actual costs '$200,000, what are the final fee and Sinl price? 10 minutes PE fo 000 fee arene, & e0f, xffocce ~ 8000 § WyK jeocex_202O| Fined fre = aFeoods proce = 2onovo F + Lap e00f= Contract Statement of Work Ease za Detailed description of products need ta be procured ‘Should be used by prospective seTers TO aerernine their capably o provide requested toms Itcan be refined during procurement process, butt should be finalize by the time contracts signed + May include technical speotcations + Itbecomes a part of he contract Types of Contract SOW i + Performance > Conveys what the final product should bbe able to accomplish + Functional or detailed > Conveys the end purpose or result Design > Conveys precisely what work is required aeons12.2. Plan Contracting ak S Plan Contracting BN Creating and integrating procurement documents: = Request For Proposal (RFP) = Invitation For Bia (FB) = Request For Quotation (RFQ) comesPlan Contracting - Outputs ae 4 Procurement Documents Invitation for Bia (IFS) Request for Proposal (RFP) Request for Quotation (RFQ) Invitation for Negotiation Contractor intial Response [DEvaluation criteria Used trate or score proposals cost Content of procurement documents AN + tlomaton er Seers = squat me ~ Przegl tet pope = ome ~ rama tetomanto Work Proposed Terms & ConditionsContracts and SOW TAN BUN Procurement [Contract ‘sow Documents REP oR Performance or - Funetional ire FP Design RFO Tan any Noncompetitive procurement BUN + When seller has unique qualifications or holds @ patent + When there is only one seller + Two forms: = Single Source — Sole SourceRequest Seller Responses ‘Buyers are answering to sellers questions + Sollers are preparing proposals + Major tools = Bidder Conferences + AILQBA are witen and sent to all potential sellers = Advertsing Public institutions are required to advertise most of ‘heir procurements12.4. Select Sellers sus \ ‘Resse nate Select Seller EN Receiving proposals + Applying evaluation teria to selec a sete (provider) + This process may be repeated in major procurementsSelect Sellers - Tools ‘Weighting systems ‘Independent estimates Screening system Contract negotiation Seller rating systems, + Expert judgment *Proposal evaluation techniques mee 4 Outputs: Select Sellers - sSelocted celles Contract ‘Contract management plan Resource availabilty ‘Procurement management plan (updates) ‘Requested changesNegotiation + Objectives = Obtain a far and reasonable price = Develop a good relationship withthe saller = To protect company's interests, assets and reputation = Minimize risks = Maintain options : Pm i Negotiation — Heavy tactics + attacks + Personal insults + Good guylBad guy + Deadine + Lying + Limited authorityNegotiation — Light Tactics Missing Man “Fai and reasonable “Delay “Extreme demands ‘itherawal “Fait accompli Saxe FOE Negotiation Preparation + Financial ~ Minimal acceptable francal pasion given the schedule and deliverables, “ = Target financial position — Maximum (opening) financial position and target 28 reference parts, ~ Explore various positions ~ Explore trade-ots iN + Proposal team uses during negotiation the min, max MyconesNegotiation Process - 1 + Negotiating team should include: = Project technical aware personnel = Contract aware personnel = Negotiator + Planning! Preparation = Objectives, ranges, walk-away options = Analyse supplier objectives = Pran“win-win’ outcome = Datermine if buyer seller objectives are aligned = Establish the time and place aioxes Negotiation Process - 2 + Conducting negotiations ~ Follow the negotiation plan + Documentation! follow-up = Document agreement = Ust follow-up actions + Signing the conditional contract contract12.5. Contract Administration it ‘Gormact managenent Shears ces >t sata coves adere en Siren an vidtgaromece | IContract Change Control System it + A oral process for modifying elements of the conract + Tt shouldbe included inthe contract + Itroquirs intorpretaion ofthe contract Terms & Conditions (TC) + May involve conficts ‘+The contract supercedes any previous memo, dlscussions, agreementsContract Interpretation i ‘Words over numbers Detailed terms over general terms Common definition over intanded meaning Industry use of term over common use of term Special provisions over general provisions Inaled handwritten comment over typed-over wording ‘Contract language over memos and agreements, eee 12.6. Contract Closure BN|Contract Closure Activities Includes activities from Administrative Closure: = Product verfcation = Financial closure (fnal contractual payments) = Updating records = Contract performance reporting = Contract fle Procurement Audits > a strstured review ofthe overall procurement process; similar with lessons learned Contracts elosed when formal acceptance ofthe products is signed-of Tat: Contract Closure [Procurement aualts ‘structured review ofthe procurement process from the Plan Purchases and Acquisiton to Contract ‘Administration Records management system aOutputs: Contract Closure - uy BUN closed contracts ‘usually the buyer provides the seller wit formal written retice that the contracthas been completed requirements for formal contact closure are usually efined in the contract organizational process assets (updates) soontract fle ‘deliverables acceptance ‘lessons learned documentation Practice Test Project Procurement Management + 20 Questions! 30 minutes + Focus Group Project Procurement Management + Further readings and study 2