NUS SCALE Class 09 - Procurement Management RevF0 11OctSep2021

TIE 4240
Project Management
Project Procurement Management
Class 09
Ravish Maqsood
The materials and its content are confidential information and copyright materials of the rights holder.
Material used is solely for your personal use in advancement of education, training and research purposes. All rights are expressly reserved by the rights holder.
You SHALL not, except with express written permission from the rights holder, distribute or exploit the content, commercially or otherwise.
You may not transmit the materials or store it in any other website or other form of electronic retrieval system.
Copyright
The materials and its content are confidential information and

copyright materials of the rights holder.
Material used is solely for your personal use in advancement of

education, training and research purposes. All rights are expressly
reserved by the rights holder.
• You SHALL not, except with express written permission from the
rights holder, distribute or exploit the content, commercially or
otherwise.
• You may not transmit the materials or store it in any other website
or other form of electronic retrieval system.
PROJECT
MANAGEMENT
COURSE SCHEDULE
Copyrights @ Ravish Maqsood

Schedule
Lecture 1: Introduction and Overview (16 Aug 2021, Monday): Course summary and organization,
learning outcomes, definition of a project, introduction to project management, project team, project
management processes.
Lecture 2: Project Integration Management (23 Aug 2021, Monday): Overview of development of
project charter, project management plan, direct and manage project work, monitor and control project
work, integrated change control, project close out.
Lecture 3: Project Scope Development (30 Aug 2021, Monday): Overview of project scope
management, requirements collection, scope definition, WBS, validation and control.
Lecture 4: Project Planning and Scheduling (06 Sep 2021, Monday): Project scheduling, CPM, PERT,
Planning tools (Gantt Project), Interactive Planning Session
Lecture 5: Project Cost estimation and Budgeting (13 Sep 2021, Monday): Project cost, estimates,
budget.
Lecture 6: Project Quality Management (20 Sep 2021, Monday): Project quality management, quality
assurance and control.
Recess Week (18 – 26 Sep 2021)
4
Schedule
Lecture 7: Mid Term Test / Quiz, Project Resource Management (27 Sep 2021, Monday): Resource
allocation and management.
Lecture 8: Project Risk Management (04 Oct 2021, Monday): Risk management process, assessment,
analysis, mitigation, risk register, risk for various stake holders.
Lecture 9: Project Procurement Management (11 Oct 2021, Monday): Procurement process, sub-
contracting processes.
Lecture 10: Conflict Management, Stakeholder Management (18 Oct 2021, Monday): Conflict and
stakeholder management.
Lecture 11: Project Communications, Personal Management & Leadership skills, Motivation (25 Oct
2021, Monday): Communications plan and management, personal management, Challenges and
opportunities, human factors, motivation, decision making, time management, communication,
presentation, meetings, reports etc.
Lecture 12: Students Presentation (01 Nov 2021, Monday): Group presentations.
Lecture 13: Students Presentation (08 Nov 2021, Monday): Group presentations.
5
QUICK RECAP
6
Project Risk Management
Project Risks
Project Risks
Known – Unknown –
Unknown Unknown
Copyright@ Ravish Maqsood 7

No slide or part to be reproduced or published
on any platform without permission of the owner.
Levels of Risks
INDIVIDUAL OVERALL
PROJECT RISK PROJECT RISK
Risks
• Impact on one or • Exposure to the

more project project variations.
objectives.
• Impact on overall
project.

Risk Management Process
IDENTIFY ASSESS
RISK RISK
RISK
MANAGEMENT
PROCESS
REVIEW CONTROL
CONTROLS RISK

Risk Management Process
RISK CONSEQUENCE
RISK
Sno RISK Low Medium High
MITIGATION
. DESCRIPTION
PLAN
High
1 Description. Action
RISK LIKELIHOOD
Medium
Low
Risk Level: Low Medium High

PROJECT PROCUREMENT
MANAGEMENT
-OVERVIEW
11
Definition
What is
Procurement?
Project Procurement Management includes the processes
necessary to purchase or acquire products, services, or
results needed from outside the project team.
Copyright@ Ravish Maqsood Source: PM@BOK 12

Definition
Why
Project
Procurement
Management is
important?

Procurement & Subcontracting: Definitions
Some companies use terminology Some companies use terminology

“Procurement” only for purchasing “Procurement” to combine purchasing
of Equipment and other items of Equipment and other items PLUS sub-
contracts
Procurement Procurement Sub-Contracting
Vendors / Vendors / Other

Suppliers/ Suppliers contracts
other
contracts
Note: For ease, Suppliers and Vendors are called as “Vendors” in this class
Copyright@ Ravish Maqsood

No slide or part to be reproduced or published 14
Procurement: Project Success Factors (Non-exhaustive)
• Timely and good quality of:

• Overall scope and concept deliverables
• Realist achievable schedule
• Timely:
• Deliverables from Engineering. Material/Contract requisition, standards,
specs.
• Issuance of request for quote
• Bid reviews thru final technical and commercials
• Placement of Purchase orders for equipment, bulk items, material
• Placement of Sub-contracts for installation and other services
• Fabrication i.e. vessels, pumps ; pipe spools, structural steel
• Inspection
• Factory Acceptance Test for equipment
• Shipping and delivery on time
• Site acceptance, inspection

Procurement: Project Success Factors (Non-exhaustive)
• Good planning and monitoring
• Good Material Control and Management
• Installation quality
• Development / Fabrication / Construction monitoring
• Installation
• Minimize rework

Procurement: Pre-Order and Post Order Activities
Procurement Prime Responsibility:

Purchase Equipment, items, place orders and ensure its timely delivery to the
project
Procurement Activities
• Vendor Selection • Order tracking and coordination

• Preparing Bid / Tender Documents • Expediting and Inspection
• Calling Bids/ Tenders • FAT (Factory Acceptance Test) witness
• Evaluating • Shipping and Delivery to the site
• Award • Material Control and Management
• Over, Short and Damaged (OS&D)
• Contract close out

Procurement:

Procurement: Vendor/ Supplier/ Sub-Con List
A list is prepared Vendors/ Suppliers/ Sub-contractors to be invited for the Bid/Tender for
the specific project
Identify the Final

Project Purchases Vendors Shortlisting Number Client
Shortlist of Bids shortlisted APPROVAL
Scope required available in criteria Bidders List
the market
Unders Location Shortlist Seek

Identify Identify the Agree Prepared by
tand of the the best Approval
purchase possible number of Procurement
the project, available by the
to be vendors Bids need Team
scope made who could Vendors to be called CLIENT
of the Best prior
(List of deliver the for each
project Value proceedin
Equipme requirement purchase to
Option to g any
nt and be made
select the further
other
Vendors,
items)
Client
Preference
etc
Agreement with Is it necessary??

In coordination with Best Source Options
Project Manager What about for
Project Engineering are explored at this
and Client EPC LSTK
Team and Master stage 19
Representative contract, would it
Plan
be needed?
WHY ?? WHY ??
Copyright@ Ravish Maqsood Heavy involvement of Project
No slide or part to be reproduced or published Engineering Team 19
Procurement: Bid / Tender Process
Respond to Tender Bid/ Technical Commercial

Clarifications Issue of Clarification Submission Tender Recommend Approvals
Addendums s s Opening Evaluation Evaluation ation
Call for Issue the Clarifications Focal point Open the Technical To be Prepare final Prepare final
clarification changes to up to the to receive document as evaluation performed Recommend Recommend
meetings the Bidder time agreed the agreed of the by ation after ation after
Bid/tender earlier submission Procureme combining combining
Align the Work closely submissions nt Team Technical Technical
objectives, with Technical Only as per and and
Team to Technical to agreed commercial commercial
Missed out respond the be opened timeline evaluations evaluations
information relevant
queries or both
Other options Technical
and
Commercial?
Letter of Intent
Inform
AWARD
Unsuccessful
Bidders/
Tenderers
Prepare letter of
Copyright@ Ravish Maqsood Award
Procurement:

Procurement: Expediting and Inspection
Kick off Scope Vendor Shop Change FAT Shipment

Meeting Alignment Drawings Inspections Management
Call for Align the Vendor Inspections Continuous Factory Agree all
Kick off scope submit the are Process to Acceptance requiremen
meeting detailed planned as ensure that Test are ts
with the Check the drawings per the any changes witnessed
Vendor information for plan issued by the Ensure
issued to the approval agreed during the team as timely
Vendor during by the earlier fabrication / per the shipment
the Bidding/ technical during the manufacturin contractual
Tendering team bidding / g are requirement Delays and
phase is up tendering captured mitigation
to date phase.
Discuss the
plan for
document
submission

Procurement: Delivery, Inspection, Storage, installation
Arrival of Inspection Release Damaged

Bulk
Equipment Of the item and
Installation Material Close out
and Delivered for Surplus
handling
Material items Installation Items
Port of Inspect the Release for Support Bulk Managem Contract

arrival condition of installation during the material is ent of close out
the items installation managed Damaged
Route to arrived Update the by QC team and and Payment
deliver the system supplied Surplus settlement
items Raise any Third party to the site items
damages inspection installation
Delivery at etc and team
the site or certifications
warehouse

Procurement:

Procurement: Approved vendor/ suppliers/ sub-contract list
Approvals:
• Can we proceed without client’s approvals?
• Any client suggested vendor/ supplier/ sub-contractor/

specialist must be recorded and duly signed by the client.
• Such list must be mentioned in PEP (Project Execution Plan)
• Safety, Quality, Past performance and financial checks still

must be performed on client’s suggested vendor/ supplier/
sub-contractor/ specialist
• Single source items and vendor/ supplier/ sub-contractor/

specialist must be recorded and duly signed.
Procurement: Risk Management
Risks need to be managed:
• Financial failure of the Vendor / Supplier/ Sub-contractor
• Under performance
• Delays (Fabrication, Delivery, Installation etc.)

Market risks:
• Misjudgment of supply chain market
• Difficulty of transporting/delivering the products
• No long-term purchase agreement/guaranteed payment

for the service or product

Political risks:
• New laws/legislations
• Strikes/terrorism
• Government consent/permit/priorities
• Breach of contract due to political reasons
• Nationalization of project assets

Development/ Fabrication /Construction risks:
• Risks associated with different types of contract i.e. LS or RR
• Scope changes and claims
• Delay of project completion
• Cost overrun at completion
• Over-estimate of the supply chain’s technical capability

and capacity
• Project failure to meet performance specification
• Compliance with local legislation

Other risks:
• Misidentification of project
• Corruption in procurement
• Misidentification of procurement strategies and/or delivery

procedures

Procurement: Biggest Challenge (high level)
The biggest challenge on a project is to call the Bid / Tender and place orders on time as per the
planned schedule:
Development / Fabrication
Engineering Team Procurement Team /Construction Team
Plan Engineering Schedule Procurement Schedule Construction Schedule
Reality Engineering Schedule Procurement Schedule Construction Schedule
Engineer
Responsibility to
Ensure timely Positioning Every delay puts
delivery of of lots of pressure on
Procurement Construction Team
Technical Package
Team ??
to Procurement with Cost, Quality
and Safety
Challenges

Procurement: Long Lead Items
FID
Project Approval
Project Planning Project Implementation
Evaluation & Definition Execution
Concept FEED Engineering and Procurement

Contracts
Fabrication
PEP
Construction
Estimate
Commissioning Startup
Operations

FID
Project Approval

Contracts
Fabrication
PEP
Construction
Estimate
Operations
LLitems Misses
Design, Fabrication, Inspections, FAT, Delivery Construction
design
Tender, completion
commenced Install
Bid eval,
during DD award
date
phase
Are there any solutions?

Procurement: Long Lead Items Management
DISCUSSION TIME
How can we manage Long Lead items?
1. Squeeze the vendor or supplier for shorter time duration
2. Change the specifications
3. Change quality checks hold points requirement to be less stringent
4. Change mode of shipment of the product / equipment (Express

services, fly in instead of sailing or via road)
5. Manage time to place order of the equipment / product (start early)
6. Others ???

Procurement: Product / Equipment movement
by road….
by road…. by ship….

by road….
by ship….

by road….

Project Approval

Contracts
Fabrication
PEP
Construction
Estimate
Operations
LL items
design
Fabrication, Inspections, FAT, Delivery Meets the
commenc Design,
Tender, overall
ed during Install
Bid eval, schedule
FEED award
phase

DISCUSSION TIME
How do we identify Long Lead items?
1. Identify critical items which will affect the overall schedule.
2. Conduct cost-benefit analysis to prioritize the items to place

order during FEED.
3. Are there any Risks associated?

Long Lead items order placement before FID.
1. Challenges:
a) Funding to support this approach.
b) Risk if the project does not get approved.
c) Any major design changes will affect the overall cost.
2. Benefits:
a) Improved schedule to completion.
b) Early start up of the final production.

Procurement: Bulk Quantities
Is it possible to buy only what is needed on a project?
• Yes
• No
Do we buy exact quantities as specified by the engineering?
• Yes
• No
Do we buy slightly more quantities?
• Yes, (how much more)

• No

What to do with the surplus quantities after project

completion?
a. Keep it for next project

b. Keep it as surplus material
c. Sell in open market
d. Sell it back to the supplier
e. Give it away free to someone who needs it
If we decide to sell, then what should be the expectations on

the price?
a. Same as bought with open book to show the price.

b. More than the price bought as the buyer will save the lead time.
c. Less than the price bought to get rid of it.

Who will have the best price offered by the Mill/ Manufacturer?
Mill /
Manufacturer
Wholesale
End-user Suppliers
Customers
Main Sub
Contractors Contractors

PROJECT PROCUREMENT
MANAGEMENT
44
Overview
1. Plan Procurement Management
2. Conduct Procurements
3. Control Procurements

on any platform without permission of the owner. 45
Overview
Plan Procurement
Conduct Procurements
Control
Management Procurements
-Procurement Management -Select Sellers -Closed Procurements

Pan -Agreements Work Performance
-Procurement Strategy -Change Requests Information
-Bid Documents -Project Management Plan -Procurement
-Procurement Statement of Updates Documentation Updates
Work -Project Documents Updates -Change Requests
-Source Selection criteria -Organizational Process -PMP Updates
-Make-or-buy decisions Assets Updates -Project Docs Updates
-Independent Cost -Organizational Process
Estimates Assets Updates
-Change Requests
-Project Documents
Updates
-Organizational Process
Assets Updates

Plan Procurement
Control
-Project Charter -Project Management Plan -Project Management Plan

-Business Documents -Project Documents -Project Documents
-Project Management Plan -Procurement -Agreements
Inputs -Project Documents Documentation -Procurement
-Enterprise Environmental -Seller Proposals Documentation
Factors -Enterprise Environmental -Approved Change
-Organizational process Factors Requests
assets -Organizational process -Work Performance Data
assets -Enterprise Environmental
Factors
-Organizational process
assets

Outputs

-Change Requests
-Project Documents
Updates
Assets Updates

No slide or part to be reproduced or published Source Reference: PMBOK Guide 6th Edition
PROJECT PROCUREMENT
MANAGEMENT
1.PLAN PROCUREMENT
MANAGEMENT
48

Plan Procurement
Control

Factors
assets

Outputs

-Change Requests
-Project Documents
Updates
Assets Updates

Plan Procurement
Management 1. Plan Procurement Management
1. Project Charter
Inputs
2. Business Documents
• Business Case
• Benefits management plan
3. Project Management Plan

• Scope Management Plan
• Quality Management Plan
• Resource Management Plan
• Scope Baseline
4. Project Documents
• Milestone List
• Project Team Assignments
• Requirements Traceability Matrix
• Resource Managements
• Risk Register
• Stakeholder Register
5. Enterprise Environmental Factors

6. Organizational process assets
Plan Procurement
Inputs
• Marketplace conditions
• Availability of product or services in the marketplace
• Seller past performance and reputation
• Terms and Conditions applicable
• Local and regulatory requirements
• Legal requirements
• Contract management system
• Established multi-tier supplier system
• Financial Accounting and Contract Payments System

Plan Procurement
Inputs
• Approved seller lists

• Formal Policies, Procedures and Guidelines
• Contract Types

Plan Procurement
Contracts Types
Fixed Price Cost-Reimbursable Time and Material

Contracts Contracts Contracts (T&M)
Hybrid of Fixed Price and

Firmed Fixed Price Cost Plus Fixed Fee
Cost-Reimbursable
(FFP) (CPFF)
Contracts
Fixed Price Incentive Fee Cost Plus Incentive Fee

(FPIF) (CPIF)
Fixed Price with Economic

Cost Plus Award Fee (CPAF)
Price Adjustments (FPEPA)

Plan Procurement
TOOLS & TECHNIQUES

Techniques
Tools &
a. Expertise and Past Experience

b. Data Gathering
• Market Research
c. Data Analysis
• Make-or-buy analysis
d. Source Selection Analysis

• Least Cost
• Qualifications Only
• Quality Based / Highest Technical Proposal Score
• Quality and Cost Based
• Sole Source
• Fixed Budget
e. Meetings

Outputs Plan Procurement

a. Procurement Management Pan

• Project procurement activities coordination
• Key Procurement Activities Schedule
• Role & Responsibilities
• Legal Requirements
• Estimates
• Risk Management
• Pre-qualified sellers
b. Procurement Strategy
• Delivery Methods
• Contract payment types (Fixed, Cos plus, incentives etc)
• Procurement Phases

Plan Procurement
c. Bid Documents
Outputs
• Request for Information

• Request for quotation
• Request for proposal
d. Procurement Statement of Work

e. Source Selection criteria
• Capability and Capacity
• Product cost and life cycle cost
• Delivery dates
• Technical expertise
• Experience
• Comply to specifications and requirements
• Resources and their suitability and competence
• Financial Stability

Plan Procurement
g. Make-or-buy decisions
Outputs
h. Independent Cost Estimates

i. Change Requests
j. Project Documents Updates
• Lessons/ Risk / Stakeholder Register
• Requirement's documentation
k. Organizational Process Assets Updates

Plan Procurement
b. Procurement Strategy
Outputs
• Delivery Methods
• Contract payment types (Fixed, Cos plus, incentives etc)
• Procurement Phases
c. Bid Documents
• Request for Information
• Request for quotation
• Request for proposal

PROJECT PROCUREMENT
MANAGEMENT
2. CONDUCT PROCUREMENTS
60

Plan Procurement
Control

Factors
assets

Outputs

-Change Requests
-Project Documents
Updates
Assets Updates

Conduct
Procurements 2. Conduct Procurements
Inputs
• Scope Management Plan

• Requirements Management Plan
• Communication Management Plan
• Risk Management Plan
• Procurement Management Plan
• Configuration Management Plan
• Cost Baseline
• Lessons Register
• Project Schedule
• Requirements Documentation
• Risk Register
3. Procurement Documentation
• Bid Documents
• Procurement Statement of Work
• Independent Cost Estimates
• Source Selection Criteria

Conduct
4. Seller Proposals
Inputs


Conduct
TOOLS & TECHNIQUES

Techniques
Tools &

b. Advertising (Invitation)
c. Bidder Conferences
d. Data Analysis
e. Negotiation

Outputs Conduct
a. Select Sellers
b. Agreements
• Scope
• Schedule
• Performance progress reporting
• Pricing and Payment terms
• Inspection, Quality and Acceptance criteria
• Warranty
• Incentives and penalties
• Insurance and performance bonds
• General T&C
• Termination clause and dispute resolution clause
c. Change Requests

Outputs Conduct
d. Project Management Plan Updates

• Requirements updates
• Quality Management Plan
• Communications management plan
• Scope baseline
• Schedule baseline
• Cost baseline

Outputs Conduct
e. Project Documents Updates

• Requirements documentation
• Resource calendars
• Risk Register
f. Organizational Process Assets Updates

PROJECT PROCUREMENT
MANAGEMENT
3. CONTROL PROCUREMENTS
69

Plan Procurement
Control

Factors
assets

Outputs

-Change Requests
-Project Documents
Updates
Assets Updates

Inputs Control
Procurements 3. Control Procurements

• Requirements Management Plan
• Change Management Plan
• Schedule Baseline
• Assumption Log
• Quality Reports
• Requirement Documentation
• Risk Register
3. Agreements
4. Procurement Documentation

Inputs Control
5. Approved Change Requests

6. Work Performance Data
7. Seller Proposals

Control
TOOLS & TECHNIQUES

Techniques
Tools &

b. Claims Administration
c. Data Analysis
• Performance Reviews
• Earned Value Analysis
• Trend Analysis
d. Inspections
e. Audits

Outputs Control
a. Closed Procurements
b. Work Performance Information
c. Procurement Documentation Updates
d. Change Requests
e. Project Management Plan Updates
• Schedule Baseline
• Cost Baseline

Outputs Control
f. Project Documents Updates

• Resource Requirements
• Risk Register
g. Organizational Process Assets Updates

Summary
a. Procurement of material, purchasing, sub-contracts

and 3rd party engagements.
b. Pre-order and Post-order activities.
c. Challenges for the Long Lead Items.
d. Surplus purchase.
e. Risks associated with procurement processes.
a. Market risks
b. Political risks
c. Development/ site risks
d. Other risks

Copyright
The materials and its content are confidential information and

copyright materials of the rights holder.
Material used is solely for your personal use in advancement of

education, training and research purposes. All rights are expressly
reserved by the rights holder.
• You SHALL not, except with express written permission from the
rights holder, distribute or exploit the content, commercially or
otherwise.
• You may not transmit the materials or store it in any other website
or other form of electronic retrieval system.
End of the class

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TIE 4240

Project Procurement Management

The materials and its content are confidential information and

Material used is solely for your personal use in advancement of

Copyrights @ Ravish Maqsood

Copyright@ Ravish Maqsood 7

• Impact on one or • Exposure to the

Copyright@ Ravish Maqsood 8

Risk Management Process

Copyright@ Ravish Maqsood 9

Risk Management Process

Risk Level: Low Medium High

Copyright@ Ravish Maqsood 10

Copyright@ Ravish Maqsood Source: PM@BOK 12

Copyright@ Ravish Maqsood 13

Some companies use terminology Some companies use terminology

Procurement Procurement Sub-Contracting

Vendors / Vendors / Other

Copyright@ Ravish Maqsood

• Timely and good quality of:

• Realist achievable schedule

Copyright@ Ravish Maqsood

• Good planning and monitoring

• Good Material Control and Management

Copyright@ Ravish Maqsood

Procurement Prime Responsibility:

• Vendor Selection • Order tracking and coordination

Copyright@ Ravish Maqsood

Copyright@ Ravish Maqsood

Identify the Final

Unders Location Shortlist Seek

Agreement with Is it necessary??

Respond to Tender Bid/ Technical Commercial

Copyright@ Ravish Maqsood

Kick off Scope Vendor Shop Change FAT Shipment

Copyright@ Ravish Maqsood

Arrival of Inspection Release Damaged

Port of Inspect the Release for Support Bulk Managem Contract

Copyright@ Ravish Maqsood

Copyright@ Ravish Maqsood

• Can we proceed without client’s approvals?

• Any client suggested vendor/ supplier/ sub-contractor/

• Such list must be mentioned in PEP (Project Execution Plan)

• Safety, Quality, Past performance and financial checks still

• Single source items and vendor/ supplier/ sub-contractor/

Risks need to be managed:

• Financial failure of the Vendor / Supplier/ Sub-contractor

• Delays (Fabrication, Delivery, Installation etc.)

Copyright@ Ravish Maqsood

• Misjudgment of supply chain market

• Difficulty of transporting/delivering the products

• No long-term purchase agreement/guaranteed payment

Copyright@ Ravish Maqsood

• Breach of contract due to political reasons

• Nationalization of project assets

Copyright@ Ravish Maqsood

Development/ Fabrication /Construction risks:

• Risks associated with different types of contract i.e. LS or RR

• Scope changes and claims

• Delay of project completion

• Cost overrun at completion

• Over-estimate of the supply chain’s technical capability

• Project failure to meet performance specification