CV-457

CV-457
Contract Management
Contract Management

CV-457
CONTRACT MANAGEMENT
Lecture-2a (Week-2)

Engr. Rafia Nawaz

Lecturer Department of Civil Engineering
GIK Institute
Dr.-Ing Abdur Rehman Nasir
Assistant Professor ofEngineering
of Construction Engineering Sciences & Technology, Topi, Swabi KPK
and Management
1
12.09.2019 NIT (SCEE), NUST H-12, Islamabad
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Topics to cover

❑ Procurement

❑ Procurement Cycles
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What is Procurement?
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Procurement
▪ Procurement is the action of obtaining or procuring something – Oxford Dictionary

▪ Procurement is the acquisition of goods or services.

▪ Procurement is a process that involves (two) parties with different objectives who
Interact in a given market segment.
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Procurement Management
▪ Mostly all projects need to acquire some resources from outside.

▪ Not understanding the different ways to contract could result in an unnecessary

risk for the project.

▪ Project Procurement Management includes the processes necessary to

purchase or acquire products, services, or results needed from outside the
project team.
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Procurement Management
▪ Procurement Management includes the contract management and change control
processes required to develop and administer contracts or purchase orders issued
by the authorized project team.

▪ Procurement Management also administers contractual obligations placed on the

project team by the contract.
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What is the difference between

Procurement and Purchasing?
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Procurement Vs. Purchasing

• Many people use the terms purchasing and procurement interchangeably, but despite
their similarities, they do have different meanings.

• Procurement is concerned with acquiring (procuring) all goods, services, and work
that is vital to an organization.

• Purchasing generally refers to buying goods andservices. It is basically a subset of

procurement.

• Purchasing is usually described as the transactional explicit function of procurement.

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Procurement Environments
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Procurement Environments
The environment in which Procurement Take Place is
a critical factor.
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Procurement Environment: Macro

▪ Macro environment includes general external variables that can
influence which influence a firm’s decision-making and have an impact on its
performance. ‘How & When’ we do procurement.
▪ It Includes:

– Recessions,
– Inflation,
– Cost of borrowing money,
– Unemployment.
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Procurement Environment: Micro

▪ Micro environment is internal to a Firm/Organization.

▪ It includes five following cycles of “Procurement /Contract System”:

1. Requirement Cycle: defines the boundaries of a Project.
2. Requisition Cycle: analysis of sources
3. Solicitation Cycle: Bidding process
4. Award cycle: Contractor selection & Contract Award
5. Contract Admin Cycle: Managing contractor until completion of the Contract.
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Cycles of Procurement System

1. Requirement Cycle
▪ First Step in the procurement process is the Definition of project-specific requirements.
▪ The requirement cycle includes:
1. Defining the need for the project
2. Development of the statement of work, specifications, and work breakdown
structure
3. Performing a make or buy analysis
4. Laying out the major milestones and the timing/schedule
5. Cost estimating, including life-cycle costing
6. Obtaining authorization and approval to proceed
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Cycles of Procurement System

2. Requisition Cycle
▪ Once the ‘Requisition identification’ is done, a ‘Requisition form’ is sent
to begin “Requisition Process”.

▪ The requisition cycle includes:

1. Evaluation for confirming specification.
2. Confirming sources
3. Reviewing the past performance of sources
4. Producing Specification Package (S/P)
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Specification Package

1. Bid documents (usually standardized)

2. Listing of qualified contractors (expected to bid)
3. Proposal evaluation criteria
4. Bidder conferences
5. How change requests will be managed
6. Payment plan
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Cycles of Procurement System

3. Solicitation Cycle
▪ Selection of“Procurement (Acquisition) Method” is the key element in the
Solicitation Cycle.

Common Procurement Methods :

1. Competitive Bidding
2. Negotiation
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Common Procurement Methods

Competitive Bidding

• Bidding is the process of submitting a proposal to undertake or manage a

construction project. The process starts with a cost estimate from designs and
quantity take offs.
▪ Advertising goes out for sealed bids.
▪ There are no negotiations.
▪ Competitive market forces determine the price and the award goes to the lowest
bidder.

Tender Notice Invitation to Bid

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Common Procurement Methods

Tender Notice Invitation to Bid

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Common Procurement Methods

Competitive Bidding

▪ Competitive Bidding is of two types

1. Open Competitive Bidding: Competitive bidding in which the bid opening is

conducted at a public venue and in the presence of all who may wish to witness
the opening of the received sealed bids.
2. Closed Competitive Bidding: Competitive bidding in which the bid opening is
conducted at a private venue and in the presence only of the authorized
personnel of the party requesting the bids.
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Common Procurement Methods

Negotiation

▪ The Request for proposal (RFP) details the scope, specifications, and terms
and conditions of the proposed contract and the criteria for evaluating the
bids.
▪ Then separate negotiations are carried out with each bidder whose bid falls
within the preset competitive range.
▪ On Large contracts the Negotiation Process may also include Price, Quantity,
Quality & Timing.
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Common Procurement Methods

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Common Procurement Methods

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Negotiation Tactics

▪ Attacks – Argue a point ▪ Fair and Reasonable

▪ Personal Insults – Attack other sides
negotiator
▪ Good Guy/Bad Guy
▪ Deadline – The offer stands until…
▪ Lying
▪ Limited Authority – I need to check
with
▪ Missing Man – Boss is out today, I will
have to get back tomorrow
▪ Delay – Tabling issues important to the
other side
▪ Extreme Demands
▪ Withdrawal – Feigning interest
▪ Fait Accompli – Done Deal, this is how
we have to do it….
These are all tactics, but not necessarily good tactics!
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Cycles of Procurement System

4. Award Cycle

▪ Objective of the Award Cycle is to negotiate a contract.

▪ Key elements are the selection of contractor and contract type
▪ Selection of the ‘type of Contract’ and ‘price’ also comes under the negotiations.
▪ Through this cycle, reasonable ‘Contractor risks’ are discussed, and the
contractor is provided with the greatest incentive for efficient & economic
performance.
▪ This cycle results in a “signed contract”.
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Cycles of Procurement System

5. Contract Admin Cycle

▪ Contract Administrator is mainly responsible for compliance by the Contractor to

Contract's “Terms & Conditions”.
▪ Functions of contract administrators are adhered to in this cycle.
▪ The objective is to make sure that the final product is ‘Fit for Use’.
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Cycles of Procurement System

▪ Several activities of the Procurement Process overlap several of the Procurement
Cycles.

▪ The cycles are also conducted in parallel, especially “Requisition & Solicitation”.
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Thank you!