Project Procedurement

Management
CREATED BY PHUDD
Key Concepts for Procedurement
Management
 Purchasing the products and services for the project
 Planning
 Acquiring the products or services
 Choosing a source
 Administering the contract
 Closing out the contract
 Point of view of the buyer or the seller and/or buyer
 Purchase order
 Memoranda of agreements (MOA)
 Service level agreement (SLA)
 Contracting
Considerations for Project Managers

 Legal obligations and penalties tied to procurement processes

 Typically not authorized to sign legal agreements
 Delegation of authority
Contracting Overview

 Contracts clearly state the deliverables and results expected

 Anything not in the contract cannot be legally enforced
 International contracts and local law
 Terms and conditions for what the seller is to perform or provide
 Must confirm procurement meets the project need
Seller Participation

 Buyer becomes the customer to subcontractors, suppliers, and service providers

and is a key stakeholder
 Seller’s project management team may be concerned with all the processes
involved in performing the work
 Terms and conditions are inputs to seller’s management processes
 Contract can limit the project team’s options
 The seller may become a buyer of lower-tiered products, services, and materials
from subcontractors and suppliers
Planning for Proceduement

 Whether procurement is needed

 What to procure
 How much to procure
 When to procure
ITTOs: Plan Procurement Management
Procurement Actions

 Create procurement Statement of Work (SOW) or Terms of Reference (TOR)

 A high-level cost estimate to determine the budget
 Advertise the opportunity
 Identify qualified sellers
 Create and issue bid documents
Procurement Actions (cont)

 Seller creates submits proposal

 Buyer does a technical evaluation of proposal
 Buyer does cost evaluation of the proposal
 Buyer Examine combined quality and cost evaluation
 Buyer and seller negotiate sign contract
Planning for the Project Requirements

 Project scope statement

 Work breakdown structure
 WBS dictionary
 Helps defined what must procured and what does not
SOW and TOR

 Statement or works (SOW)

 Terms of reference (TOR)
 Define the work to be accomplished within the project
 Does not define the product description as a whole
 Entire project is to be procured from a vendor, the SOW and the product
description are the same
 Reference the requirements documentation
TOR Specifics

 Tasks the contractor is required to complete

 Standards the contractor will fulfill
 Data that needs to be submitted for approval
 List of data and services that will be provided to the contractor by the buyer for
use in performing the contract
 Schedule for initial submission and the review time required
Contracts

 A contract is a formal agreement

 Contracts state all requirements for product acceptance
 Changes to the contract must be formally approved, controlled, and documented
 Contracts can be used as a risk mitigation tool
Contract Legalities

 Fixed Price or Cost Reimbursable

 Contain an offer
 Have been accepted
 Provide for a consideration (payment)
 Be for a legal purpose
 Be executed by someone with capacity and authority
Firm fixed-price Contracts (FFP)

 Most common contract

 Seller carries risk of cost overruns
 Buyer specifies what’s to be purchased
 Changes to the scope
 Fixed price incentive fee (FPIF)
 Fixed price with economic price adjustments (FPEPA)
Cost reimbursable

 Cost plus a fee

 Scope or work can’t be defined early
 High risks may exist in the project
 Buyer carries risk of overruns
 Cost plus fixed fee (CPFF)
 Cost plus incentive fee (CPIF)
 Cost plus award fee (CPAF)
Determine Build or Buy

 Less costly
 Use in-house skills
 Control of work
 Control of intellectual property
 Learn new skills
 Available staff
 Focus on core project work
Example of Determination Build or Buy
 To create a portion of the project deliverable, the team could complete the project work for
$27,000, with a monthly fee of $4,000. A vendor could complete the same work for $13,000 but
the monthly support for their solution is $7,000. If elects to create the solution in-house rather
than turn to the vendor, how long must the solution be in use to be more cost effective than the
vendor’s?

Build Buy Diff Build vs Buy

27000 13000 14000

Build Monthly
Build?
Buy Monthly Fees Diff Monthly Fees
Fees
4000
7000 3000 Buy?
Divide Differences
14000/3000 = 4.667 months
Conduct Procurements

 Obtaining seller responses

 Selecting the seller
 Award a contract
From the Buyer

 SOW/TOR
 Request for Quote
 Invitation for Bid
 Request for Proposal
 Request for Information
From the Seller

 Quote
 Bid
 Information
 Proposal
Seller Selection

 Weighting system
 Independent estimates
 Screening systems
 Contract negotiation
 Seller rating systems
 Expert judgment
 Proposal evaluation
Contract Details (Agreement)
 SOW/TOR and requirements
 Schedule baseline
 Performance reporting
 Period of performance
 Roles and responsibilities
 Where work is to occur
 Pricing
 Payment terms
 Inspection and acceptance criteria
 Warranty
 Product support
 Limitation of liability
 Fees and retainage
 Pernaties
 Incentives
 Insurance and performance bonds
 Change request handling
 Termination/alternative dispute resolution
Letter of intent

 From the buyer to the seller

 Indicating that the seller will be awarded the contract
 Buyer intends to do business with the seller
 Not be legally-binding contract
Controlling Procurements

 Ensuring that the seller and the buyer live up to the contract
 Project manager and the contract administrator work together
 If the seller does not fulfill their contractual requirements
 Legal remedies
 Based on the terms of the contract
 Contract overrides everything else
Preparing to Control Procurements

 Project management plan

 Project documents
 Agreements
 Procurement documentation
 Approved change requests
 Work performance data
 Enterprise environmental factors (EEFs)
 Organizaitional process assets (OPAs)
Procurement and processes

 Direct and manage project execution

 Report performance
 Perform quality control
 Perform integrated change control
 Monitor and control risks
Administer Procurement Details

 Payments to the seller

 Seller compensation linked to progress
 Seller performance review
 Consideration for future assignments
Cancelling the Contract

QUALITY OR NO LONGER NEEDED TERMS OF CONTRACT

PERFORMANCE ISSUE
Claims administration

 Claims, disputes, or appeals

 Contested changes
 Disagreements
 Terms of the contract
 Alternative dispute resolution (ADR)
 Negotiation is preferred method
Thank you for your listening
Q&A