What is an agreement?
Any document or communication that defines the initial intentions of a project.
- Contract, memorandum of understanding (MOU), letters of agreement, verbal agreements, email, etc.
What is authority?
The right to apply project resources, expend funds, make decisions, or give approvals.
What is Project Procurement Management?
- Includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team
- In other words: the processes required to develop and administer agreements like contracts, POS, memoranda agreements, service level agreements.
What does project procurement management involve?
- Agreements that describe the relationship between a buyer and a seller
- Agreements that comply with local, national, and international laws regarding contracts
- Knowing about the governing bodies surrounding procurements, as well as the options for suppliers
- The PM making sure all procurements meet the specific needs of the project
- Significant legal obligations and penalties tied to the procurement process
What is change control?
The process whereby modifications to documents, deliverables, or baselines associated with the project are identified, documented, approved, or rejected.
PM Role in Procurement Mgmt
- Preparing requests for proposals (RFPs)
- Negotiating contracts
- Selecting a seller
- Collaborate with other departments in the organization to tailor contract terms and conditions
• Legal
• Technical
• Financial - Provide stakeholders like senior mgmt with insight and recommendations. Ultimately their decision
Describe the buyer-seller relationship
Seller is known as a bidder at first.
- May be external or internal to the organization - Once it wins the agreement, it manages the work as a project - The buyer is a key stakeholder to the seller's project - Agreement turns into an input in the seller's management processes
What are the three processes in project procurement management?
Plan Procurement Mgmt
Conduct procurements
Control procurements
What are some tailoring considerations for Procurement Mgmt?
Complexity of procurements
- Is there one main procurement, or are there multiple procurements at different times with different sellers?
Physical Location
- Sellers and buyers in the same location is very beneficial, depending on what is being created/distributed
Gov’t and regulatory environments
- Are local laws and regulations integrated into the organizations procurement policies?
Availability of contractors
- There may be limited suppliers based on the complexity/specificity of the work, or on the demand for these buyers in the marketplace
What are the typical steps of procurement?
10
- Prepare the procurement statement of work (SOW)
- Prepare a high level cost estimate to determine the budget
- Advertise the opportunity
- Identify a short list of qualified sellers
- Prepare and issue bid documents
- Prepare and submit proposals by the seller
- Conduct technical and quality based evaluation of the proposals
- Perform a cost evaluation of the proposals
- Prepare the final combined quality and cost evaluation to select the winning proposal
- Finalize negotiations and sign a contract
What is a statement of work? SOW
- Describes the procurement item in enough detail to allow prospective sellers to determine if they are capable of providing the products, services, or results.
- A narrative description of products, services or results to be delivered by the project.
- Developed from the project scope baseline and defines only that portion of the project scope that is to be included within the related contract
Describe Bid Documents
- Used to solicit proposals from prospective sellers
- Terms like Bid, tender, and quotation are generally used when the seller selection decision is based on price - like for commercial or standard items.
- Terms like proposal are generally used when other considerations such as technical capability or technical approach are the most important.
What are the main considerations of procurement strategy?
- Delivery methods
- Contract payment types
- Procurement phases
What are the types of contracts for procurement?
Fixed Price, Cost-Reimbursable, Time and Materials
What is a Fixed price contract?
- Setting a fixed total price for a defined product, service, or results
- Used when requirements are well defined and no significant changes to scope are expected
○ Firm fixed price (FFP) - price is set and unlikely to change
○ Fixed Price incentive fee (FPIF) - allows for deviation of the price of the goods, depending on the performance of the seller
○ Fixed Price with economic price adjustments (FPEPA) - allows for adjustments to the contract price due to changed conditions
- Used when requirements are well defined and no significant changes to scope are expected
What is a cost-reimbursable contract?
- Involve payments to the seller for all costs incurred while completing the work, plus a fee representing seller profit.
○ Cost plus fixed fee (CPFF) - a seller is reimbursed for all costs and received a fixed fee payment
○ Cost Plus incentive fee (CPIF) - a seller is reimbursed for all costs and receives a predetermined incentive fee
○ Cost plus award fee (CPAF) - a seller is reimbursed for all costs, but the fee is based on satisfaction criteria
What is a time and materials contract?
- Hybrid type of contractual arrangement with aspects of both cost-reimbursable and fixed price contracts
- Often used for the acquisition of experts, and any other outside support when a precise statement of work cannot be quickly prescribed
What is source selection criteria?
Used when the buyer wants to ensure the proposal selected will offer the best quality for the services required
- Capability and capacity - Product cost and life cycle cost - Delivery dates - Technical expertise and approach - Specific relevant experience - Finical Stability
After a it is decided that you need to procure a product/service, what are some procurement strategies to consider?
- Professional Services Delivery Methods
• Buyer/services provider with no subcontracting
• Buyer/services provider with subcontracting allowed
• Joint Venture between buyer and services provider
• Buyer/services provider acts as the representative - Construction Services Delivery Methods
• Turnkey
• Design Build
• Design Bid Build
• Design Build Operate
• Build own operate transfer
How is advertising used in conducting procurements?
- Communicates with users or potential users of a product/service
- Expands existing lists of potential sellers by placing ads in general circulation publications like newspapers or trade publications
- If a government job, public advertising is required
What is included in procurement documentation
- Bid documents
- Procurements statement of work
- Independent cost estimates
- Source selection criteria
What fields of expertise are needed to refer to for this conducting procurements?
- Proposal evaluation
- Technical or subject matter
- Relevant functional areas such as
• Finance
• Engineering
• Design
• Development
• Supply chain management - Industry regulatory environment
- Laws, regulation and compliance requirements
What are constructive changes?
- Requested but unresolved changes that include direction by the buyer or actions taken by the supplier that the other party considers a constructive change to the contract
- Technically they can be disputed by one party and can lead to a claim against the other
- These are uniquely identified and documented by project correspondence
What are claims?
- They are documented, processed, monitored, and managed throughout the contract life cycle
- Contested changes and potential constrictive changes where the buyer and seller cannot reach an agreement on compensation for the change, or cannot agree that the change has occurred.
