Project Management

Project Management Chapter 20 : Project Procurement Management Project Procurement Planning

Scope Statement Product or Service Description Procurement Resources Market Conditions Make or Buy Analysis Expert Judgement Selecting a Type of Contract Procurement Management Plan Statement of Work Solicitation Planning Procurement Document Criteria for Judging the Vendor Solicitation Short listed Vendor List Vendor Meetings Negotiation and its Goals Advertising Accepting Proposals Vendor Selection Contract Negotiation Weighting System Screening System Developing Independent Estimations Contracting Contract Administration Contract Change Management System Contract Closing

Chapter Summary Procuring is one of the major challenges faced by project managers, especially when the project is one of infrastructure or manufacturing. These projects require various materials and skills from external sources and therefore its important to adhere to the organizational standards for quality and price. According to PMBOK, project procurement management is the process of acquiring goods and services from a firm external to the project organization. There are five key components in a project procurement management system-project procurement planning, solicitation planning, solicitation, source selection, contract administration and contract closing. Project procurement planning is about discovering the needs of the project that can be satisfied by acquiring products and services from firms external to the project organization. When the project requires products and services from external firms, it has to go through a series of activities starting from solicitation planning to contract closure. The project manager should get help from the professionals in contracting and procurement, if required. Procurement process is effective if it contributes to organizational profits through discounts on bulk purchases and quality products and services. Contract selection is influenced by the project manager's level of uncertainty. While entering into contract, the vendee always likes to transfer the maximum risk of performance to the vendor, while the vendor likes to minimize his level of risk and maximize his profit. Generally there are five major categories of contracts namely: • Fixed Price (FP) contracts • Cost Plus Fixed Fee (CPFF) or Cost Plus Percentage Fee (CPPF) contracts • Guaranteed Maximum Shared Savings (GMSS) contracts • Fixed Price Incentive Fee (FPIF) contracts • Cost Plus Incentive Fee (CPIF) contracts Solicitation is a process of seeking information from all prospective vendors. It is one-way of knowing the vendor's way of solving the problem or satisfying the project requirements. The process involves handling the procurement documents, short listing vendors list, negotiating and advertising and accepting proposals. In order to administer the contract in an effective and efficient manner, the project organization should employ a contract administrator to manage total contract administration activities. Therefore it becomes his responsibility to see to it that the end-product or service matches the performance expectations of the project. The project organization has the authority to put an end to a continuing contract at any point of time depending on the nature of the contract and the terms and conditions that are agreed upon.