Project Procurement Management

Project Procurement Management

Presented by Zia ur Rehman

Definitions Procurement Management involves managing the process of acquiring outside project resources to produce project deliverables. Procurement Planning – the determination of what procure, when and

2

how

to

Definitions  Procurement Management - involves managing the process of acquiring outside project resources to produce project deliverables.  Procurement Planning – the determination of what to procure, when and how  Solicitation - the process of obtaining quotes, bids, or proposals  Selection - the process of singling out from a number or group according to fitness or preference 3

PROJECT PROCUREMENT MANAGEMENT  Project procurement management involves acquiring goods and services for a project from outside the performing organization.  In Project Procurement Management the PMI(Project Management Institute’s) along with thousands of project managers worldwide, have identified six processes for managing procurements within projects: 1. Plan Purchases and Acquisition 2. Plan Contracting 3. Request Seller Responses 4. Select Seller 5. Contract Administration 6. Contract Closure

4

Learning Objectives  Understand the importance of project procurement management.  Discuss what is involved in planning contracting, including the creation of various procurement documents and evaluation criteria for sellers.  Describe the seller selection process and recognize different approaches for evaluating proposals or selecting suppliers.  Describe the contract closure process. 5

Importance of Project Procurement Management  Procurement means acquiring goods and/or services from an outside source.  Experts predict that global spending on computer software and services will continue to grow.

6

Why Outsource?  To reduce both fixed and recurrent costs.  To access skills and technologies.  To provide flexibility.  To increase accountability. (responsible)

7

1)Planning Purchases and Acquisitions

Step 1 – Confirm the project objective Step 2 – Statement of Work Step 3 – Identify resources Step 4 – Conduct a market analysis Step 5 – Determine project constraints Step 6 – Select contract type Step 7 – Prepare a Procurement Management Plan

8

2) Planning Contracting Step 1 – Review project constraints Step 2 – Review forms, templates, policies Step 3 – Develop a Product or Service Procurement Document Step 4 – Develop Evaluation Criteria Step 5 – Make necessary changes

9





2) Planning Contracting Cont…

Describing requirements for the products or services desired from the procurement and identifying potential sources or sellers (contractors, suppliers, or providers who provide goods and services to other organizations). Documentation: 

Request for Proposals: Used to solicit proposals from prospective sellers.  A proposal is a document prepared by a seller when there are different approaches for meeting buyer needs.



Requests for Quotes: Used to solicit quotes or bids from prospective suppliers.  A bid, also called a tender or quote (short for quotation), is a document prepared by sellers providing pricing for standard items that have been clearly defined by the buyer. 10

Contracts  A contract is a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them.  Contracts can clarify responsibilities and sharpen focus on key deliverables of a project.  Because contracts are legally binding, there is more responsibility for delivering the work as stated in the contract.

11

Types of Contracts  Different types of contracts can be used in different situations:  

Fixed price or lump sum contracts: Involve a fixed total price for a well-defined product or service. Cost reimbursable/ refundable contracts: Involve payment to the seller for direct and indirect costs. Or Cost-reimbursement contracts usually include an estimate of project cost, a provision for reimbursing the seller’s expenses, a provision for paying a fee as profit, and a limitation on the buyer’s cost liability.

 

Time and material contracts: Hybrid of both fixed price and cost reimbursable contracts, often used by consultants. Unit price contracts: Require the buyer to pay the seller a predetermined amount per unit of service. 12

3) Requesting Seller Responses Step 1 – Solicit service or product Step 2 – Pre-sales Meeting

13

3) Requesting Seller Responses Cont…  Obtaining information, quotes, bids, offers, or proposals from sellers, as appropriate.  Deciding whom to ask to do the work, sending appropriate documentation to potential sellers, and obtaining proposals or bids.  A bidders’ conference can help clarify the buyer’s expectations.

14

4) Selecting Sellers Also called source selection. Step 1 – Annotate seller responses Step 2 – Rank sellers and evaluate responses Step 3 – Negotiate Contract

15

CONTRACT NEGOTIATION AND FORMATION

16

KEY TO A SUCCESSFUL CONTRACT NEGOTIIATIION  Preparation and planning  Effective planning.  Negotiation skills.  Effective follow-up documentation.

17

PHASE 1: PRENEGOTIATION PLANNING (10-STEP PROCESS)

18

PHASE 2: CONDUCTING NEGOTIATIONS

19

PHASE 3: POST-NEGOTIATION ACTIONS

20

5) Administering the Contract Step 1 – Collect final contract information. Step 2 – Create a Contract Change Control System.

21

MAIIN TASKS FOR BUYERS AND SELLERS

 Analyze obligations, assign responsibilities, and set Performance goals.  Observe, document decisions and events, and report performance.  Identify and analyze variances.  Take corrective action.  Manage changes and disputes.  Close out contract.

22

6) Closing the Contract Step 1 – Collect final contract information Step 2 – Conduct post-contract review Step 3 – Document and archive lessons learned

23

6) Closing the Contract Con…

 Involves completing and settling contracts and resolving any open items.  The project team should:

 Determine if all work was completed correctly and satisfactorily.  Archive information for future use.

 The contract itself should include requirements for formal acceptance and closure.

24

REFERENCES  Garrett, Gregory A., 2003. World Class Contracting. CCH Incorporated, Chicago, Il.  Kirk, Dorothy. August 2000. PM Network. “Managing Expectations.”  The PMI® Compendium of Project Management Practices.

25

Purchases  The activity of buying things that a company needs, such as materials, parts, equipment, services, etc

Back 26

Acquisition  The act of getting something, especially knowledge, a skill etc.  E.g: the acquisition of new skills The company spent more than $1.5 billion on customer acquisition when going online.

Back 27

Evaluation  A spoken or written opinion about the quality, value, importance, etc.

Back 28