1Project Procurement & Contract Administration Jiwei Ma Project ManagementProject Procurement&Contract AdministrationJiwei Ma
2Content Project procurement concept Planning of project procurement Source selection and solicitationBid evaluation methodsContract administrationConstruction project procurement
3Project Procurement Concept DefinitionProject procurement and operation procurementProject procurement categoriesTypes of contractBasic procedure of project procurement
4Project Procurement Concept DefinitionProject management tasks to deal with part of the project's scope of work which will be bought from another organization, sometimes the result of company teaming arrangements, but most typically resulting from contracting or subcontracting project scope.
5Project Procurement Concept Project procurement and operation procurementBoth purchase products and services from another organizationUsually through solicitation and competition bid or negotiationUsually under the format of contract or mutual agreementSometimes form stable relationships, such as alliance or partneringThe process needs to be monitored, managed, and finally audited
6Project Procurement Concept Operation procurementContinuous on-going production environmentMature organization with stabilized positionLong-term cooperationMostly bulk quantity purchaseMinimized nonstandard productProject procurementNon-repetitive, progressive environmentTemporarily established organizationShort-term cooperationMostly low-volume quantityUsually customized product or service
7Project Procurement Concept Project procurement categoriesMaterials or productsEquipment or toolsLaborsProfessional servicesEntirely engineered system
8Project Procurement Concept Types of contractLump sum contractCustomized product or complicated systemUnit price contractCommodities or standard services without predefined quantityCost + fee contractProfessional services or labors
9Project Procurement Concept Basic procedure of project procurementDefine the project scope: produce or procureDraft of project procurement planSource selection and solicitationProposal evaluation and negotiationSupplier selectionMutual agreement or signing of contractContract administrationClose out of the contract
10Planning of Project Procurement Basic rulesClearly defined scope is the basis of procurementDifferent categories of procurement need different types of procedures and methodsProcurement itself costs time and moneyItems on critical path and long-lead items are critical to project implementationLong-term relation with supplier makes differenceEarly supplier involvement is important to project’s successVariations to contract might contain serious impact on project
11Planning of Project Procurement ProcedureDefine the scope of procurementCategorize and list procurement itemsSelect contract type, accordinglyDetermine principles of source selectionDetermine solicitation methods, respectivelyDetermine proposal evaluation method, respectivelyDefine contract administration responsibilities and tasksDefine contract closeout procedures
12Planning of Project Procurement Content of project procurement planScope of procurementProcurement responsibilities of project team membersProcedure of procurementSource selection and solicitationEvaluation method or criteriaTypes of contracts or agreementsMonitoring and managing of procurement contractCloseout of contract
15Source Selection and Solicitation Based on selection procedureOpenInvitedExclusiveBased on supplier categoryDomestic, joint venture or foreign companyCompany or individualBased on supplier identificationVendor or service providerDistributor or dealer/agent
16Source Selection and Solicitation MethodsPublic announcement (media)Selected invitation (with prequalification)Selected invitation (without prequalification)Direct negotiation (long-term partners)PrinciplesSelection of the solicitation methods: characteristics of products or servicesPublic funded project: “selective” and “non-discriminative” solicitation
17Bid Evaluation Methods By evaluation criteriaLow priceCost effectivenessPerformanceBy procedureCompetitive bidNegotiationTechnical feasibility evaluation + price selectionBy executive bodyProcurement management personnelThird party or consulting personnel
18Contract Administration Overall responsibilitiesPreparation and negotiation of contractMonitoring and managing contractManaging supplier communicationManaging supplier relationshipManaging procurement change
19Contract Administration Key tasksSet up contract administration team and working procedurePlan for strategies and tactics to deal with suppliers based on their contract typesIdentify and analyze risks associated with various types of contracts and plan for mitigation strategiesDevelop and enforce key performance indicatorsEstablish supplier reporting requirements
20Contract Administration Key tasksMonitor contract execution progress and find any variations to contract in a timely mannerManage variations to contracts, including cost, quality, scope, delivery and any breaches of terms and conditionsMake payment schedule and monitor payment procedureDeal with claims and find appropriate resolutionManage contract closeout and final auditingSelect historical procurement file for documentation
21Construction Project Procurement OverviewScope of procurementProcurement systemProcurement method
22Construction Project Process Overview Design PreparationDesignConstructionStartupWarranteeDecision MakingProject ProposalFeasibility StudyDesign SpecificationPreliminary DesignDesign DevelopmentConstruction DocumentAcceptanceTIMEDecision MakingImplementatio nBusiness AnalysisTechnical DescriptionTechnical and implementation planningInput of labor, materials, equipment, services, etc.Testing, inspection, evaluation, etc.Accounting, resolution of claims, etc.
23Construction Project Procurement Scope of procurementProfessional servicesFinancial, technical feasibility analysis, project management, technical consulting, geological survey, design, inspection, testing, legal services, etc.Engineered systemEntire system, part of a system, etc.MaterialBulk materials, special products, etcEquipment leasingEquipment, tools, etc.Labor supplySkilled, non-skilled, etc.
24Construction Project Procurement Procurement systemDesigner led competitive tenderDesigner led construction works managed for feePackage dealProject manager/client’s representative-led
25Construction Procurement System Construction ProjectProcurement SystemDesigner LedCompetition TenderDesigner Led Construction Managed for a FeePackageDealProject Manager/Owner’s Representative LedSeparate ContractsGeneral ContractTurnkeyDesign-BuildManagement ContractingConstruction Management
26Designer Led Competitive Tender - Separate ContractsOwnerDesignerContractor 1Contractor 2Contractor mSupplier 1Supplier 2Supplier n
27Designer Led Competitive Tender - General ContractorOwnerGeneral ContractorDesignerSupplierSubcontractor*Subcontractor*Owner outsourced tasks
29Designer Led Construction Management for a Fee - Managing Contractor/Construction ManagementOwnerMC/CM**DesignerSupplierSubcontractorSubcontractor 1Subcontractor 2Subcontractor mSupplier 1Supplier 2Supplier n*Owner outsourced tasks
33Construction Project Procurement Procurement methodCompetitive bidPerformance based procurement
34Construction Project Procurement Competitive bidThe contractor is selected on the basis of competitionDetailed design has to be finishedLow bidder preferred, in most casesUsually adopted for the selection of contractor, subcontractor, material supplier, equipment vendor and special service providerNot applicable for professional services, such as design, engineering, consulting, etc.Not applicable for laborsMandatory for public funded project in some countries
36Competitive Bid Advantages Disadvantages Lowest bid price selected Simplified bid evaluation methodOpen and justified contract award procedureDisadvantagesPossible mistakes and missed items due to hasty bid preparationContradictory view on quality standard between owner and contractorQuality of the work controlled only by project design and specificationPotential risks of project not identifiedQualification of the contractor not evaluatedProject experiences not used for future reference
37Construction Project Procurement Performance based procurementThe contractor is selected on the combined basis of contractor’s performance and owner’s expectationContractor’s overall performance level has been evaluated based on the past performance and ability to minimize the project risksOwner’s priority of objectives or perception of risks has been taken into account of contractor selectionFinal output of contractor’s performance and owner’s satisfaction will be rated and utilized for future reference
38Performance Based Procurement ProcedureCollection of the contractors’ past performance informationRequest for and rating of risk assessment plan with a final shortlistInterview with project team and the key personnel with prioritized listPre-award negotiation and contractor selectionReporting and rating of contractor’s performance in the project
39Performance Based Procurement Procedure PastPerformanceInformationRisk Assessment Plan & Short ListInterview &PrioritizationPre-AwardPeriodConstructionReporting & FinalRatingTimeNumber of Competitive Firms
40Performance Based Procurement Procedure PastPerformanceInformationRisk Assessment Plan & Short ListInterview &PrioritizationPre-AwardPeriodConstructionReporting & FinalRatingNumber of Competitive FirmsTime
41Past Performance Information Past Performance Information will be collected on all critical team components, which may include:The ContractorCritical Individuals (Project Manager, Site Superintendent)Critical Subcontractors (Mechanical, Electrical, Roofing, etc)The performance of ALL components will impact the overall value of the performance level.The team components cannot be changed/modified after the proposal is submitted.
43Performance Based Procurement Procedure PastPerformanceInformationRisk Assessment Plan & Short ListInterview &PrioritizationPre-AwardPeriodConstructionReporting & FinalRatingNumber of Competitive FirmsTime
44Risk Assessment Plan Contents The RA Plan should clearly address the following items:List and prioritize major risk items (areas that may cause the project to not be completed on time, not finished within budget, generate any change orders, or may be a source of dissatisfaction for the owner).Explain how the builder will avoid / minimize the risk.Provide a general project schedule documenting general milestones.Propose any options that could increase the value (expectation or quality) of their work.
45Short ListAll of the information collected will be inputted into a evaluation modelPast performance information (all components)RA Plan ratingThe model will prioritize the bidders based on the information and predetermined weightsThe Owner will use the information to identify the firms to be shortlisted
46Performance Based Procurement Procedure PastPerformanceInformationRisk Assessment Plan & Short ListInterview &PrioritizationPre-AwardPeriodConstructionReporting & FinalRatingNumber of Competitive FirmsTime
47Interviews The Owner will interview all key personnel. They will be interviewed separately and then as a group.No substitutions will be allowed after proposals are submittedInterview period is used to identify how well the personnel understand the project and potential risks.
48Selecting the Best-Value The interview score (along with the RA Plan Score and Past Performance Information), will be inputted into a final evaluation modelThe owner will review and analyze the prioritization in the modelThe owner may select the highest-ranked proposal, or another option based on perceived riskThe best-valued firm will be invited to the pre-award meeting
49Performance Based Procurement Procedure PastPerformanceInformationRisk Assessment Plan & Short ListInterview &PrioritizationPre-AwardPeriodConstructionReporting & FinalRatingNumber of Competitive FirmsTime
50Objective of Pre-Award Period Review all identified risks and develop a plan to minimize all risks.Provide a detailed project schedule.Coordinate the requirements in detail with all critical elements and client.Work out any conflicts.Answer any questions by client.Provide their QC/QA procedures (quality measurements, housekeeping, etc).Identify what they will do if any problems arise.
51Pre Award MeetingThe firm will be responsible for identifying how they will minimize all risksThe firm will provide the QA/QC documentIf the best-valued firm cannot minimize all of the identified risks (without modifying their time proposal or exceeding the budget), the bidder may withdrawal without penalty
52Performance Based Procurement Procedure PastPerformanceInformationRisk Assessment Plan & Short ListInterview &PrioritizationPre-AwardPeriodConstructionReporting & FinalRatingNumber of Competitive FirmsTime
53Weekly Reporting & Post Construction Rating Contractor will document relative information on a weekly basisAccuracy and timeliness of contractor’s performance will be factored into the final close out rating of the firmThe owner will evaluate the performance of the project upon completionThe rating will be based on completing the project with no change orders ($$$ and time), and overall qualityAll team components will receive the same ratingThe rating will be incorporated into the system and used as reference for future projects