Block 7 Project Procurement Management

► The processes required to acquire goods and services from outside the organization ► Purchasing  Procurement ► Common reasons for outsourcing: *Cost reduction *Focus on core business activities *Staffing flexibility *Increased accountability

Key processes and activities ► Procurement Planning ► Solicitation Planning ► Solicitation ► Source Selection ► Contract Administration ► Contract Close-out

Procurement Planning ► Do we outsource? ► How do we outsource? ► What to outsource? ► How much to outsource? ► When to procure?

Procurement Planning Tools & Techniques ► Make-or-buy analysis Types of Contracts ► Fixed price or lump sum contracts ► Cost reimbursable contracts ► Unit price contracts

Types of Contracts ► Fixed price or Lump sum: * Fixed total price for well defined product * Vendor assumes majority of risks * More common for procurements of products ► Unit price contracts: * Amount per unit of service * Total contract value = f (no. of units required) * More common with IT / SW development

Types of Contracts ► Cost reimbursable contracts: * Payment to vendor for direct & indirect actual costs * Indirect costs (e.g. over heads) as % of actual costs * Incentives for meeting deadlines or exceeding targets * Buyer assumes more risk * Types of reimbursable contracts: Cost plus incentive fee (CPIF) (lowest risk to buyer) Cost plus fixed fee (CPFF) Cost plus percentage of costs (CPPC) (highest risk to buyer)

Solicitation Planning ► Requests for Proposals (RFPs) Document used to solicit proposals from vendors Document used to solicit proposals from vendors ► Invitations to Quote (ITQs) Invitations to quote prices only for products or services already defined. Invitations to quote prices only for products or services already defined. Solicitation documents must be clearly written to facilitate accurate and complete responses from vendors Solicitation documents must be clearly written to facilitate accurate and complete responses from vendors

► Solicitation  Involves obtaining proposals or bids from prospective vendors ► Source Selection  Involves evaluating bidders’ proposals, negotiating and awarding contract ► Contract Administration  Entails managing the relationship with vendor to ensure meeting of the contract details ► Contract Close-out  Completion and settlement of contract and resolution of any open issues, verification that all work is complete, archiving information etc.