Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Chapter 11 Procurement Management Embedding value into the project

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Chapter overview 1.Planning procurement management 2.Separating the scope of work from the specification 3.Selecting potential suppliers 4.Contractual considerations 5.Conducting procurement activities 6.Controlling procurement activities 7.Closing out procurement activities 2

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Planning procurement activities  Processes necessary to purchase or acquire products, services or results needed from outside the project team  Process-based function driven by a particular department or local division seeking to get possession of something that solves an operational issue  Value-adding function that focuses on the efficient attainment of goods, services, or results that deliver a number of very specific and measured benefits to the project 3

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Scope or work, or a specification  Statement of work (SOW)—defines the component of work that will be included in the project; in other words, what the project organisation wants. Put simply, a statement of work identifies what is required (without specifying how).  Specification—defines the technical detail of the work to be performed. Put simply, the specification identifies how it must behaviour or function 4

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Selecting potential suppliers Clear, complete, accurate, applicable and user-friendly solicitation documents (and nominated response templates) will ensure suppliers can address all the criteria required in their proposals. o Understanding of the requirement o Technical capability o Management capability o Financial capability o Resource capability o Price o Past performance o Warranty o Legislation compliance o References 5

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Contractual considerations  offer (capable of being accepted)  acceptance (capable of being communicated)  consideration (provision of something valuable in return)  intention (both parties agree to be bound legally)  mutuality (neither party is disadvantaged)  capacity (both parties are not under any duress)  legality (it is not an illegal activity) 6

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Conducting procurement activities  Obtaining seller responses, selecting a seller and awarding a contract o Evaluating responses o Additional negotiations (where required) o Awarding the contract a mutually binding agreement between two or more parties prescribing what is expected from one party (perhaps performance) in return for something from the other party (perhaps payment) o Triggers contract administration phase 7

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Controlling procurement activities The contract manager, administrator, superintendent or project manager is responsible for contractual relationships and integrating project management processes throughout the project lifecycle – o directing and managing authorised work o inspecting and verifying completed work prior to payment o ensuring all variations are properly assessed and approved o confirming rectification of all corrective work o maintaining accurate historical records. 8

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Closing out procurement activities  reviewing all the procurement documentation  updating and archiving all appropriate records  financial reconciliations  analysing all requested and approved contract changes  completion of the agreed inspection and testing procedures  reporting and rectification of any defects and/or damages  auditing the entire procurement process  written confirmation that the project (or at least the supplier’s involvement) has been completed 9

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Review questions 1.What role and benefit does procurement management planning bring to any project? 2.What are examples of objective selection criteria for evaluating potential seller proposals? 3.What are some of the challenges in managing project contracts? 4.What general and/or supplementary conditions of contract would you seek to include in most contracts? 5.How can a contract be terminated? 10

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Group learning activities  Discuss how procurement can help and hinder project planning and execution  Investigate the key differences between a scope of work and a specification  Brainstorm different ways to attract potential suppliers  Compare and contrast different types of contracts  Discuss the notion that all claims should cite facts, clause, proof and amount  Identify why contractual issues arise and how they can be resolved 11

© 2014 Hartley, Project Management: Integrating Strategy, Operations and Change, 3e Tilde Publishing Assessment options  Write a scope of work and a specification for work required by a project  Develop a supplier evaluation matrix to rate and score responses  Write a report comparing and contrasting the three contracts types cited in Table 11.3  Create a progress claim template that requires facts, clause, proof and amount information  Short answer questions  Multiple choice questions 12