© 2008 Prentice Hall10-1 Introduction to Project Management Chapter 10 Managing Project Procurement Information Systems Project Management: A Process and Team Approach, 1e Fuller/Valacich/George

© 2008 Prentice Hall10-2 Two Perspectives Choices for information systems development Procurement process

© 2008 Prentice Hall10-3 Systems Development History First wave –In-house information systems development –More art than science –Limited talent pool –Most systems were custom-designed in-house –Slow and costly Second wave –Art became a science through better defined processes (planning and documentation) –Technology assisted in development effort –Off-the-shelf software becomes an option Third wave –Need for faster development –Move to agile methodologies –Software development acquired outside the organization

© 2008 Prentice Hall10-4 Sources of Application Software

© 2008 Prentice Hall10-5 Five External Sources for Software Development 1.Information Technology Services Firms Lack of internal expertise Package software solution not feasible Service firm may also host hardware IBM/Computer Sciences Corp./Accenture

© 2008 Prentice Hall Packaged Software Producers General to niche software package development Focus on business functions Hardware platform varies Office 2007/MS-Project/Quickbooks/Turnkey Microsoft/Oracle/SAP Five External Sources for Software Development (cont.)

© 2008 Prentice Hall Enterprise Solutions Software or Enterprise Resource Planning (ERP) Integrated modules Business process focus Single data repository Expensive and complex solution Sometimes required organization to change their business processes SAP/Oracle Five External Sources for Software Development (cont.)

© 2008 Prentice Hall On-Demand Computing Providers Rent or license software “Pay as you go” Could be the future trend IBM/HP Five External Sources for Software Development (cont.)

© 2008 Prentice Hall Open Source Software Software for free Maintained by independent members of the computing community Linux/mySQL Five External Sources for Software Development (cont.)

© 2008 Prentice Hall10-10 Outsourcing Outside organization develops or runs a computer application for another company –Off or on-site –Rationale Economies of scale Access to larger talent base Enables company to better focus on core business Faster delivery Internal resources can be freed for other tasks Increased process efficiencies Potential for increased revenue

© 2008 Prentice Hall10-11 Outsourcing to Offshore Security issues Potential language/legal/cultural barriers 24/7 development Requires close monitoring

© 2008 Prentice Hall10-12 Project Procurement Management Processes (PMBOK) 1.Plan Purchases and Acquisitions 2.Plan Contracting 3.Request Seller Responses 4.Select Sellers 5.Contract Administration 6.Contract Closure

© 2008 Prentice Hall Plan Purchases and Acquisitions Determination of which projects needs can best be met by obtaining services or products from outside organizations

© 2008 Prentice Hall10-14 Plan Purchases and Acquisitions Inputs Enterprise environmental factors –Assessment of available products and services; key providers; and any acquisition requirements Organizational process assets –Organizational policies/procedures/guidelines governing procurement Project scope statement –Boundaries of the project (requirements, constraints and assumptions) WBS and WBS dictionary –Specific work; descriptions; and deliverables Project management plan

© 2008 Prentice Hall10-15 Plan Purchases and Acquisitions Techniques Make or buy Expert judgment

© 2008 Prentice Hall10-16 Contract Types Fixed-price –Bound by the price quoted –Less problematic when product or service is well- defined Cost-reimbursable –Reimbursement of costs + profit % Time-and-materials –Hourly rate billing

© 2008 Prentice Hall10-17 Plan Purchases and Acquisitions Outputs Procurement management plan –Who prepares the evaluation criteria –Plan for multiple vendor management –Acquisition of procurement documents –Procedures for coordinating the procurement process with other project tasks Statement of Work (SOW) –Document detailing product or service requested from vendor

© 2008 Prentice Hall10-18 Service Contracts Incident-based –The organization is charged per visit by the service contractor Subscription-oriented –A single fee is charged by the service contractor for unlimited support

© 2008 Prentice Hall Plan Contracting Creation of documents required to support the Request Seller Responses and Select Sellers processes

© 2008 Prentice Hall10-20 Plan Contracting – Inputs Statement of Work Make-or-by decisions Procurement management plan

© 2008 Prentice Hall10-21 Plan Contracting – Tools & Techniques Standard forms/templates Expert judgment

© 2008 Prentice Hall10-22 Plan Contracting – Outputs Request for Proposal (RFP) –Document provided to vendors to ask them to propose a solution to a specific problem related to a specific project Evaluation criteria –Used to rate responses from vendors to RFPs Statement of Work updates

© 2008 Prentice Hall10-23 RFP Contents Project overview and administrative information section Technical requirements section Management requirements section Supplier qualifications and references section Suppliers’ section Pricing section Contract and license agreement section Appendices

© 2008 Prentice Hall Request Seller Responses The process of obtaining responses to procurement documents produced during Plan Contracting

© 2008 Prentice Hall10-25 Request Seller Responses – Inputs Procurement documents –RFP Organizational process assets –List of qualified sellers Procurement management plan

© 2008 Prentice Hall10-26 Request Seller Responses – Outputs List of qualified vendors requested to submit a RFP Formal procurement documents Proposals

© 2008 Prentice Hall Select Sellers Contract with a vendor to supply the desired product or service

© 2008 Prentice Hall10-28 Select Sellers – Inputs Organizational process assets Procurement management plan Evaluation criteria Procurement document package Qualified seller list Project management plan

© 2008 Prentice Hall10-29 Select Sellers – Tools & Techniques Weighing system Independent estimates Screening system Contract negotiations Seller rating systems Expert judgment

© 2008 Prentice Hall10-30 Weighing System Method to quantitatively compare vendor proposals Company AlphaCompany BetaCompany Gamma WeightRatingScoreRatingScoreRatingScore Price Vendor technical ability Solution functionality Vendor experience Vendor financial resources PMI certified project manager TOTAL

© 2008 Prentice Hall10-31 Independent Estimates –Organization determines what they believe the estimate should cost Screening System –Proposals are rejected if performance criteria do not meet a minimum value/level Contract Negotiation –Discussions between the buyer and vendor in order to reach agreement on contract structure and requirements prior to signing Weighing System (cont.)

© 2008 Prentice Hall10-32 Seller Rating System –Historical data on vendor delivery and past performance; quality ratings; and contractual compliance Expert Judgment –Those either inside or outside the organization with expertise in the specific domain of the proposed contract Weighing System (cont.)

© 2008 Prentice Hall Contract Administration Procedures that enable the organization to compare what was contracted for and what has been delivered

© 2008 Prentice Hall10-34 Contract Administration – Inputs Selected sellers Contract management plan Performance reports Work performance information Approved change requests –Contract terms –Descriptions of work

© 2008 Prentice Hall10-35 Contract Administration – Tools & Techniques Contract change control Buyer-conducted performance reviews Inspections and audits Performance reporting Payment system Claims administration Records management systems Information technology

© 2008 Prentice Hall10-36 Contract change control –Agreed upon process through which the contract can be modified Buyer-conducted performance reviews –Structured reviews of the vendor’s progress in fulfilling contract terms Inspections and audits –Procedures to determine any shortcomings in vendor’s work processes or deliverables Performance reporting –Progress reports on vendor/supplier contractual obligations Contract Administration – Tools & Techniques (cont.)

© 2008 Prentice Hall10-37 Payment system –Procedures to pay the vendor for work performed Claims administration –Process for handling disputes between buyer and vendor on work performed and resulting value Records management systems –Automated record-keeping system to manage contract documentation and results Information technology –Supports contract administrations operations Contract Administration – Tools & Techniques (cont.)

© 2008 Prentice Hall10-38 Contract Administration – Outputs Contract documentation Organizational process asset updates Recommended correction actions

© 2008 Prentice Hall Contract Closure Verification that all products and services contracted for are acceptable

© 2008 Prentice Hall10-40 Contract Closure – Inputs Procurement management plan Contract management plan Contract documentation of work performed Contract closure procedure

© 2008 Prentice Hall10-41 Contract Closure – Tools & Techniques Procurement audit –A structured review of the procurement process from the Plan Purchases and Acquisition process through the Contract Administration process; including the records management system

© 2008 Prentice Hall10-42 Contract Closure – Outputs Closed contract –Notification to vendor the contract has been completed Updates to organizational process assets –Contract file –Deliverable acceptance –Lessons learned documentation

© 2008 Prentice Hall10-43 Questions?