1. Project Procurement Management
KEC
Dhapakhel
Lalitpur
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2. Outline Procurement Management Process flow
Plan purchases and acquisition process
Enterprise environmental factor
Organizational process assets
Plan Contracting process
Standard forms
Evaluation Criteria
Request seller response process
Select seller process
Contract administration process
Contract closure process
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3. Procurement Management
Procurement means acquiring goods and/or services from an outside source.
Procurement Management is a group of processes required to purchase or to acquire the products, service or results needed from outside the project team to perform the work.
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4. Project Procurement Management Processes
Planning purchases and acquisitions: determining what to procure, when, and how Planning contracting: 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) Requesting seller responses: obtaining information, quotes, bids, offers, or proposals from sellers, as appropriate Selecting sellers: choosing from among potential suppliers through a process of evaluating potential sellers and negotiating the contract Administering the contract: managing the relationship with the selected seller Closing the contract: completing and settling each contract, including resolving any open items
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5. Project Procurement Management
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6. Procurement Management Process Flow
Need for Procurement
Procurement Planning
Make or Buy Decision
Contract Planning
Issue RFP
Request Seller Response
Receive Proposal
Selecting Seller
Award Contract
Contract Administration
Product/ Service Acquired
Contract Close-Out
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Formal Closer of Contract

7. Plan Purchases and Acquisitions Process
Identifying which project needs can best be met by using products or services outside the organization
If there is no need to buy any products or services from outside the organization, then there is no need to perform any of the other procurement management processes
Plan Purchases and Acquisitions process is a part of “Project Planning Phases”.
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8. Plan Purchases and Acquisitions Overview
INPUTS
TOOL & TECHNIQUES
OUTPUT
Enterprise Environmental Factors
Organizational Process Assets
WBS
Project Management Plan
Make or Buy Analysis
Expert Judgments
Contract Types
Procurement Management Plan
Contract Statement of Work
Make or Buy Decisions
Requested Changes
Enterprise Environmental Factors that are considered include the conditions of the marketplace and what products, services and results are available in the marketplace, from whom and under what terms and conditions.
Organizational Process Assets provide the existing formal and informal procurement related policies, procedures, guidelines, and management systems that are considered in developing the procurement management plan and selecting the contract types to be used.
Procurement history of the organization- stories of success, failure and straggle.
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9. Make or Buy Checklist Reasons to Make Reasons to Buy Cheaper to make
Experience making it
Idle production facility available
Compatible and fits in production line
Part is proprietary
Not dependent on supplier
Fragile part-> $ packing
High transportation costs
Reasons to Buy
Cheaper to buy
No production facilities
Avoid fluctuating / Seasonal demand
Inexperience with making process
Available suppliers
Maintain existing supplier
Higher reliability and quality
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10. Tools and Techniques for Planning Purchases and Acquisitions
Make-or-buy analysis: general management technique used to determine whether an organization should make or perform a particular product or service inside the organization or buy from someone else
Often involves financial analysis
Experts, both internal and external, can provide valuable inputs in procurement decisions
Expert Judgment: Expert purchasing judgment can be used to develop or modify the criteria that will be used to evaluate offers or proposals made by sellers.
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11. Contract Types
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 contracts: involve payment to the seller for direct and indirect costs
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
A single contract can actually include all four of these categories, if it makes sense for that particular procurement
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12. Cost Reimbursable Contracts
Cost plus incentive fee (CPIF): the buyer pays the supplier for allowable performance costs plus a predetermined fee and an incentive bonus
Cost plus fixed fee (CPFF): the buyer pays the supplier for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs
Cost plus percentage of costs (CPPC): the buyer pays the supplier for allowable performance costs plus a predetermined percentage based on total costs
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13. Procurement Management Plan
Describes how the procurement processes will be managed, from developing documentation for making outside purchases or acquisitions to contract closure
Content varies based on project needs
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14. Contract Statement of Work (SOW)
A statement of work is a description of the work required for the procurement
If a SOW is used as part of a contract to describe only the work required for that particular contract, it is called a contract statement of work
A SOW is a type of scope statement
A good SOW gives bidders a better understanding of the buyer’s expectations
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15. Plan Contracting Process
Involves preparing several documents needed for potential sellers to prepare their responses and determining the evaluation criteria for the contract award.
Plan Contracting Process is a part of “Project Planning Phases”.
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
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16. Plan Contracting Overview
INPUTS
TOOL & TECHNIQUES
OUTPUT
Procurement Management Plan
Contract Statement of Work
Make or Buy Decisions
Project Management Plan
Standard Forms
Expert Judgments
Procurement Documents
Evaluation Criteria
Update Contract Statement of Work
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17. Tool & Techniques for Plan Contracting Process
Standard forms include standard contracts, standard descriptions of procurement items, non-disclosure agreements, proposal evaluation criteria checklists or standardized versions of all parts of the needed bid documents.
Evaluation Criteria are developed and used to rate or score proposals. Evaluation criteria are often included as part of the procurement documents.
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18. Requesting Seller Responses Process
The Request Seller Response process obtains responses, such as bids and proposals from prospective sellers on how project requirements can be met.
Organizations can advertise to procure goods and services in several ways
Approaching the preferred vendor
Approaching several potential vendors
Advertising to anyone interested
A bidders’ conference can help clarify the buyer’s expectations
Request Seller Responses process is a part of “Project Planning Phase”
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19. Requesting Seller Responses Overview
INPUTS
TOOL & TECHNIQUES
OUTPUT
Organizational Process Assets
Procurement Management Plan
Procurement Documents
Bidder Conference
Advertising
Develop Qualified Seller List
Qualified Seller List
Procurement Document Package
Proposals
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20. Objective: to ensure equal opportunity for all prospective sellers
Bidder Conference are meetings with prospective sellers prior to preparation of a bid or proposal. They are used to ensure that all prospective sellers have a clear, common understanding of the procurement.
Objective: to ensure equal opportunity for all prospective sellers
Treat people with consideration and respect
Understand what motivates them
Communicate carefully with them
Advertising: Existing lists of potential sellers can often be expanded by placing advertisements in general circulation publications such as newspapers or in specialty publications such as professional journals.
While designing and producing as advertisement, advertisement writing style can be defined in order to achieve the following objectives:
Get attention
Gain Interest
Create Desire
Get Action
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21. Select Sellers Process
Organizations often do an initial evaluation of all proposals and bids and then develop a short list of potential sellers for further evaluation
Sellers on the short list often prepare a best and final offer (BAFO)
Final output is a contract signed by the buyer and the selected seller
Select Sellers Process is a part of “Project Execution Phase”
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22. Select Seller Process Overview
INPUTS
TOOL & TECHNIQUES
OUTPUT
Organizational Process Assets
Procurement Management Plan
Evaluation Criteria
Procurement Document Package
Proposals
Qualified Seller List
Project Management Plan
Weighting System
Independent Estimates
Screening System
Contract Negotiation
Seller Rating System
Expert Judgment
Proposal Evaluation Technique
Selected Seller
Contract
Contract Management Plan
Resource Availability
Update Procurement Management Plan
Requested Changes
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23. Five Stages of Contract Negotiation:
Contract Negotiation clarifies the structure and requirements of the contract so that mutual agreement can be reached prior to singing the contract.
Five Stages of Contract Negotiation:
Protocol- Get to know each other
Probing- Each party identifies issues of concern
Scratch bargaining- Bargaining occurs, concessions are made
Closure- Two positions summed up and final concessions made
Agreement- Both parties have identical understanding of agreements
Contract is awarded to each selected seller. It is the key output of the select seller process.
Project contracts should be treated as “two-way” contracts.
The content of the seller's proposal typically become the basis for the project work contract.
The contract can be in the form of a complex document or a simple purchase order.
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24. Contract Administration Process
Ensures that the seller’s performance meets contractual requirements
Contracts are legal relationships, so it is important that legal and contracting professionals be involved in writing and administering contracts
It is critical that project managers and team members watch for constructive change orders, which are oral or written acts or omissions by someone with actual or apparent authority that can be construed to have the same effect as a written change order
Contract Administration process is a part of “Project Controlling Phase”.
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25. Contract Administration Process Overview
INPUTS
TOOL & TECHNIQUES
OUTPUT
Contract Agreement
Contract Management Plan
Selected Seller
Performance Reports
Approved Change Requests
Work Performance Info
Contract Change Control System
Buyer Conducted Performance Review
Inspections and Audits
Performance Reporting
Payment System
Claims Administration
Record Management System
Information Technology
Contract Documentation
Requested changes
Recommended Corrective Actions
Updated Organizational Process Assets
Updated Procurement Management Plan
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26. Contract Change Control System
Changes to any part of the project need to be reviewed, approved, and documented by the same people in the same way that the original part of the plan was approved
Evaluation of any change should include an impact analysis; how will the change affect the scope, time, cost, and quality of the goods or services being provided?
Changes must be documented in writing; project team members should also document all important meetings and telephone phone calls
Project managers and teams should stay closely involved to make sure the new system will meet business needs and work in an operational environment
Have backup plans
Use tools and techniques, such as a contract change control system, buyer-conducted performance reviews, inspections and audits, and so on
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27. Contract Closure Process
Involves completing and settling contracts and resolving any open items
The project team should:
Determine if all work was completed correctly and satisfactorily
Update records to reflect final results
Archive information for future use
The contract itself should include requirements for formal acceptance and closure
Contract Closure process is a part of “ Project Closing Phase”.
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28. Contract Closure Process Overview
INPUTS
TOOL & TECHNIQUES
OUTPUT
Procurement Management Plan
Contract Management Plan
Contract Documentation
Contract Closure Procedure
Procurement Audits
Record Management System
Closed Contracts
Updated Organizational Process Assets
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29. Procurement Audit is to identify successes and failures that warrant recognition in the preparation or administration of other procurement contracts on the project.
Closed Contracts: The buyer, usually through its authorized contract administrator, provides the seller with formal written notice that the contract has been completed. Requirements for formal contract closure are usually defined in the terms of the contract, and would be included in the contract management plan.
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30. Thank You
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