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Includes the processes to purchase or acquire the products, services, or results needed from outside the project team to perform the work. The organization can be either the buyer or seller
Includes the contract management and change control processes required to administer contracts or purchase orders issued by authorized project team members
Most large organizations have procurement departments that are ultimately responsible for soliciting, negotiating, administering and closing contracts
Also includes administering any contract issued by an outside organization (the buyer) that is acquiring the project from the performing organization (the seller), and administering contractual obligations placed on the project team by the contract
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Project Management Professionals
Hot Topics & Challenges – 4 procurement management
• Is the process of documenting project purchasing decisions, specifying the approach, and identifying potential sellers. It identifies those project needs which can best be met by acquiring products, services, or results outside of the project organization, versus which can be accomplished by the project team
Procurement Management Plan: Describes how project procurements will be managed, including
– What service, product or result will be produced.
– Types of contracts to be used.
– Who will prepare independent estimates and when.
– What procurements the project team may make on its own.
– Which standard procurement documents will be used.
– List prequalified sellers if there is any.
– How the sellers will be selected.
– How sellers’ performance will be measured.
– How procurement will be coordinated with other project aspects (scheduling, performance reporting).
– Assumptions and constraints related to procurements.
Procurement Statement of Work: Describes the subject item in sufficient detail to allow prospective sellers to determine offerings (bids, proposals, etc.)
Plan Procurement Management: Outputs Procurement Documents: Used to solicit proposals from prospective sellers. Well-
designed procurement documents help in easier comparison of seller responses, more complete proposals, more accurate pricing and decrease in the amount of changes in the project.
– Request For Proposal (RFP): Buyer’s request to all potential sellers for the details of how work will be performed. May include specific questions regarding performance of work and aspects of the seller’s business (e.g. service capabilities, experience in this work, warranties, financing, etc. as well as
– Background information about the project goal, objective etc from buyer’s prospective.
– Procedure for applying.
– Guidelines for preparation of the response.
– Exact format of response required.
– Evaluation criteria that the buyer will use to evaluate the sellers.
– Pricing forms.
– Procurement Statement of Work.
– Terms and conditions.
– Invitation For Bid ( IFB or Request for Bid, RFB): Request from buyer for all potential sellers to submit a total price bid for work to be performed.
– Request for Quotation (RFQ): Request a price quote per item, hour, foot or other unit of measure.
– There is only one seller who can provide the goods or services
– A seller holds a patent for the item you need
– Other mechanisms exist to ensure that the seller’s price is
reasonable
Two Types Noncompetitive Forms of Procurement
– Single Source (Preferred Seller)
– Sole Source (only seller)
Exercise: What type of issues might occur in term of scope, cost, quality, schedule, customer satisfaction and risk etc in a noncompetitive procurement that would not be as significant in a competitive environment?
Letter of Intent: A letter of intent is a letter expressing the intention of the buyer to hire the seller.
Bidder Conferences (Also called contractor conference, vendor conference, pre-bid conference)
– Intended to assure all sellers have a clear, common understanding of the procurement (technical requirements, contractual requirements, etc.)
– Can be THE key to making sure the pricing in the seller’s response matches the work that needs to be done
– Answers to questions may result in amendments to contract documents
During a Bidding Conference the project manager must be on the alert so that:
– There is no collusion among sellers and / or buying agents
– Sellers don’t save questions for later private meetings in order to gain a competitive advantage
– All questions are submitted in writing and issued to sellers as an addendum to the procurement document so all sellers respond to the same scope of work
Proposal Evaluation Techniques: Many different techniques are used to evaluate proposals; all will use some expert judgment and some form of evaluation criteria.
– Evaluation criteria includes objective and/or subjective components and usually includes assigned predefined weightings.
– Proposal evaluation usually includes input from multiple reviewers who review input that is obtained during the Select Sellers process. Any significant differences in scoring are resolved at this point.
– An overall weighting system that determines the total weighted score for each proposal.
– Evaluation techniques can also include a screening system and utilize data from a seller rating system.
Weighting System: A method for quantifying qualitative data to minimize the effects of personal prejudice. Usually follows these steps:
– These estimates may help judge whether the SOW was adequate in its description or the Seller fully understood or responded fully to the SOW
Expert Judgment
– Used to evaluate proposals
– Proposals are evaluated by multi-discipline review team with expertise in each of the areas covered by the procurement documents and proposed contract.
Advertising
– Seller lists may be expanded by placing advertisements in general circulation publications such as newspapers or professional journals
Selected Sellers: The selected sellers are those who are in a competitive range based on the outcome of the proposal or bid evaluation and have been negotiated all the procurement related items, terms and conditions etc with.
Agreements: An agreement which is also called an understanding, a contract, a subcontract, or a purchase order is a legally binding, formal agreement between two parties which obligates the seller to provide the specified product, service or result and obligates the buyer to compensate for it.
Resource Calendars: A document containing the quantity and availability of resources and the dates each specific resource can be available or idle.
Change Requests: Changes Requested including changes to the project management plan and subsidiary plans/components.
Project Management Plan Updates: Cost, scope and schedule baseline in addition to procurement management plan can be updated.
Project Document Updates: Requirement document, requirement traceability matrix and risk register along with other relevant documents may need to be updated.