Procurement Knowledge Area
Project Procurement Management includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team.
Project Procurement Management includes the contract management and change control processes.
Contracts are legal documents between a buyer and a seller.
A contract represents a mutually binding agreement that obligates the seller to provide something of value and obligates the buyer to provide monetary or other valuable compensation.
An agreement can be simple or complex, and may reflect the simplicity or complexity of the deliverables or required effort.
Contracts are a method of transferring risk for a fee (a strategy used in Risk Response Planning).
A complex project may involve managing multiple contracts or subcontracts simultaneously or in sequence.
Fixed-price contracts involve setting a fixed total price for a defined product, service, or result to be provided.
In a Firm Fixed Price Contracts (FFP) the price for goods is set at the outset and not subject to change unless the scope of work changes.
The most commonly used contract type is the FFP.
Fixed Price Incentive Fee Contracts (FPIF) gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed upon metrics.
Fixed Price with Economic Price Adjustment Contracts (FP-EPA) is used whenever the seller’s performance period spans a considerable period of years, as is desired with many long-term relationships Project.
Cost-reimbursable contracts involve payments (cost reimbursements) to the seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit.
In a Cost Plus Fixed Fee Contracts (CPFF) the seller is reimbursed for all allowable costs for performing the contract work, and receives a fixed-fee payment calculated as a percentage of the initial estimated project costs.
In a Cost Plus Incentive Fee Contracts (CPIF) the seller is reimbursed for all allowable costs for performing the contract work and receives a predetermined incentive fee based upon achieving certain performance objectives as set forth in the contract.
In a Cost Plus Award Fee Contracts (CPAF) the seller is reimbursed for all legitimate costs, but the majority of the fee is earned only based on the satisfaction of certain broad subjective performance criteria defined and incorporated into the contract.
Time and material contracts are a hybrid type of contractual arrangement.
Time and material contracts are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed.
Seller has the cost risk in a Fixed-Price Contract.
Buyer has the cost risk in a Cost-reimbursable Contract.
RFP(Request for Proposal or Request for Tender) – requests a price and details.
IFB(Invitation for Bid or Request for Bid) – requests one price for all the work.
RFQ(Request for Quote) – requests a price quote per item, on hourly or per unit basis.
The knowledge area of Project Procurement Management consists of the following four processes:
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Process Name
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Project Management Process Group
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Key Deliverables
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Plan Procurement Management
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Planning
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Procurement Management Plan
Procurement Statement of Work
Source Selection Criteria
Make-or-Buy Decision
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Conduct Procurements
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Executing
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Selected Sellers
Agreements
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Control Procurements
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Monitoring and Controlling
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Work Performance Information
Change Requests
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Close Procurements
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Closing
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Closed Procurements
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Plan Procurement Management is the process of documenting project procurement decisions, specifying the approach, and identifying potential sellers.
The key benefit of this process is that it determines whether to acquire outside support, and if so:
· what to acquire
· how to acquire it
· how much is needed
· when to acquire it
The company or person who purchases the services or goods is called “buyer”.
The seller may be identified as a contractor, subcontractor, vendor, service provider, or supplier.
Many companies are a buyer in one procurement and a seller in another.
Formal procurement policies, procedures, and guidelines are part or Organizational Process Assets.
A make-or-buy analysisis a general management technique used to determine whether particular work can best be accomplished by the project team or should be purchased from outside sources.
The Plan Procurement Management process includes evaluating the risks involved with each make-or-buy analysis.
Expert purchasing judgment can also be used to develop or modify the criteria that will be used to evaluate seller proposals.
Market researchincludes examination of industry and specific vendor capabilities.
The procurement management plan is a component of the project management plan that describes how a project team will acquire goods and services from outside the performing organization.
The statement of work (SOW) for each procurement is developed from the project scope baseline and defines only that portion of the project scope that is to be included within the related contract.
Source selection criteria are developed and used to rate or score seller proposals, and can be objective or subjective.
The Inputs, Tools and Techniques and Output of Plan Procurement Management process are given below:
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Project Management Plan
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Make-or-Buy Analysis
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Procurement Management Plan
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Requirements Documentation
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Expert Judgment
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Procurement Statement of Work
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Risk Register
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Market Research
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Procurement Documents
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Activity Resource Requirements
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Meetings
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Source Selection Criteria
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Project Schedule
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Make-or-Buy Decisions
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Activity Cost Estimates
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Change Requests
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Stakeholder Register
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Project Documents updates
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Enterprise Environmental Factors
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Organizational Process Assets
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Conduct Procurementsis the process of obtaining seller responses, selecting a seller, and awarding a contract.
During the Conduct Procurements process:
1. The team will receive bids or proposals
2. The team will apply previously defined selection criteria
3. The team will select one or more sellers who are qualified to perform the work and acceptable as a seller
Seller proposals, prepared in response to a procurement document package, form the basic information that will be used by an evaluation body to select one or more successful bidders (sellers).
The procurement statement of work provides suppliers with a clearly stated set of goals, requirements, and outcomes from which they can provide a quantifiable response.
The statement of work is a critical component of the procurement process and can be modified as needed through this process until a final agreement is in place.
Bidder conferences are used to ensure that all prospective sellers have a clear and common understanding of the procurement requirements), and that no bidders receive preferential treatment.
Proposal Evaluation Techniques are use in complex procurements.
The evaluation committee will make their selection for approval by management prior to the award.
Independent Estimates can be prepared to check and evaluate the proposals received from sellers.
The quantity and availability of contracted resources and those dates on which each specific resource or resource group can be active or idle are documented in resource calendars.
The Inputs, Tools and Techniques and Output of Conduct Procurements process are given below:
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Procurement Management Plan
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Bidder Conference
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Selected Sellers
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Procurement Documents
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Proposal Evaluation Techniques
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Agreements
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Source Selection Criteria
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Independent Estimates
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Resource Calendars
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Seller Proposals
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Expert Judgment
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Change Requests
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Project Documents
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Advertising
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Project Management Plan Updates
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Make-or-Buy Decisions
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Analytical Techniques
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Project Documents updates
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Procurement Statement of Work
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Procurement Negotiations
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Organizational Process Assets
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Control Procurementsis the process of managing procurement relationships, monitoring contract performance, and making changes and corrections to contracts as appropriate.
The key benefit of this process is that it ensures that both the seller’s and buyer’s performance meets procurement requirements according to the terms of the legal agreement.
Both the buyer and the seller will administer the procurement contract for similar purposes.
Many organizations treat contract administration as an administrative function separate from the project organization.
While a procurement administrator may be on the project team, this individual typically reports to a supervisor from a different department.
Control Procurements also has a financial management component that involves monitoring payments to the seller.
The Control Procurements process reviews and documents how well a seller is performing or has performed based on the contract and establishes corrective actions when needed.
Approved change requests can include modifications to the terms and conditions of the contract.
Changes where the buyer and seller cannot reach an agreement on compensation for the change or cannot agree that a change has occurred are called claims, disputes, or appeals.
A records management system is used by the project manager to manage contract and procurement documentation and records.
The Inputs, Tools and Techniques and Output of Control Procurements process are given below:
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Project Management Plan
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Contract Change Control System
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Work Performance Information
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Procurement Documents
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Procurement Performance Reviews
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Change Requests
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Agreements
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Inspections and Audits
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Project Management Plan Updates
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Approved Change Requests
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Performance Reporting
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Project Documents updates
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Work Performance Reports
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Payment Systems
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Organizational Process Assets updates
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Work Performance Data
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Claims Administration
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Records Management System
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Close Procurementsis the process of completing each procurement.
The Close Procurements process also involves administrative activities such as finalizing open claims, updating records to reflect final results, and archiving such information for future use.
The Close Procurements process supports the Close Project or Phase process by ensuring contractual agreements are completed or terminated.
Early termination of a contract is a special case of procurement closure that can result from a mutual agreement by both parties, from the default of one party, or for convenience of the buyer if provided for in the contract.
A procurement audit is a structured review of the procurement process originating from the Plan Procurement Management process through Control Procurements.
Final equitable settlement of all outstanding issues, claims, and disputes by negotiation is a primary goal.
Some form of alternative dispute resolution (ADR) including mediation or arbitration may be explored.
Litigation in the courts is the least desirable option.
The Inputs, Tools and Techniques and Output of Close Procurements process are given below:
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Project Management Plan
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Procurement Audits
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Closed Procurements
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Procurement Documents
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Procurement Negotiations
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Organizational Process Assets updates
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Records Management System
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