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© 2008 Prentice Hall10-1 Introduction to Project Management Chapter 10 Managing Project Procurement...
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Transcript of © 2008 Prentice Hall10-1 Introduction to Project Management Chapter 10 Managing Project Procurement...
© 2008 Prentice Hall 10-1
Introduction to Project Management
Chapter 10Managing Project Procurement
Information Systems Project Management: A Process and Team Approach, 1e Fuller/Valacich/George
© 2008 Prentice Hall 10-2
Two Perspectives
• Choices for information systems development
• Procurement process
© 2008 Prentice Hall 10-3
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 Hall 10-4
Sources of Application Software
© 2008 Prentice Hall 10-5
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 10-6
2. 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 10-7
3. 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 10-8
4. 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 10-9
5. 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 Hall 10-10
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 Hall 10-11
Outsourcing to Offshore
• Security issues
• Potential language/legal/cultural barriers
• 24/7 development
• Requires close monitoring
© 2008 Prentice Hall 10-12
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 10-13
1. Plan Purchases and Acquisitions
• Determination of which projects needs can best be met by obtaining services or products from outside organizations
© 2008 Prentice Hall 10-14
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 Hall 10-15
Plan Purchases and AcquisitionsTechniques
• Make or buy
• Expert judgment
© 2008 Prentice Hall 10-16
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 Hall 10-17
Plan Purchases and AcquisitionsOutputs
• 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 Hall 10-18
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 10-19
2. Plan Contracting
• Creation of documents required to support the Request Seller Responses and Select Sellers processes
© 2008 Prentice Hall 10-20
Plan Contracting – Inputs
• Statement of Work
• Make-or-by decisions
• Procurement management plan
© 2008 Prentice Hall 10-21
Plan Contracting – Tools & Techniques
• Standard forms/templates
• Expert judgment
© 2008 Prentice Hall 10-22
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 Hall 10-23
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 10-24
3. Request Seller Responses
• The process of obtaining responses to procurement documents produced during Plan Contracting
© 2008 Prentice Hall 10-25
Request Seller Responses – Inputs
• Procurement documents– RFP
• Organizational process assets– List of qualified sellers
• Procurement management plan
© 2008 Prentice Hall 10-26
Request Seller Responses – Outputs
• List of qualified vendors requested to submit a RFP
• Formal procurement documents
• Proposals
© 2008 Prentice Hall 10-27
4. Select Sellers
• Contract with a vendor to supply the desired product or service
© 2008 Prentice Hall 10-28
Select Sellers – Inputs
• Organizational process assets
• Procurement management plan
• Evaluation criteria
• Procurement document package
• Qualified seller list
• Project management plan
© 2008 Prentice Hall 10-29
Select Sellers – Tools & Techniques
• Weighing system
• Independent estimates
• Screening system
• Contract negotiations
• Seller rating systems
• Expert judgment
© 2008 Prentice Hall 10-30
Weighing System Method to quantitatively compare vendor proposals
Company Alpha Company Beta Company Gamma
Weight Rating Score Rating Score Rating Score
Price 40 3 120 3 120 2 80
Vendor technical ability 10 4 40 4 40 4 40
Solution functionality 15 4 60 3 45 2 30
Vendor experience 10 3 30 3 30 4 40
Vendor financial resources 15 4 60 3 45 4 60
PMI certified project manager 10 5 50 1 10 1 10
TOTAL 100 360 290 260
© 2008 Prentice Hall 10-31
• 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 Hall 10-32
• 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 10-33
5. Contract Administration
• Procedures that enable the organization to compare what was contracted for and what has been delivered
© 2008 Prentice Hall 10-34
Contract Administration – Inputs
• Selected sellers
• Contract management plan
• Performance reports
• Work performance information
• Approved change requests– Contract terms
– Descriptions of work
© 2008 Prentice Hall 10-35
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 Hall 10-36
• 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 Hall 10-37
• 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 Hall 10-38
Contract Administration – Outputs
• Contract documentation
• Organizational process asset updates
• Recommended correction actions
© 2008 Prentice Hall 10-39
6. Contract Closure
• Verification that all products and services contracted for are acceptable
© 2008 Prentice Hall 10-40
Contract Closure – Inputs
• Procurement management plan
• Contract management plan
• Contract documentation of work performed
• Contract closure procedure
© 2008 Prentice Hall 10-41
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 Hall 10-42
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 Hall 10-43
Questions?