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CHAPTER 15

Project Procurement Management

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Procurement and Project Management

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Procurement and Project Management (cont.)

• Long lead-time items

• Large capital items

• Make or Buy decision

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Procurement Management Plan

• Governance• Organisational policy and procedures in

relation to procurement, contracting and legal processes

• Requirements of long lead-time items and large capital-purchase items

• Purchasing assumptions• Risk analysis of procurement decision• Review of procurement lessons learned

from previous projects

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Common Tender Types

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Outsourcing Project Work

If the decision is to ‘buy’ into the project, one of the most frequently used phases is to outsource.

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Outsourcing Project Work (cont.)

Advantages

• Cost reduction

• Faster project completion

• High level of expertise

• Flexibility

Disadvantages

•Coordination breakdowns

•Loss of control

•Conflict

•Security issues

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Outsourcing Project Work (cont.)

Best practices• Well-defined requirements and procedures

• Extensive training and team-building activities

• Well-established conflict management processes in place

• Frequent review and status updates

• Co-location when needed

• Fair and incentive-laden contracts

• Long-term outsourcing relationships

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Contracting and Contract Types

• Infrastructure ‘type’ contracts

Build, Own, Operate, Transfer (BOOT)

Build, Own, Operate (BOO)

Build, Operate, Transfer (BOT)

• Partnerships

• Time and material contracts

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Contracting and Contract Types (cont.)

• Fixed Price Contracts Firm fixed price (FFP)

Fixed price incentive fee (FPIF)

Fixed price with economic price adjustment (FP-EPA)

• Cost Reimbursable Contracts Cost plus fixed fee (CPFF)

Cost plus incentive fee (CPIF)

Cost plus award fee (CPAF)

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Summary of Contract Types

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Essential Elements of a Contract

1. Offer and acceptance (agreement).

2. Intention to create legal relations.

3. Consideration.

4. Legal capacity.

5. Consent.

6. Illegal and void contracts.

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The Art of Negotiating

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Project Procurement Integration

continued

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Project Procurement Integration (cont)

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Key Terms• BATNA

• closed tender

• contract law

• contract types

• large capital items

• long lead-time items

• make or buy (decision)

• open tender

• Outsourcing

• partnering charter

• principled negotiation

• procurement

• six essential elements of a contract

• tender process