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BSBPMG408A Apply Contract and Procurement Procedures1
Apply Contract andProcurement Procedures
Introduction to Procurement
Certificate IV in Project Management 17871Qualification Code BSB41507
Unit Code BSBPMG408A
BSBPMG408A Apply Contract and Procurement Procedures2
• Includes processes to purchase or acquire products or services from outside of the project team
• It also includes the contract management and change control processes required to develop and implement purchase orders and contracts
• The project procurement processes form the lifecycle of any contract that is established as part of that process
• A complex project can involve managing multiple contracts or subcontracts simultaneously
• Purchasing interactions with government departments and large organisations are often dictated by complex and formal procurement policies and procedures
Project Procurement Management
Adapated from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures3
• Project procurements often involve a formal contract, contracts are legal documents between a buyer and a seller that are mutually binding
• Sellers are obliged to provide the specified products or services
• Buyers are obliged to provide monetary compensation• Some contracts are extremely complex and others can be
very simple• Contracts will include terms and conditions specified by the
buyer and negotiated with the seller• Contracts normally require an extensive negotiation and
approval process including expert assistance form procurement and legal professionals
Procurement Contracts
Adapated from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures4
Procurement Approaches
Quotation
ClosedTender
PreviousSupplier
OpenTender
PreferredSuppliers
• Often requires three to five quotes and selecting the lowest or the one that best fits the requirements
• Proposals are sought from a pre-selected group of potential suppliers
• Proposals are sought from all potential suppliers
• Recurring purchasing from a previously selected and well performing supplier
• Pre-qualified list of potential suppliers for different categories of products or services
BSBPMG408A Apply Contract and Procurement Procedures5
• Procurement processes for large organisations and government departments normally include some form of tender process
• Tender processes can be very complex and time consuming so they are normally reserved for major procurement, often over a particular monetary threshold
• There are different types of tenders available – open and closed
• There are many different potential steps that can be included in the tender process depending on the preferences and policies of the purchasing organisation
• Tenders result in a legally binding contract between the buyer and the seller
Tender Process
Adapated from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures6
Common Tender Process
NegotiateContract
AnnounceSelection
ReviewSelectionCriteria
SupplierSubmissions Requirements
BriefingSession
IssueRequest
ForProposal
PreQualification
Briefing
ReviewRespondents
Request forInformation
ProcurementProcess
Selection
BusinessRequirements
Definition
BSBPMG408A Apply Contract and Procurement Procedures7
Tender Definitions
RFI – Request for Information• An open enquiry that spans the market seeking broad data and
understanding
RFQ – Request for Quotation• An opportunity for potential suppliers to competitively cost the final
chosen solution(s)
RFT – Request for Tender• An opportunity for potential suppliers to submit an offer to supply
goods or services against a detailed tender
BSBPMG408A Apply Contract and Procurement Procedures8
Tender Definitions
RFP – Request for Proposal• An opportunity for potential suppliers to submit a detailed proposal
on their ability to meet the requirements of the tender
Supplier Briefings• Held by the buyer with all potential or short listed supplier to answer
questions and clarify requirements
EOI – Expression of Interest• An opportunity for potential suppliers to show interest in responding
to a tender
BSBPMG408A Apply Contract and Procurement Procedures9
Procurement Policies and Procedures
• There are many excellent procurement related websites and resources available online –
www.tenders.gov.au – Federal government tenderswww.tenders.nsw.gov.au - NSW government tenderswww.tenders.vic.gov.au – VIC government tenderswww.vgpb.vic.gov.au – VIC purchasing boardwww.finance.gov.au/procurement/ - Federal purchasing policywww.apcc.com.au – AUS procurement and construction councilwww.treasury.gov.au/procurement/ - Federal government
procurement guidelines and information
BSBPMG408A Apply Contract and Procurement Procedures10
Apply Contract and Procurement Procedures
Procurement Processes
Certificate IV in Project Management 17871Qualification Code BSB41507
Unit Code BSBPMG408A
BSBPMG408A Apply Contract and Procurement Procedures11
Project Procurement Management Processes
PMBOK Project Procurement Management Processes -
12.1 Plan Procurements
12.2 Conduct Procurements
12.3 Administer Procurements
12.4 Close Procurements
PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures12
12.1 Plan Procurements
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
• The process of documenting project purchasing decisions, specifying the approach and identifying potential suppliers.
• It identifies project needs that are best met by acquiring products or services from outside of the project organisation. It considers potential suppliers and the contractual arrangements that may be required to manage these external parties to achieve the project objectives.
• Closely related to Risk Management
• Occurs during Planning
BSBPMG408A Apply Contract and Procurement Procedures13
12.1 Plan Procurements
• Inputs to Plan Procurements Scope Baseline - Scope Statement and WBS Requirements documentation Project Schedule Teaming Agreements - with third parties Risk Register Activity Resource Requirements Activity Cost Estimates Cost Performance Baseline Enterprise Environmental Factors
– Marketplace conditions and products/services available
– Suppliers past performance
– Typical terms and conditions
Organisational Process Assets– Formal procurements policies and procedures
– Preferred Supplier AgreementsAdapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures14
12.1 Plan Procurements
• Tools and techniques to Plan Procurements –
Adapted from PMBOK 4th Edition
Make or BuyAnalysis
ExpertJudgement
ProcurementPolicies &
Procedures
PreferredSupplier
Agreements
ContractTypes
ProcurementApproach
BSBPMG408A Apply Contract and Procurement Procedures15
12.1 Plan Procurements
Make or Buy Analysis
– Determines whether particular work can be accomplished by the project team or must be purchased from outside sources
– The capability may exist internally but may be committed to other projects
– Budget constraints can influence make or buy decisions
– Make or buy decisions need to cover the following –
Purchase versus lease
Related costs – direct costs and indirect support costs
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures16
12.1 Plan Procurements
Make or Buy Analysis: Would you make or buy given the following aims?
• Reduce costs• Easy integration of operations• Utilize skills of suppliers• Utilize existing capacity that may be idle• Maintain direct control• Small volume requirement• Having limited capacity or capability• Avoid unreliable supplier base• Maintain design/production secrecy• Supplement existing labor force• Stabilise existing workforce
From Kerzner and Saladris, 2006
BSBPMG408A Apply Contract and Procurement Procedures17
12.1 Plan Procurements
Purchase vs Lease?
Consider the following situation:
You have the option to buy a piece of equipment for $12,000. You can also lease the equipment for $70 per day plus a one-time fee of $8,000. You need the equipment for 75 days.
Should you purchase or lease it?
What is the break-even point in days?
From Kerzner and Saladris, 2006
BSBPMG408A Apply Contract and Procurement Procedures18
12.1 Plan Procurements
Expert Judgement – Consulting procurement and legal professionals– May be internal or external to the project organisation
Preferred Supplier Agreements– Many organisations (particularly government) negotiate
agreements with pre-qualified suppliers of regularly purchased products or services
– The project team then needs to select the supplier from the preferred supplier agreement
– It makes it much easier to find reputable suppliers and reduces requests for information within the market
– Exceptions normally need to be approved by an internal Procurement Department
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures19
12.1 Plan Procurements
Procurement Approach
– Once the Buy decision has been made, many different approaches can be used to procure the required products or services
– Three Quotes – traditionally three quotes are obtained for certain trades and then the cheapest is selected, depending on conditions
– Previous Supplier – may be related to preferred supplier agreements, a well known supplier that has been used in the past is automatically chosen
– Tender Processes – can be open to the entire market or closed to specific suppliers often from the preferred supplier list
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures20
12.1 Plan Procurements
Procurement Policies and Procedures
– Most large organisations and all government departments will have extensive policies and procedures to govern purchasing
– These often include – Preferred Supplier Agreements Purchase Ordering and Supply processes Delegated authorities for approval of expenditure
Contract Types
1. Fixed Price
2. Cost Reimbursable
3. Time and MaterialsAdapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures21
Fixed Price Contracts
• Involves setting a fixed total price for a defined product or service
• Often include financial incentives for achieving or exceeding objectives such as time, cost and quality
• Suppliers assume much of the delivery risk and are legally obligated to complete the contract
• Financial and legal penalties are common if the contract conditions are not met
• Normally the most complex to negotiate and administer
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures22
Types of Fixed Price Contracts
Firm Fixed Price Contracts (FFP)– Most common form of fixed price contract, favoured by most
buying organisations– Price is set at the outset and only subject to change if the scope of
work formally changes– Any cost increase due to poor performance is the responsibility of
the seller– The buyer must precisely specify the requirements, any changes to
the specification will normally result in additional costs– Doesn’t normally result in the BEST price for the product or service
Buyer Risk is LOW but must document detailed requirements
Seller Risk is HIGH so normally charge a premium
BSBPMG408A Apply Contract and Procurement Procedures23
Types of Fixed Price Contracts
Fixed Price Incentive Fee Contracts (FPIF)– Similar to basic Fixed Price but with some flexibility based on
performance under the contract– Financial incentives and penalties are often negotiated based on
time, cost and quality– The Seller can receive additional payment if they outperform or
may be subject to addition costs if they under perform– Not popular with Sellers for new products or services, or high
risk procurement– Under FPIF a price ceiling is set, all costs above this are the
responsibility of the Seller
Similar Buyer and Seller Risk Profiles to Fixed Price
Much more COMPLEX to negotiate and administer
BSBPMG408A Apply Contract and Procurement Procedures24
Types of Fixed Price Contracts
Fixed Price with Economic Price Adjustments (FP-EPA)– Normally used for long term contracts – Basic Fixed Price with clauses allowing for a variation in price
should economic conditions change– Price adjustments may be allowed due to inflation, commodity
price fluctuations and variations to exchange rates– Best if related to reliable, standard and externally calculated
financial indices– Should ideally allow for both price increases and price
decreases, but price decreases are often overlooked– Intended to protect both the Buyer and Seller from economic
conditions outside of their control
Lowest Risk Profile but COMPLEX to negotiate and administer
BSBPMG408A Apply Contract and Procurement Procedures25
• Involves paying the Seller for all legitimate actual costs incurred plus an agreed fee for Seller profit
• May also include financial incentive or penalty clauses
• Delivery risk is shared between the Buyer and Seller
• Gives flexibility to the Buyer to redirect the Seller whenever the scope of work changes
• Especially popular where the Buyer cannot define detailed requirements or for high risk projects
• Financial and legal penalties are harder to enforce if the contract conditions are not met, simpler than Fixed Price to negotiate and administer
Cost Reimbursable Contracts
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures26
Types of Cost Reimbursable Contracts
Cost Plus Fixed Fee Contracts (CPFF)
– Seller is reimbursed for all allowable costs for performing the agreed work
– Seller receives a fixed fee payment calculated as a percentage of the initial estimated project cost
– The Fee is paid only for completed work and does not change due to Seller performance – no incentives or penalties
– The Fee can only be varied due to an agreed change in project scope
Low Risk Profile but COMPLEX to negotiate and administer
Loosely defined requirements can lead to disagreements over SCOPE
BSBPMG408A Apply Contract and Procurement Procedures27
Types of Cost Reimbursable Contracts
Cost Plus Incentive Fee Contracts
– Seller is reimbursed for all allowable costs for performing the agreed work
– Seller receives a predetermined incentive fee based on meeting agreed performance objectives
– If the final costs vary from the original estimate, then both the Buyer and the Seller share the cost overrun or underrun based on a predetermined percentage split
– Approach to changes in costs due to changes in scope is unclear and can cause conflict
Medium Risk Profile and COMPLEX to negotiate and administer
Loosely defined requirements can lead to disagreements over SCOPE
BSBPMG408A Apply Contract and Procurement Procedures28
Types of Cost Reimbursable Contracts
Cost Plus Award Fee Contracts (CPAF)
– Seller is reimbursed for all allowable costs for performing the agreed work
– The profit component of the fee is only earned based on the satisfaction of broad subjective performance criteria defined and incorporated into the contract
– The amount of the fee is based solely on the subjective assessment of Seller performance by the Buyer
– Generally includes a clause where no appeals can be made on the amount of the fee.
LOW Risk Profile for Buyer, HIGH Risk Profile for Seller
Very unpopular with Sellers
BSBPMG408A Apply Contract and Procurement Procedures29
• Hybrid type of contract containing both aspects of cost-reimbursable and fixed-price contracts
• Often used to acquire consultants, contract staff and subject matter experts
• Also used when the Buyer cannot, or doesn’t want to, specify the statement of work or requirements in detail
• Gives flexibility to the Buyer to redirect the Seller whenever the scope of work changes
• Many organisations will require not-to-exceed values or time limits on such contracts in order to manage and monitor costs
Time and Material Contracts (T&M)
Risk is shared between the Buyer and Seller
VERY Common for contract labour
BSBPMG408A Apply Contract and Procurement Procedures30
12.1 Plan Procurements
• Outputs of this process include – Procurement Management Plan
– Detailed contents covered in slide 22 and 23
Procurement Statements of Work– Derived from the project scope baseline– That portion of project scope to be included in the particular contract
Make or Buy Decisions– Included as a table of decisions in the Procurement Management Plan
Procurement Documents– Requests for Tender– Seller Evaluations– Contracts
Source Selection Criteria– Detailed in slide 24
Change RequestsAdapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures31
Procurement Management Plan
• The Procurement Management Plan describes how the procurement processes will be managed.
• It is critical that it is linked to relevant industry regulations and organisational policies and procedures.
• Common inclusions in the Procurement Management Plan – Links to organisational procurement management policies and procedures Types of contracts to be used and contract templates Delegated authorities and required involvement from internal purchasing,
finance and legal experts/departments Tender document templates Assumptions, constraints and risks related to procurement Schedules of contracted deliverables Preferred supplier lists Procurement metrics and performance measurements
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures32
Procurement
Item
Procurement
Manager
Requirements Sourcing Approach
Summary Selection Criteria
Contract
Type
Major
Risks
Key Dates
Budgeted
Amount
Budget estimate or allowance
Fixed Price, Cost reimbursable or Time and Materials, often includes performance criteria
• It is often very useful to document all procurement approaches and decisions in a table known as the Procurement Planning Register
• Includes information about the sourcing approach, type of contract, selection criteria, requirements, risks etc
• Content can be tailored to organisational policies and procedures
Name and position of the person responsible for managing the procurement – often NOT the Project Manager
Procurement Planning Register
Name of the item being purchased
Approach selected for the procurement eg – three quotes, preferred supplier, tender
Primary criteria on which the selection will be made
Summary requirements forthe product or service
Summary of Risks
Major date and dependencies
BSBPMG408A Apply Contract and Procurement Procedures33
Selection Criteria
• Selection criteria are often included as part of tender documents and are used to rate or score different suppliers
• Facilitate and provides justification for procurement decisions• Can be limited to purchase price for commodity type items or can
also include other selection criteria such as reputation, financial viability, fit with requirements etc
• Often weighted based on relative importance
UnderstandingOf Requirements Industry
ExperienceTechnicalApproach
ManagementApproachRisk
TechnicalCapability
Overall orLifecycle Costs
IntellectualProperty
BusinessSize & Type
ProductionCapacity
FinancialViabilityWarranty Past
Performance& References
BSBPMG408A Apply Contract and Procurement Procedures34
• The process of obtaining seller responses, selecting a seller and awarding the contract
• The team applies selection criteria to the bids or proposals received from the various sellers
• The process is sometimes repeated in more detail for major procurements once a short list of qualified vendors is identified
• Often referred to as the tender process
• Occurs during Execution
12.2 Conduct Procurements
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures35
12.2 Conduct Procurements
• Inputs to Conduct ProcurementsProject Management PlanProcurement Management PlanProcurement Planning registerProcurement DocumentsSource Selection CriteriaSeller Short ListSeller ProposalsRisk RegisterTeaming agreements with external companiesOrganisational Process Assets –
– Preferred supplier lists
– Preferred supplier agreements
– Lessons learned on past procurementsAdapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures36
12.2 Conduct Procurements
• Tools and techniques to Conduct Procurements –
Adapted from PMBOK 4th Edition
BidderConferences
ExpertJudgement
ProcurementPolicies &
Procedures
IndependentEstimates or
Review
ProposalEvaluationTechniques
Advertising
ProcurementNegotiations
InternetSearch
BSBPMG408A Apply Contract and Procurement Procedures37
12.2 Conduct Procurements
Bidder Conferences
– Also known as Contractor Conferences, Vendor Conferences, Pre-Bid Conferences
– Meetings with all prospective sellers and representatives from the buyer
– Used to clarify requirements and answer questions prior to the submission of bids or proposals
– Ensure that all sellers have a clear and common understanding of the requirements and that no bidder receives preferential treatment
– Buyers must ensure that all prospective sellers hear every question and receive every answer
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures38
12.2 Conduct Procurements
Expert Judgement – Consulting procurement and legal professionals– May be internal or external to the project organisation– Establishing multi disciplined review team for the proposals
Proposal Evaluation Techniques– Used for complex purchasing decisions where the selection is
made using pre-defined and weighted selection criteria– Requires complex spreadsheet and calculations of the
responses of a selection committee– The selection committee normally consists of project team
members, key stakeholders and subject matter experts who independently rate the selection criteria
– Results are then calculated and presented to the selection committee who may alter the outcome based on other considerations
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures39
12.2 Conduct Procurements
Independent Estimates and Review– The purchaser may elect to have an independent specialist
prepare an estimate of costs to provide a benchmark for the seller responses
– Significant variations in the cost estimates of the different proposals can indicate deficiencies with the requirements or statement of work
– Can also use independent experts to review the outcomes of selection processes
Advertising
– Advertisements for prospective sellers are often placed in major newspapers or on specific websites that are regularly reviewed by the providers of commonly purchased products and services
– Low cost means of expanding the pool of prospective sellersAdapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures40
12.2 Conduct Procurements
Internet Search – Now a major tools and influence on the availability of prospective
sellers and the outcomes of procurement decisions– Many commodities and off the shelf items can be quickly located
and secured at a fixed price on the internet– Not very useful for high risk and complex procurements, except
for the location of potential sellers
Procurement Negotiations
– Many large organisations and government departments will have a specific negotiation process to ensure a fair outcome
– Can include assistance from legal and purchasing professionals
– Can also include pro forma contracts and mandatory clausesAdapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures41
12.2 Conduct Procurements
Procurement Policies and Procedures – Most large organisations and all government departments will
have comprehensive policies and procedures– It is critical that the project team are aware of these and that they
are followed, otherwise approval may not be obtained for purchasing requirements and timeframes can be severely impacted
– These procedures will also impact the project schedule during the planning stage as critical internal specialist may not be available when required by the project
– It is often mandatory to engage internal purchasing professionals and either internal or external legal professionals
– Purchasing decisions may need to be escalated to senior management or even the Board for approval, depending on the overall cost. This can also impact timelines.
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures42
12.2 Conduct Procurements
• Outputs of this process include – Selected Sellers Procurement Contract
– Statement of Work, deliverables and requirements– Timeline and pricing– Performance and reporting procedures– Roles and responsibilities– Incentives and penalties– Acceptance criteria– Warranty and insurances– Confidentiality and intellectual property
Resource Calendars Change Requests Project Management Plan updates
– Cost, Scope and Schedule baseline– Procurement Management Plan
Project Document Updates– Requirements documentation– Risk Register
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures43
• The process of managing procurement relationships, monitoring contract performance and making changes or corrections as needed
• Undertaken by both the buyer and the seller as both parties need to ensure that the other is meeting their contractual obligations
• Many organisations treat contract administration as an administrative function separate from the project and it is carried out by a Purchasing Department or by a designated functional manager
• Managing these relationships both internally and externally can be a very complex communication activity with it’s own processes and procedures that must be followed, often dictated by the terms of the contract and internal policies and procedures
• Occurs during Monitoring and Control
12.3 Administer Procurements
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures44
• This process is closely related to the following project management processes –– Direct and Manage Project Execution
– Report Performance
– Perform Quality Control
– Perform Integrated Change Control
– Monitor and Control Risks
– Control Costs
• The Project Manager must regularly monitor the efficiency and effectiveness of this process in order to successfully manage the project and any dependencies
• Close financial management is also required to ensure that payments are being made according to the terms in the contract
12.3 Administer Procurements
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures45
12.3 Administer Procurements
• Inputs to Administer ProcurementsProcurement Documents
Project Management Plan
Contract
Performance and Status Reports– From the Seller
Approved Change Requests
Work Performance Information– Quality
– Costs
– Schedule
– Scope
Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures46
12.3 Administer Procurements
• Tools and techniques to Administer Procurements –
Adapted from PMBOK 4th Edition
ContractChangeControl
PaymentSystems
ProcurementPerformance
Reviews
ProcurementPolicies &
ProceduresInspections
& Audits
ClaimsAdministration
BSBPMG408A Apply Contract and Procurement Procedures47
12.3 Administer Procurements
Contract Change Control – The process by which procurements can be modified, often
included in each specific contract and can vary between them– Closely related to the processes of Control Scope and Perform
Integrated Change Control– Often jointly managed by the Project Manager and the
purchasing department
Procurement Performance Reviews– A structured review of the seller’s progress to delivery the
contracted scope and quality within the cost and timeframe that have been agreed
– Performance information is compared against actual outcomes– Often conducted by the purchasing department or internal audit
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures48
12.3 Administer Procurements
Inspections & Audits – If required by the buyer, then these will be specified in the
contract– Often involves the buyer having access to regular external audit
reports on the seller, can include buyer procurement personnel
Performance Reporting– Regular status reports and performance information required of
the seller as specified in the contract– Tracks the seller’s performance against contractual obligations
of scope, quality, time and cost
Payment Systems– Payments to the seller are typically processed by the accounts
payable system after they have been authorised by project or procurement personnel
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures49
12.3 Administer Procurements
Claims Administration – Relates to contested changes where the buyer and seller cannot
agree on items such as Change Requests, Incentive Payments or Penalties
– Referred to as Claims, Disputes or Appeals– A resolution process is normally documented in the contract and
settlement via negotiation is preferred– If agreement cannot be reached then legal action may be
required
Records Management Systems– Used by the Project Manager to manage contract and
procurement documentation and records– Contains a retrievable archive of all contract documentation,
correspondence and performance reports
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures50
12.3 Administer Procurements
Procurement Policies and Procedures – Most large organisations and all government departments will
have comprehensive policies and procedures– It is critical that the project team are aware of these and that they
are followed, otherwise approval may not be obtained for purchasing requirements and timeframes can be severely impacted
– These procedures will also impact the project schedule during the planning stage as critical internal specialist may not be available when required by the project
– It is often mandatory to engage internal purchasing professionals and either internal or external legal professionals
– Purchasing decisions may need to be escalated to senior management or even the Board for approval, depending on the overall cost. This can also impact timelines.
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures51
12.3 Administer Procurements
• Outputs of this process include –
Procurement Documentation– Contract and supporting schedules– Change Requests– Claims and disputes
Organisational Process Assets– Correspondence regarding the contract– Payment schedules and requests– Seller performance evaluation documentation
Change Requests
Project Management Plan Updates– Procurement Management Plan– Baseline Schedule and Budget
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures52
• The process of Completing each project procurement
• Part of the overall Close Project Phase
• Involves the administrative activities related to claims, change requests and final procurement results
• Includes either the completion of each contract or the handover of contracts for on-going administration for the life of the product or service that has been purchased
• Early termination of a contract is a special case of procurement closure and can occur by mutual agreement or when either the buyer or seller fails to meet agreed terms and obligations
• Legal action can occur on unresolved claims even after the contract has been closed
• Occurs during Close
12.4 Close Procurements
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures53
12.4 Close Procurements
• Inputs to Close ProcurementsProcurement Documents
Project Management Plan
Contract
• Tools and techniques to Close Procurements –
Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition
ProcurementAudits
RecordsManagement
SystemNegotiatedSettlements
BSBPMG408A Apply Contract and Procurement Procedures54
12.4 Close Procurements
Procurement Audits – A structured review of the procurement process that may have
been specified in the Plan procurements process and then carried out during Administer Procurements and Close Procurements
– The objective is to identify successes, failures and lessons learned
Negotiated Settlements– Final equitable settlement of all outstanding issues, claims and
disputes– Direct negotiation between the buyer and seller is preferred, if
not possible then mediation, arbitration or legal action may be required
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures55
12.4 Close Procurements
Record Management Systems – Used by the Project Manager to manage contract and
procurement documentation and records– Contains a retrievable archive of all contract documentation,
correspondence and performance reports
Adapted from PMBOK 4th Edition
BSBPMG408A Apply Contract and Procurement Procedures56
12.4 Close Procurements
• Outputs of this process include –
Closed Procurements
– Formal written notice of contract completion
– Contract closure performed as per terms and conditions of the contract and the Procurement Management Plan
Organisational Process Assets
– Procurement File
– Deliverable Acceptance and Sign Off
– Lessons Learned documentation
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
BSBPMG408A Apply Contract and Procurement Procedures57
Team Assignment Criteria
Team AssignmentComponents
Marks Basic Competency Higher Competency
Procurement Register 10 Table of major procurement and contracting requirements for human and non-human resourcesSourcing approach detailed and responsibility assigned
Table of detailed procurement and contracting requirements including human and non-human resourcesSelection criteria and contract requirements also included
Assessment and selection approach
5 Detailed assessment and selection approach for a major procurement
Detailed assessment and selection approach for several major procurements
Procurement procedures 5 Basic procurement policies and procedures developed including contract review and approval
Advanced procurement policies and procedures developed including flowcharts and different processes as values increase
Total 20 13 to 16 17 to 20