Proj Proc Mgt Chap5.Ppt

7/29/2019 Proj Proc Mgt Chap5.Ppt

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Project Procurement

Management


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35

Objectives

Importance Of Project Procurement

Management

Project Procurement Management

Processes

Procurement Planning

Solicitation Planning

Solicitation Source Selection

Contract Administration

Contract Close-out


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Procurement means acquiringProcurement means acquiringgoods / services from an outsidegoods / services from an outside

source.source.

Other terms include purchasingOther terms include purchasing

and outsourcing.and outsourcing.


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Summary

PlanningPlanning Process : Plan Purchases and acquisitionsProcess : Plan Purchases and acquisitions

Process : Plan ContractingProcess : Plan Contracting

ExecutingExecuting

Process : Request seller responsesProcess : Request seller responses

Process : Select SellersProcess : Select Sellers

Monitoring & ControllingMonitoring & Controlling

Process : Administer the contractProcess : Administer the contract

Closing : Contract ClosureClosing : Contract Closure


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Process

Procurement Planning :determining what toProcurement Planning :determining what to

procure and when.procure and when.

Solicitation Planning :documenting productSolicitation Planning :documenting product

requirements and identifying potentialrequirements and identifying potential

sources or sellers.sources or sellers.

Solicitation :obtaining quotations, bids,Solicitation :obtaining quotations, bids,

offers, or proposals as appropriate.offers, or proposals as appropriate.


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Source Selection :choosing from amongSource Selection :choosing from among

potential sellers.potential sellers.

Contract Administration :managing theContract Administration :managing the

relationship with the seller.relationship with the seller.

Contract Close-outcompletion andContract Close-outcompletion and

settlement of the contract, includingsettlement of the contract, includingresolution of any open items.resolution of any open items.


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These processes interact with each otherThese processes interact with each other

and with the processes in the otherand with the processes in the other

knowledge areas as well.knowledge areas as well.

Each process may involve effort from oneEach process may involve effort from one

or more individuals or groups of individualsor more individuals or groups of individuals

based on the needs of the project.based on the needs of the project.


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Project Procurement Mgt. Process &

Key Outputs

Procurement

Planning

Source

Selection

Solicitation

Planning

Contract

Administration

Solicitation

Contract

Close Out

Make-or-buy

decisionIssue RFP

Receive

Proposals

Award

Contract

Complete

Substantial

Amt. of Work

Formally

Close

Contract


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PLANNING PURCHASES AND

ACQUISITIONS (PROCUREMENT

PLANNING) Procurement planning is the process ofProcurement planning is the process of

identifying which project needs can be bestidentifying which project needs can be best

met by procuring products or servicesmet by procuring products or servicesoutside the project organization.outside the project organization.

It involves consideration of whether toIt involves consideration of whether toprocure, how to procure, what to procure,procure, how to procure, what to procure,

how much to procure, and when to procurehow much to procure, and when to procure

it.it.


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Steps in procurement planning

Scope Statement

Product Description

Market

Condition

Other planning

Outputs

Constraints

Make-or-buy

Analysis

Expert

Judgment

Contract Type

Selection

Procurement

Management Plan

Statement(s) of

Work

Inputs Tools &Technique Outputs


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Procurement Planning Tools &

Techniques Make-or-buy AnalysisMake-or-buy Analysis : to determine: to determine

whether an organization should make orwhether an organization should make or

perform a particular product or serviceperform a particular product or serviceinside the organization or buy frominside the organization or buy from

someone else.someone else.

ExpertsExperts : Both internal and external, can: Both internal and external, can

provide Valuable inputs in procurementprovide Valuable inputs in procurement

decisions.decisions.


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Make-or-Buy Example:

Assume you can lease an item you need forAssume you can lease an item you need for

a project for $150/day. To purchase thea project for $150/day. To purchase the

item, the cost is $1,000 plus a dailyitem, the cost is $1,000 plus a daily

operational cost of $50/day.operational cost of $50/day.

How long will it take for the purchase costHow long will it take for the purchase cost

to be the same as the lease cost?to be the same as the lease cost?

If you need the item for 12 days, should youIf you need the item for 12 days, should youlease it or purchase it?lease it or purchase it?


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Make-or Buy Solution:

Set up an equation so the make is equal toSet up an equation so the make is equal tothe buythe buy

In this example, use the following equation.In this example, use the following equation.Let d be the number of days to use the item.Let d be the number of days to use the item.

$150d = $1,000 + $50d$150d = $1,000 + $50d

Solve for d as follows:Solve for d as follows:

Subtract $50d from the right side of theSubtract $50d from the right side of the

equation to get $100d = $1,000equation to get $100d = $1,000


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Divide both sides of the equation by $100Divide both sides of the equation by $100

d = 10 daysd = 10 days

The lease cost is the same as the purchaseThe lease cost is the same as the purchase

cost at 10 dayscost at 10 days

If you need the item for 12 days, it would beIf you need the item for 12 days, it would be

more economical to purchase itmore economical to purchase it


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Expert judgment

Expert judgment will often be required to assessExpert judgment will often be required to assess

the inputs to this process.the inputs to this process.

Such expertise may be provided by any group orSuch expertise may be provided by any group or

individual with specialized knowledge or trainingindividual with specialized knowledge or training

and is available from many sources including:and is available from many sources including: Other units within the performing organization.Other units within the performing organization.

Consultants.Consultants.

Professional and technical associations.Professional and technical associations. Industry groupsIndustry groups


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Contract type selection

Different types of contracts are more or lessDifferent types of contracts are more or lessappropriate for different types of purchases.appropriate for different types of purchases.

Contracts generally fall into one of threeContracts generally fall into one of threebroad categories:broad categories:

Fixed price or lump sum contractsFixed price or lump sum contracts ::involves a fixed total price for a well-involves a fixed total price for a well-

defined product.defined product.


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Cost reimbursable contractsCost reimbursable contracts : involves: involves

payment (reimbursement) to the seller forpayment (reimbursement) to the seller forits actual costs.its actual costs.

Time and material ContractsTime and material Contracts : Hybrid of: Hybrid ofboth fixed-price and cost-reimbursableboth fixed-price and cost-reimbursable

contracts.contracts.

Unit-pricing ContractsUnit-pricing Contracts : Require the buyer: Require the buyer

to pay the supplier a predetermined amountto pay the supplier a predetermined amount

per unit of product.per unit of product.


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Cost reimbursable contractsCost reimbursable contracts

With a cost plus incentive fee (CPIF)With a cost plus incentive fee (CPIF)

contract the buyer pays the supplier forcontract the buyer pays the supplier for

allowable performance cost along with aallowable performance cost along with a

predetermined fee and an incentive bonus.predetermined fee and an incentive bonus.

With a cost plus fixed fee (CPFF) contractWith a cost plus fixed fee (CPFF) contract

the buyer pays the supplier for the allowablethe buyer pays the supplier for the allowableperformance cost plus a fixed fee paymentperformance cost plus a fixed fee payment

usually based on a percentage of estimatedusually based on a percentage of estimated

costs.costs.


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With a cost plus percentage of costs(CPPC)With a cost plus percentage of costs(CPPC)

contract the buyer pays the supplier forcontract the buyer pays the supplier for

allowable performance costs along with aallowable performance costs along with apredetermined percentage based on the totalpredetermined percentage based on the total

costs.costs.

Contract Types Versus RiskContract Types Versus Risk


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Outputs from Procurement Planning

Procurement management planProcurement management plan. The. Theprocurement management plan shouldprocurement management plan should

describe how the remaining procurementdescribe how the remaining procurement

processes (from solicitation planningprocesses (from solicitation planning

through contract close-out) will bethrough contract close-out) will be

managed.managed.

What types of contracts will be used?What types of contracts will be used?

How will multiple providers be managed?How will multiple providers be managed?


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Statement(s) of work: SOW is a description of work required forSOW is a description of work required for

the Procurement.the Procurement.

Many Contracts, or mutually bindingMany Contracts, or mutually binding

agreements , include SOWs.agreements , include SOWs.

A good SOWs gives bidders a betterA good SOWs gives bidders a better

understanding of the buyers Expectations.understanding of the buyers Expectations.

The statement of work should be as clear, asThe statement of work should be as clear, as

complete, and as concise as possible.complete, and as concise as possible.


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Statement of Work (SOW) Template


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Solicitation Planning (PLANNINGCONTRACTING)

Solicitation planning involves preparing theSolicitation planning involves preparing the

documents needed to support solicitation.documents needed to support solicitation.

Procurement documents includeProcurement documents include

Request For Proposal (RFP) : used to solicitRequest For Proposal (RFP) : used to solicit

proposals from prospective suppliers.proposals from prospective suppliers.

Request For Quote (RFQ): used to solicitRequest For Quote (RFQ): used to solicit

quotes for well defined procurement.quotes for well defined procurement.


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Steps in Solicitation Planning

Procurement

ManagementPlan

Statement(s) of

Work

Standard Forms

Expert

Judgment

Procurement

Documents

Evolution

Criteria

Inputs Tools &Technique Outputs

Proj Proc Mgt Chap5.Ppt

Documents

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