Kyambogo university

Bachelor of Engineering in Electrical Engineering (BEE)

Year 4 , SEMESTER I

TEEE4107 PROJECT PLANNING AND MANAGEMENT

UNIT 6: procurement and

tendering
Prepared by: Julius Plucker
Email: jpyazzi@gmail.com
Mob: 0705666065
 Procurement Defined
The term “procurement” refers to the process of
acquiring goods, works and services. The process
spans the whole cycle from identification of needs
through to the end of a services contract or the
useful life of an asset

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 Procurement Chain:

Sourcing
REQ Receipt and Opening
(Potential Suppliers)

Bidding

Review By Contracts
Evaluation of Offers
Committee

Approval by CPO Create Vendor Award Contract Vendor

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Public Procurement Life Cycle

Procurement Plan

Procurement Procurement
Evaluation Formalization

Procurement
Implementation

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 Procurement Planning:
• This should take place well before taking any purchasing
action.
• It should not be limited to specific requisition but part of
positioning the procurement unit to best advantage
• The first task is to establish the significance to the buying
organization of the purchased items and then to gain an
understanding of the market conditions.
• This require the use of following three techniques
– Supply Positioning
– Supplier Preferences
– Vulnerability management
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 Procurement Plan:
• A procurement plan describes which product will be acquired
from vendor as well as when and how they will be acquired.
What, When, How
• Template
– Items to be procured
– Evaluation criteria
– Procurement Method
– Schedule/ Date of delivery
– Ownership rights of the source code
– Ownership rights of the production
• One of the major initiative to improve procurement system
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 Procurement Planning
Procurement planning, prior to any action taken, is essential for the
timely solicitation of quotations, bids or proposals; the award of
contracts; and the delivery of inputs. Procurement planning entails
more than the selection of a procurement method for various
goods, works and services and when to schedule activities, but
combines the legal and institutional frameworks in which
procurement must be carried out. Business Units should consider
the following:
Requisitions;
Types of goods, works or Delivery time and place;
services required;
Evaluation criteria;
Method of procurement;
Justification for non-
potential sources;
competitive procurement;
Estimated costs; and
Source of funds; Reviews.

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Project procurement management
Project procurement management includes the following processes for acquiring goods
and services from outside the project organisation:

• Procurement planning: determining what to procure and when.

• Solicitation planning: documenting product requirements and identifying
potential sources.

• Solicitation: obtaining quotations, bids, offers, or proposals as appropriate.

• Source selection: choosing from among potential vendors.
• Contract administration: managing the relationship with the vendor.
• Contract close-out: completion and settlement of the contract.

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 Procurement Management
Processes & Key Outputs
The figure below summarises the major processes involved in procurement
management, and identifies important milestones associated with each stage.
For example, after procurement planning the key milestone is the “make or
buy decision”. This will determine if further procurement management
processes are required.

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 Project Procurement Planning
Procurement planning involves identifying which project
needs can be best met by using products or services
outside the organization. It includes deciding:
•Whether to procure.

•How to procure.

•What to procure.

•How much to procure.

•When to procure.

It is essential to be thorough and creative when planning

procurement. Even though a company may be viewed as
a competitor, it will often be advantageous to
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collaborate on some projects.
 Project Procurement Planning
Inputs to Procurement Planning

The inputs needed for procurement planning include:

•The project scope statement.

•Product description.
•Market conditions.
•Constraints and assumptions.
It is important to define the scope of the project, the
products, market conditions, and constraints and
assumptions. However, it is also essential to know exactly 11
 Project Procurement Planning
Inputs to Procurement Planning

The inputs needed for procurement planning include:

•The project scope statement.

•Product description.
•Market conditions.
•Constraints and assumptions.
It is important to define the scope of the project, the
products, market conditions, and constraints and
assumptions. However, it is also essential to know exactly 12
 Types of Contracts
A contract is a mutually and legally binding agreement that obligates the seller to provide
specified products or services, and obligates the buyer to pay for them. Different types of
contracts are suited to particular circumstances, below are some broad categories:

• Fixed price or lump sum: involve a fixed total price for a welldefined product or
service.

• Cost reimbursable: involve payment to the seller for direct and indirect costs.
• Unit price contracts: require the buyer to pay the seller a predetermined amount per
unit of service

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 Fixed Price Contracts
Fixed price or lump sum contracts involve a fixed total
price for a well defined product or service. These
contracts are particularly suited where supplies or
services can be clearly specified before tenders are
invited.
The buyer incurs little risk in this situation.

Fixed price contracts may also include incentives for

meeting or exceeding project objectives. They may also
include safeguards in the form of penalty clauses,
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however these may be difficult to apply before the
 Cost Reimbursable Contracts
Cost reimbursable or cost-plus contracts involve payment
to the seller for direct and indirect actual costs. These
contracts are often used for projects that include the
provision of goods and services associated with new
technologies.
The buyer absorbs more risk with the type of contract,
which has three forms:
•Cost plus incentive fee (CPIF): the buyer pays the
seller for allowable performance costs plus a
predetermined fee and an incentive bonus.
•Cost plus fixed fee (CPFF): the buyer pays the seller
for allowable performance costs plus a fixed fee
payment usually based on a percentage of estimated15
costs.
 Unit Price Contracts
Unit price contracts require the buyer to pay the seller a
predetermined amount per unit of service, and the total value of
the contract is a function of the quantities needed to complete
the work.

Unit price contracts are also called a time and materials contract,
and may incorporate volume discounts.

This type of contract is often used for services that are needed
when the work cannot be clearly specified and total costs cannot
be estimated in a contract. Many contract programmers and
consultants prefer to use unit price contracts.
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 Statement of Work (SOW)
Many contracts include a statement of work (SOW). A statement of work is a
description of the work required for the procurement. The SOW describes the
work in sufficient detail to allow prospective sellers to determine if they are
capable of providing the goods and services required, and to allow them to
determine an appropriate price.

A good SOW gives bidders a better understanding of the buyer’s expectations,

and therefore should be as clear, concise and as complete as possible. It should
describe all the services required, and include performance reporting
requirements. The SOW should specify the product of the project, use industry
terms, and refer to industry standards.

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 Statement of Work (SOW) template
I. Scope of Work: Describe the work to be done to detail. Specify the hardware and software
involved and the exact nature of the work.
II. Location of Work: Describe where the work must be performed. Specify the location of
hardware and software and where the people must perform the work
III. Period of Performance: Specify when the work is expected to start and end, working hours,
number of hours that can be billed per week, where the work must be performed, and related
schedule information.
IV. Deliverables Schedule: List specific deliverables, describe them in detail, and specify when they
are due.
V. Applicable Standards: Specify any company or industry-specific standards that are relevant to
performing the work.
VI. Acceptance Criteria: Describe how the buyer organization will determine if the work is
acceptable.
VII. Special Requirements: Specify any special requirements such as hardware or software
certifications, minimum degree or experience level of personnel, travel requirements, and so
on.

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 Solicitation Planning
Solicitation planning involves preparing of the documents needed for requesting
bids (solicitation), and determining the evaluation criteria for the award of a
contract. Common documents used in this process are:

• Request for Proposals: used to solicit proposals from prospective sellers

where there are several ways to meet the sellers’ needs.

• Requests for Quotes: used to solicit quotes for well-defined procurements.

• Invitations for bid or negotiation and initial contractor responses are

also part of solicitation planning.

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 Outline for a Request for Proposal (RFP)

I. Purpose of RFP
II. Organization’s Background

III. Basic Requirements

IV. Hardware and Software Environment

V. Description of RFP Process

VI. Statement of Work and Schedule Information

VII. Possible Appendices

A. Current System Overview
B. System Requirements
C. Volume and Size Data
D. Required Contents of Vendor’s Response to RFP E. Sample Contract

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 Solicitation
Solicitation (or tendering) involves obtaining proposals, tenders or bids from
prospective sellers. Prospective sellers do most the work in this process, usually at
no cost to the buyer or the project. The buying organisation is responsible for
advertising the “request to tender” (the solicitation).

Organizations can advertise to procure goods and services in several ways:

• Approaching the preferred vendor.

• Approaching several potential vendors.

• Advertising to anyone interested.

• A bidders’ conference or similar meeting between the buyer and the prospective sellers can help clarify the
buyer’s expectations

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 Source Selection
Once buyers receive proposals, they must select a vendor or decide to cancel the
procurement. Source selection involves:

• Evaluating bidders’ proposals.

• Choosing the best one.
• Negotiating the contract.
• Awarding the contract.

It is highly recommended that clients use formal evaluation procedures for selecting
vendors.

Buyers often create a “short list”.

After developing a short list of possible contractors, organisations will often
undertake more detailed evaluation.

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