Project Procurement

Management

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 Project Procurement Management
Plan Procurement Management is the process of documenting Project
purchasing decisions, specifying the approach, and Identifying potential sellers

Conduct Procurements is the process of obtaining seller responses, selecting a

seller and awarding a contract
Control Procurements is the process of managing procurement relationships,
monitoring contract performance, and making changes and corrections as
needed

Close Procurements is the process of completing each project procurement

Knowledge area Initiating Planning Executing Monitoring and Control Closing

Procurement Yes Yes Yes Yes

Plan Conduct Control procurement Close
procurement procurement procurement

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 Procurement-Planning
Plan Procurement Management
This is the process of documenting how the procurement activities will be
carried out.

Purchasing decisions
Products, services, results outside of the organization versus those that
can be accomplished by the project team

Procurement approach
What to acquire, how much to acquire, when to acquire and how to
acquire

Identifying potential sellers

Who is responsible to obtain and hold relevant permits and licenses
required in the procurement process

Project schedule can influence the plan procurement process

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 Procurement-Planning
Plan Procurement Management

Inputs Tools & Techniques Outputs

Project management Plan Make-or-buy analysis Procurement
Requirements documentation Expert judgment management plan
Risk register Market Research Procurement
Activity resource requirements Meetings statement of work
Project schedule Make-or buy
Activity cost estimates decisions
Stakeholder register Procurement
documents
EEF
Source selection
OPA criteria
Change request
Project document
updates

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 Procurement-Planning
Plan Procurement Management - Inputs
Project Management Plan: Project Scope Statement, WBS and WBS Dictionary
(Scope Baseline)
Need, Justification and Project boundaries
Scope statement, WBS and WBS Dictionary
Product/Service/Result scope description, list of deliverables, technical issues,
constraints like delivery dates

Requirements documentation
Contractual and legal implications, health, safety, security intellectual property
rights, licenses and permits

Risk Register
Provides list of risks along with the results of risk response planning

Risk related to contract decisions - Agreements on insurance, bonding, services

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 Procurement-Planning
Plan Procurement Management - Inputs
Activity resource requirements - Information on people, equipment

Project Schedule - Mandated deliverable dates

Activity cost estimates - Evaluate the reasonableness of bids or proposals,

planned budget

Stakeholder Register- Stakeholders and their interest

Enterprise Environmental Factors

Products, Services and Results available in the market, suppliers and their
past performance, local requirements, terms and conditions of products

Organizational Process Assets

Procurement policies, procedures and guidelines, Pre-qualified sellers based
on previous experience

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 Procurement-Planning
Plan Procurement Management - Tools
Make or buy analysis
Management technique to evaluate whether a particular product/service/
result can be generated in house or has to be purchased from outside.
Schedule commitments and budget constraints need to be considered in the
analysis

Expert Judgment
Any expertise provided by experienced individuals or groups

Market Research
To examine industry/vendor specific capabilities

Meetings
For additional information, exchange meetings with potential bidders

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 Procurement-Planning
Plan Procurement Management - Tools

Contract Type

Fixed Price Cost Plus or Cost Time and Material

Reimbursable

 Firm Fixed Price (FFP ) • Cost Plus Fixed Fee(CPFF )

 Fixed Price Incentive Fee (FPIF ) • Cost Plus Award Fee (CPAF ) Time and Material (T&M)
 Fixed Price Economic Price • Cost Plus Incentive Fee (CPIF ) (Hybrid model of CR and FP)
Adjustment (FPEPA)

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 Procurement-Planning
Plan Procurement Management - Outputs
Procurement Management Plan
This is a document that describes how the procurement processes will be
managed from developing the procurement documentation through the
contract closure. This includes contract types, evaluation criteria, handle long
lead times, performance bonds, insurance contracts, metrics to manage
contracts

Procurement statements of work

Developed from project scope baseline for each procurement. Includes
specifications, quantities, quality levels, performance

Change requests
Some change requests may arise to the project management plan and its
subsidiary plans as a result of plan procurements

Make-or buy decisions

Resulting decisions on what will be accomplished by the project team and
what will be acquired from outside
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 Procurement-Planning
Plan Procurement Management - Outputs
Project Document Updates
Requirement document, traceability matrix, risk register may get updated

Procurement documents
Procurement documents are prepared by the buyer to let the sellers know the
requirements. These documents are used to seek uniform response from the
sellers. They facilitate accurate and complete response from the seller side and
facilitate easy evaluation of the bids for the buyer. They contain the format of
the response templates, SOW, contract details.

Request for information (RFI)

This document is used to gather information on seller capabilities. Generally
after gathering the seller information the buyer will be able to prepare the RFP
and RFQ

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 Procurement-Planning
Plan Procurement Management - Outputs
Request for Proposal (RFP)
This is a document used to request a detailed technical proposal from the
sellers. The RFP may request Qualifications of the bidders along with corporate
information.

Request for Quotation (RFQ)

Precise requirements including the details of technical approach are sent to
the sellers and a subsequent price quotation is requested for carrying out the
work. However, quoted prices may not be binding on either party

Invitation for Bid (IFB)

This document is used to solicit bids from the sellers for simple services or
goods such as products from catalogs. Price is a critical factor in this and
generally lowest bidder gets the contract.

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 Procurement-Planning
Plan Procurement Management - Outputs
Source selection criteria
Source selection criteria are generally included in the procurement
documents and are used to rate the proposals.
These criteria include parameters like

Source Selection Criteria

Financial & Management Technical and Business Performance Security & Others

• Financial capacity • Business • Warranty

• Overall or lifecycle understanding • Past performance • Intellectual
cost • Technical ability of the seller property rights
• Management • Capacity & scale up • Customer base • Propriety rights
Approach to the demands • References
• Risk Mitigation
approach
• Business Size Type

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 Procurement-Executing
Conduct Procurements
This is the process of obtaining seller responses, selecting a seller, and
awarding a contract

Inputs Tools & Techniques Outputs

Procurement management Bidder conferences Selected sellers

plan Proposal evaluation Agreements
Procurement documents techniques Resource calendars
Source selection criteria Independent estimates Change requests
Seller proposals Expert judgment Project management plan
Project documents Advertising updates
Make-or-buy decisions Analytical Techniques Project document updates
Procurement Statement of Procurement negotiations
work
OPA
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 Procurement-Executing
Conduct Procurements - Tools
Bidder’s Conference/Pre-Bid Conference
A conference conducted between the buyer and all the sellers. This
happens during the conduct procurement process. This is conducted with
a view to create a common understanding of the requirements to all the
sellers.

When the following situations occur, the procurement processes may not
be carried out-
 Single source: The buyer has preferred vendors
 Sole source: There is only one qualified vendor

Proposal Evaluation Techniques

Source selection will be made on the seller responses to previously
defined weighted criteria, a formal review process will be defined by the
buyer’s procurement policies

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 Procurement-Executing
Conduct Procurements - Tools
Independent Estimates
Procuring organization develops its estimates internally or through a
consultant. If the difference is high, either SOW is not complete or the
seller did not understand it.

Expert Judgment
Multi-functional expertise contracting, legal, finance, sales, etc needed

Advertising
To expand potential seller list. Most Government jurisdictions need public
advertising

Analytical Techniques
Help identify readiness of vendor to meet objectives, risk involved,
budget, etc.

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 Procurement-Executing
Conduct Procurements - Tools
Procurement Negotiation techniques

Fair and Reasonable

A negotiator claims that the price of the product is equitable because that
is what another company is paying

Deadline
Imposing a deadline to reach an agreement

Delays
Delaying the agreement process. This is useful when tempers flare up

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 Procurement-Executing
Conduct Procurements - Outputs
Agreements
Depending upon the application area, an agreement can also be called as an
understanding, a contract, a sub contract, or a purchase order

An agreement may include

Statement of work, Acceptance criteria, pricing, schedule
Claims resolution procedure, Payment terms, Limitation of liabilities,
Incentives, termination clause and ADR (Alternate Dispute Resolution)

Resource Calendars
The quantity and availability of the contracted resources, and those dates on
which specific resource can be active or idle is documented

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 Procurement-Executing
Conduct Procurements - Outputs
Selected Seller
The selected seller are those who have been selected for the contract
award.

Change Requests
Based on the agreement, changes to the project management plan, etc. are
processed through Integrated Change Control

Project Management Plan Updates

Cost, scope, schedule baselines and other plans

Project Documents Updates

Requirement documentation, risk register, stakeholder etc.

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 Procurement-Controlling
Control Procurements
Some of the processes that are applied are:
Direct & Manage Project Work
Control Quality
Perform Integrated Change Control
Control Risks

Involves monitoring payments, compensation is linked to sellers performance

Performance review is also used for measuring seller’s competency for future
work and whether/not meeting contract

Details for managing early termination of contract are captured here and
used in Close Procurements

Agreements can be modified by mutual consent before contract closure

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 Procurement-Controlling
Control Procurements
This is process of managing procurement relationships, monitoring
contract performance and making changes and corrections to the
contract as needed

Inputs Tools & Techniques Outputs

Procurement Contract change control Work performance

documents system information
PM plan Procurement performance Change Requests
Agreements reviews PM Plan updates
Approved change Inspection and audits Project document
requests Performance reporting updates
Work Performance Payment systems OPA updates
reports Claims administration
Work performance Records management
Data system
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 Procurement-Controlling
Control Procurements - Tools
Contract Change Control system
This is a subsystem of the integrated change control containing guidelines
and procedures to modify procurement contract.

Procurement Performance Reviews

Structured review to compare if delivered as per contract to identify
performance successes/failures, progress to quantify ability to perform.
Done as part of project status review

Inspections and Audits

Inspections and audits are done by the buyer and supported by the seller to
check the compliance of the deliverables during direct and manage project
execution of the buyer

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 Procurement-Controlling
Control Procurements - Tools
Performance Reporting
Work Performance data and performance reports supplied by the vendor are
evaluated against the agreements and work performance information is
prepared as appropriate

Payment systems
The payments to the seller are handled by the accounts payable department of
the buyer. This system ensures that satisfactory work is done in accordance
with the contract

Claims Administration
A claim can also be called as a dispute or appeal. These are changes where the
buyer or seller cannot reach agreement on a change or where they feel that a
change has not occurred. Claims will be resolved through ADR (Alternative
Dispute Resolution). However, negotiation is the preferred method for
resolving claims

Records Management System

Used to manage contract and procurement processes and a part of PMIS 22
 Procurement-Controlling
Control Procurements - Outputs
Work performance information
Work performance information provides a basis for identification of
current or potential problems to support later claims or new
procurements.
It includes reporting compliance of contracts, which provides procuring
organizations a mechanism to track specific deliverables expected and
received from vendors

Change Requests
Change requests to the project management plan and it’s subsidiary
plans are processed through perform integrated change control process.

Updates to Project Management Plan, Project Documents &

OPA (Correspondence, Payment schedules, Seller Performance evaluation
documentation)

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 Procurement-Closing
Close Procurements
This is the process to verify that all work and deliverables from the seller
are acceptable to the buyer and completing each procurement

Inputs Tools & Techniques Outputs

Project management Procurement audits Closed procurements
plan Procurement Negotiations OPA updates
Procurement Records management system
documents

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 Procurement-Closing
Close Procurements
This process supports the Close Project or Phase process and involves
verification that all work and deliverables are acceptable

Early Termination of a contract is a special case of procurement closure,

the rights & responsibilities are in the termination clause of contract

Other activities include

• finalizing open claims

• updating records
• Archiving information

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 Procurement-Closing
Close Procurements - Tools
Procurement Audits
A procurement audit is a structured review of the procurement processes
from Plan procurements to Control procurements. Procurement audits
are conducted during close procurement process to identify
success/failure.

Procurement Negotiation
Negotiated settlements can include Negotiations, ADR and Litigation.
While negotiation is the first desirable option for settling issues,
Litigation is the least desirable option. ADR involves third parties to settle
the issues

Record Management System

Contract documents and correspondence are archived

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 Procurement-Closing
Close Procurements - Outputs
Closed Procurements
The buyer authorizes /provides the seller with the formal written notice
that the contract has been completed.

OPA Updates
The elements of the OPA that are updated are:
 Procurement file
 Deliverable acceptance
 Lesson learned documentation

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