Procurement Knowledge Area
Project Procurement Management includes the
processes necessary to purchase or acquire products, services, or results
needed from outside the project team.
Project Procurement Management includes the
contract management and change control processes.
Contracts are legal documents between a buyer
and a seller.
A contract represents a mutually binding
agreement that obligates the seller to provide something of value and obligates
the buyer to provide monetary or other valuable compensation.
An agreement can be simple or complex, and
may reflect the simplicity or complexity of the deliverables or required
effort.
Contracts are a method of transferring risk
for a fee (a strategy used in Risk Response Planning).
A complex project may involve managing multiple
contracts or subcontracts simultaneously or in sequence.
Fixed-price contracts involve setting a fixed total price
for a defined product, service, or result to be provided.
In a Firm Fixed Price Contracts (FFP) the price for goods is set at the outset and not
subject to change unless the scope of work changes.
The most commonly used contract type is the FFP.
Fixed Price Incentive Fee Contracts (FPIF) gives the buyer and
seller some flexibility in that it allows for deviation from performance, with
financial incentives tied to achieving agreed upon metrics.
Fixed Price with Economic Price Adjustment Contracts (FP-EPA) is used whenever the
seller’s performance period spans a considerable period of years, as is
desired with many long-term relationships Project.
Cost-reimbursable contracts involve payments (cost
reimbursements) to the seller for all legitimate actual costs incurred for
completed work, plus a fee representing seller profit.
In a Cost Plus Fixed Fee Contracts (CPFF) the
seller is reimbursed for all allowable costs for performing the contract work,
and receives a fixed-fee payment calculated as a percentage of the initial
estimated project costs.
In a Cost Plus Incentive Fee Contracts (CPIF) the seller is reimbursed for all allowable costs
for performing the contract work and receives a predetermined incentive fee
based upon achieving certain performance objectives as set forth in the
contract.
In a Cost Plus Award Fee Contracts (CPAF) the seller is reimbursed for all legitimate
costs, but the majority of the fee is earned only based on the satisfaction of
certain broad subjective performance criteria defined and incorporated into the
contract.
Time and material contracts are a hybrid type of
contractual arrangement.
Time and material contracts are often used for
staff augmentation, acquisition of experts, and any outside support when a
precise statement of work cannot be quickly prescribed.
Seller has the cost risk in a Fixed-Price Contract.
Buyer has the cost risk in a Cost-reimbursable Contract.
RFP
(Request for Proposal or Request for Tender) - requests a price and details.
IFB
(Invitation for Bid or Request for Bid) - requests one price for all the work.
RFQ
(Request for Quote) - requests a price quote per item, on hourly or per unit
basis.
The knowledge area of Project Procurement Management consists
of the following four processes:
Process Name
|
Project
Management Process Group
|
Key Deliverables
|
Plan Procurement
Management
|
Planning
|
Procurement
Management Plan
Procurement
Statement of Work
Source Selection
Criteria
Make-or-Buy
Decision
|
Conduct
Procurements
|
Executing
|
Selected Sellers
Agreements
|
Control
Procurements
|
Monitoring and
Controlling
|
Work Performance
Information
Change Requests
|
Close
Procurements
|
Closing
|
Closed Procurements
|
Plan
Procurement Management is the process of documenting project procurement
decisions, specifying the approach, and identifying potential sellers.
The key benefit of this process is that it
determines whether to acquire outside support, and if so:
·
what
to acquire
·
how
to acquire it
·
how
much is needed
·
when
to acquire it
The company or person who purchases the
services or goods is called “buyer”.
The seller may be identified as a contractor,
subcontractor, vendor, service provider, or supplier.
Many companies are a buyer in one procurement
and a seller in another.
Formal procurement policies, procedures, and
guidelines are part or Organizational Process Assets.
A make-or-buy analysis
is a general management technique used to determine whether particular
work can best be accomplished by the project team or should be purchased from
outside sources.
The Plan Procurement Management process
includes evaluating the risks involved with each make-or-buy analysis.
Expert purchasing judgment can also be used to
develop or modify the criteria that will be used to evaluate seller proposals.
Market
research
includes examination of industry and specific vendor capabilities.
The procurement management plan is a component of the project management plan
that describes how a project team will acquire goods and services from outside
the performing organization.
The statement of work (SOW) for each procurement is developed from the project scope
baseline and defines only that portion of the project scope that is to be
included within the related contract.
Source selection criteria are developed and used to rate or
score seller proposals, and can be objective or subjective.
The Inputs, Tools and Techniques and Output
of Plan
Procurement Management process are given below:
Project
Management Plan
|
Make-or-Buy
Analysis
|
Procurement
Management Plan
|
Requirements
Documentation
|
Expert Judgment
|
Procurement
Statement of Work
|
Risk Register
|
Market Research
|
Procurement
Documents
|
Activity Resource
Requirements
|
Meetings
|
Source Selection
Criteria
|
Project Schedule
|
Make-or-Buy
Decisions
|
|
Activity Cost
Estimates
|
Change Requests
|
|
Stakeholder
Register
|
Project Documents
updates
|
|
Enterprise
Environmental Factors
|
||
Organizational
Process Assets
|
Conduct
Procurements
is the process of obtaining seller responses, selecting a seller, and awarding
a contract.
During the Conduct Procurements process:
1.
The
team will receive bids or proposals
2.
The
team will apply previously defined selection criteria
3.
The
team will select one or more sellers who are qualified to perform the work and
acceptable as a seller
Seller proposals, prepared in response to a
procurement document package, form the basic information that will be used by
an evaluation body to select one or more successful bidders (sellers).
The procurement statement of work provides suppliers with a clearly stated set of
goals, requirements, and outcomes from which they can provide a quantifiable
response.
The statement of work is a critical component
of the procurement process and can be modified as needed through this process
until a final agreement is in place.
Bidder conferences are used to ensure that all
prospective sellers have a clear and common understanding of the procurement
requirements), and that no bidders receive preferential treatment.
Proposal Evaluation Techniques are use in
complex procurements.
The evaluation committee will make their
selection for approval by management prior to the award.
Independent Estimates can be prepared to check and evaluate
the proposals received from sellers.
The quantity and availability of contracted
resources and those dates on which each specific resource or resource group can
be active or idle are documented in resource calendars.
The Inputs, Tools and Techniques and Output
of Conduct
Procurements process are given below:
Procurement
Management Plan
|
Bidder Conference
|
Selected Sellers
|
Procurement
Documents
|
Proposal
Evaluation Techniques
|
Agreements
|
Source Selection
Criteria
|
Independent
Estimates
|
Resource
Calendars
|
Seller Proposals
|
Expert Judgment
|
Change Requests
|
Project Documents
|
Advertising
|
Project
Management Plan Updates
|
Make-or-Buy
Decisions
|
Analytical
Techniques
|
Project Documents
updates
|
Procurement
Statement of Work
|
Procurement
Negotiations
|
|
Organizational
Process Assets
|
Control
Procurements
is the process of managing procurement relationships, monitoring contract
performance, and making changes and corrections to contracts as appropriate.
The key benefit of this process is that it
ensures that both the seller’s and buyer’s performance meets procurement
requirements according to the terms of the legal agreement.
Both the buyer and the seller will administer
the procurement contract for similar purposes.
Many organizations treat contract administration
as an administrative function separate from the project organization.
While a
procurement administrator may be on the project team, this individual typically
reports to a supervisor from a different department.
Control Procurements also has a financial
management component that involves monitoring payments to the seller.
The Control Procurements process reviews and
documents how well a seller is performing or has performed based on the
contract and establishes corrective actions when needed.
Approved change requests can include
modifications to the terms and conditions of the contract.
Changes where the buyer and seller cannot
reach an agreement on compensation for the change or cannot agree that a change
has occurred are called claims, disputes, or appeals.
A records management system is used by the
project manager to manage contract and procurement documentation and records.
The Inputs, Tools and Techniques and Output
of Control
Procurements process are given below:
Project
Management Plan
|
Contract Change
Control System
|
Work Performance
Information
|
Procurement
Documents
|
Procurement
Performance Reviews
|
Change Requests
|
Agreements
|
Inspections and
Audits
|
Project
Management Plan Updates
|
Approved Change
Requests
|
Performance
Reporting
|
Project Documents
updates
|
Work Performance
Reports
|
Payment Systems
|
Organizational
Process Assets updates
|
Work Performance
Data
|
Claims
Administration
|
|
Records
Management System
|
Close
Procurements
is the process of completing each procurement.
The Close Procurements process also involves
administrative activities such as finalizing open claims, updating records to
reflect final results, and archiving such information for future use.
The
Close Procurements process supports the Close Project or Phase process by
ensuring contractual agreements are completed or terminated.
Early termination of a contract is a special case of
procurement closure that can result from a mutual agreement by both parties,
from the default of one party, or for convenience of the buyer if provided for
in the contract.
A procurement audit is
a structured review of the procurement process originating from the Plan
Procurement Management process through Control Procurements.
Final equitable settlement of all outstanding
issues, claims, and disputes by negotiation is a primary goal.
Some form of alternative dispute resolution (ADR) including mediation or arbitration may be
explored.
Litigation
in the courts is the least desirable option.
The Inputs, Tools and Techniques and Output
of Close
Procurements process are given below:
Project
Management Plan
|
Procurement
Audits
|
Closed
Procurements
|
Procurement
Documents
|
Procurement
Negotiations
|
Organizational
Process Assets updates
|
Records
Management System
|
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