1

Picture source: Refer bottom left hand corner of picture

Project Procurement Management(Outsourcing)

2

What is Procurement Management?

Deciding what work to give to outside contractors (if any) and how to do that.

Requesting and receiving proposals. Selecting the right contractor and

proposal. Negotiation and managing a

contract.

3

Tutorial exercise

Bravo Flying Bravo Flying BoatsBoats Alpha Alpha

AircraftAircraft

Charlies CargoCharlies Cargo

Sales Managers Purchase Managers

4

Project Procurement Management

ProcurementPlanning

- Make-or-buy

- If, what, when, how?

P-Plan

SolicitationPlanning

SOWs

- Determine SOW

- Determine SelectionCriteria

EvaluationCriteria

RFP

Solicitation

- Inform bidders

- Seek proposals

Proposals

SourceSelection

-Assess proposals

-Contract negotiation

Contract

ContractClose

-Audit

-Close project

Accept-ance

-Assess performance

-Manage changes

ContractAdmin

ContractChanges

Payments

Workdone

5

Government Order

What parts have to be outsourced?

A

What can Alpha make itself?

A

B

C

D

E

F

6

Government Order

What parts have to be outsourced?

B

What can Bravo make itself?

A

B

C

D

E

F

7

Government Order

What parts have to be outsourced?

C

What can Charlie make itself?

A

B

C

D

E

F

8

Tutorial: Deciding what to outsourceMmm.. we need to outsource the engine and the undercarriage

We have to

contract out

the frame &

the

undercarriage I’m

hungry

Bravo Flying Bravo Flying BoatsBoats Alpha Alpha

AircraftAircraft

Charlies CargoCharlies Cargo

9

Solicitation PlanningProcurement

Planning

- Make-or-buy

- If, what, when, how?

P-Plan

SolicitationPlanning

SOWs

- Determine SOW

- Determine SelectionCriteria

EvaluationCriteria

RFP

Solicitation

- Inform bidders

- Seek proposals

Proposals

SourceSelection

-Assess proposals

-Contract negotiation

Contract

ContractClose

-Audit

-Close project

Accept-ance

-Assess performance

-Manage changes

ContractAdmin

ContractChanges

Payments

Workdone

10

Our criteria are “Must look like our drawing” & “A promise that it will be delivered before our time deadline”.

Let’s prepare RFP’s for the two items we must outsource and send them to

two different suppliers

Tutorial – Preparing RFPs

11

Tutorial: RFP to 1st supplier

Alpha Aircraft

Bravo Boats

3:20pm

12

A “real” RFP

Source:IT Project Management, Schwalbe

1. Purpose of RFP2. Background of organisation3. Hardware and Software Environment4. The RFP process5. Statement of Work and Schedule Information6. Appendices

a) Current system overviewb) System requirementsc) Volume and size datad) Required contents of Vendor’s repsonse to RFPe) Sample Contract

13

Tutorial: RFP to 2nd supplier

Alpha Aircraft

Charlie’s Cargo

3:20pm

14

Tutorial: Prepare RFPs

RFP1c-bRFP1c-b RFP1c-aRFP1c-a

RFP2c-bRFP2c-b RFP2c-aRFP2c-a

RFP1b-cRFP1b-cRFP1b-aRFP1b-a

RFP2b-cRFP2b-c RFP2b-aRFP2b-aRFP1a-RFP1a-

bbRFP1a-cRFP1a-c

RFP2a-bRFP2a-b RFP2a-cRFP2a-c

15

Solicitation & Source Selection

ProcurementPlanning

- Make-or-buy

- If, what, when, how?

P-Plan

SolicitationPlanning

SOWs

- Determine SOW

- Determine SelectionCriteria

EvaluationCriteria

RFP

Solicitation

- Inform bidders

- Seek proposals

Proposals

SourceSelection

-Assess proposals

-Contract negotiation

Contract

ContractClose

-Audit

-Close project

Accept-ance

-Assess performance

-Manage changes

ContractAdmin

ContractChanges

Payments

Workdone

16

Tutorial: Seek Proposals

RFP1c-bRFP1c-b RFP1c-aRFP1c-a

RFP2c-bRFP2c-b RFP2c-aRFP2c-a

RFP1b-cRFP1b-cRFP1b-cRFP1b-c

RFP2b-aRFP2b-a RFP2b-aRFP2b-aRFP1a-RFP1a-

bbRFP1a-cRFP1a-c

RFP2a-bRFP2a-b RFPa-cRFPa-c

17

Ok, guys. We have to respond to these 4 RPFs with 4 proposals. Sales

Manager…take the lead!

Tutorial: Write Proposals

...via this...

...to this.

18

Write Proposal

Alpha Aircraft

Charlies Cargo

3:20pm2 gold bars5 minutes

From this...

19

Tutorial: Submit Proposals

P1c-bP1c-b P1c-aP1c-a

P2c-bP2c-b P2c-aP2c-a

P1b-cP1b-c

P1b-aP1b-a

P2b-cP2b-c

P2b-aP2b-a

P1a-bP1a-b

P1a-cP1a-c

P2a-bP2a-b

P2a-cP2a-c

20

Tutorial: Proposals duly received

P1c-bP1c-b

P2c-bP2c-b

P1c-aP1c-a

P2c-aP2c-a

P1b-cP1b-c P1b-aP1b-a

P2b-cP2b-c P2b-aP2b-aP1a-bP1a-b P1a-cP1a-c

P2a-bP2a-b Pa-cPa-c

21

Tutorial: Audit

At this point the Purchasing Manager has to show the tutor that he has two proposals for each of two parts

22

Solicitation & Source Selection

ProcurementPlanning

- Make-or-buy

- If, what, when, how?

P-Plan

SolicitationPlanning

SOWs

- Determine SOW

- Determine SelectionCriteria

EvaluationCriteria

RFP

Solicitation

- Inform bidders

- Seek proposals

Proposals

SourceSelection

-Identify winning proposal

- Negotiate contract

Contract

ContractClose

-Audit

-Close project

Accept-ance

-Assess performance

-Manage changes

ContractAdmin

ContractChanges

Payments

Workdone

A. Select the proposal with the most beautiful drawing.B. Choose at random so as to be fair to everyone.C. Select the company which employs your best friend.D. Determine which supplier is offering the largest bribe.E. Use the original criteria as the basis for selection.

23

Which is the correct way to select the winning proposal/bid?

24

Tutorial: Select Proposals

P1c-bP1c-b P1c-aP1c-a

P2c-bP2c-b P2c-aP2c-a

P1b-cP1b-c P1b-aP1b-a

P2b-cP2b-c P2b-aP2b-aP1a-bP1a-b P1a-cP1a-c

P2a-bP2a-b P2a-cP2a-c

25

Tutorial: Negotiate Contract

You need to agree a contract for each part you outsource

26

Contract AdministrationProcurement

Planning

- Make-or-buy

- If, what, when, how?

P-Plan

SolicitationPlanning

SOWs

- Determine SOW

- Determine SelectionCriteria

EvaluationCriteria

RFP

Solicitation

- Inform bidders

- Seek proposals

Proposals

SourceSelection

-Assess proposals

-Contract negotiation

Contract

ContractClose

-Audit

-Close project

Accept-ance

-Assess performance

-Manage changes

ContractAdmin

ContractChanges

Payments

Workdone

27

Make, sell, buy, check, accept, pay

28

Contract CloseProcurement

Planning

- Make-or-buy

- If, what, when, how?

P-Plan

SolicitationPlanning

SOWs

- Determine SOW

- Determine SelectionCriteria

EvaluationCriteria

RFP

Solicitation

- Inform bidders

- Seek proposals

Proposals

SourceSelection

-Assess proposals

-Contract negotiation

Contract

ContractClose

-Audit

-Close project

Accept-ance

-Assess performance

-Manage changes

ContractAdmin

ContractChanges

Payments

Workdone

29

If both sides are happy then sign off.

30

Assemble and hand over to government

and keep the gold bars

The finished product in the last photo matches which government proposal?

31

A. The one given to AlphaB. The one given to BravoC. The one given to CharlieD. None of them – it’s original work of artE. None of them – there’s been a

diabolical breakdown in communications!

So far, I understand what’s going on

1. Strongly agree2. Agree3. Not sure4. Disagree5. Strongly disagree

32