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PROJECT PROCUREMENT MANAGEMENT TEMPLATE

Public Works and Government Services Canada


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Public Works and Government Services Canada

PREFACE

The Project Procurement Management (PPM) Template is intended as guidance for procurement

managers and the teams involved in complex project procurements. It should be considered tobe a work in process that will be refined as feedback becomes available from users.

In order to make this document widely available, it is being posted on the PWGSC web site athttp://www.ames-mpsl.com

Some hardcopies also are being distributed for the convenience of many interested professionals.However, distribution is not controlled. Therefore, hardcopy updates cannot be provided toholders of the document. Rather, you are requested to check the web site to obtain the latestrevision which will be indicated by the revision number and date on the cover page.

Your comments are solicited. The collective knowledge and experience of the many peopleinvolved in complex procurement can be of great value in improving the content of theTemplate. Please forward your comments by E-mail to [email protected].

The author acknowledges the importance to this work of several documents cited herein:

SOSB Business Process Renewal Blueprint, Final Report, October 2, 1998;

Canadian Government Procurement Guide, Computer Sciences Corporation; 1997.

Draft DND Acquisition Reform Guide, Directorate of Business Change Management,March 31, 1998;

Systems Engineering Management

, Computer Sciences Corporation, October, 1998.


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Public Works and Government Services Canada i

TABLE OF CONTENTS

Section Title Page

1. FOCUS OF THE PPM TEMPLATE............................................................................1

2. FORCES FOR CHANGE .............................................................................................2

3. THE PPM TEMPLATE AND DESKTOP TOOL.......................................................6

4. INTEGRATED PROCUREMENT TEAMS................................................................7

5. PROJECT PROCUREMENT MANAGEMENT FRAMEWORK..........................10

5.1 Phase 1 - Project and Procurement Planning (P&PP) ...................................10

5.1.1 Validate Requirements ...........................................................................12

5.1.1.1 Analyze (Review Clients) Requirement..................................... 135.1.1.2 Define Procurement Concept...................................................... 15

5.2 Phase 2 - Solicitation Planning........................................................................19

5.2.1 Define Procurement Requirements .........................................................215.2.1.1 Define Business and Technical Requirements............................. 235.2.1.2 Define Project Management Strategy.......................................... 255.2.1.3 Define Scope of Contract(s)........................................................ 345.2.1.4 Define Reporting Strategy...........................................................355.2.1.5 Define Approval Strategy ........................................................... 365.2.1.6 Define the Change Management Strategy....................................36

5.2.2 Define Procurement Strategy..................................................................36

5.2.2.1 Validate Sources of Supply......................................................... 385.2.2.2 Define Procurement Methodology (Tools & Techniques) ........... 395.2.2.3 Define Bid Evaluation Criteria and Basis of Source Selection ..... 395.2.2.4 Prepare Bid Solicitation Document ............................................. 405.2.2.5 Obtain Management Approval of the Procurement Strategy........ 44

5.3 Phase 3 - Solicitation and Source Selection (S&SS)........................................455.3.1 Execute Procurement Strategy................................................................47

5.3.1.1 Solicit Bids.................................................................................485.3.1.2 Receive Bids...............................................................................485.3.1.3 Evaluate Bids..............................................................................495.3.1.4 Select Contractor ........................................................................ 50

5.3.1.5 Negotiate Contract...................................................................... 515.3.1.6 Prepare Contract ......................................................................... 525.3.1.7 Obtain Contract Approval ........................................................... 525.3.1.8 Award Contract .......................................................................... 53

5.4 Phase 4 - Contract Management .....................................................................545.4.1 Manage Contract .................................................................................... 56

5.4.1.1 Manage Technical, Systems and Quality Performance ................ 57


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Public Works and Government Services Canada ii

5.4.1.2 Manage Cost/Schedule and Delivery Performance ...................... 585.4.1.3 Manage Government Furnished Resources (GFR) Performance.. 595.4.1.4 Administer Contract ................................................................... 59

5.5 Phase 5 - Contract Closeout ............................................................................595.5.1 Contract Closeout...................................................................................615.5.1.1 Physical Disengagement ............................................................. 625.5.1.2 Administrative Disengagement ................................................... 62

Figures

Figure Title Page

Figure 1 Procurement Types ......................................................................................................2

Figure 2 Social, Industrial and Economic Objectives..................................................................3Figure 3 Desktop Tool Main View ..........................................................................................7Figure 4 Integrated Procurement Team.......................................................................................8Figure 5 Complex Procurement Effort Profile ............................................................................9Figure 6 Project and Procurement Planning Process.................................................................13Figure 7 Integrated Procurement Team Concept.......................................................................15Figure 8 Market Research Service............................................................................................16Figure 9 Procurement Management Plan..................................................................................19Figure 10 Solicitation Planning Process Part I.......................................................................21Figure 11 Options Analysis......................................................................................................22Figure 12 Business Case Analysis............................................................................................24

Figure 13 SEI Continuous Risk Management Model................................................................26Figure 14 Dealing with Risk.....................................................................................................28Figure 15 Risk Mitigation Through Contract Management.......................................................29Figure 16 Choosing From a Plethora of Standards....................................................................31Figure 17 Determining Contract Scope ....................................................................................35Figure 18 Solicitation Planning Process Part II......................................................................37Figure 19 Alternative Procurement Strategies...........................................................................38Figure 20 Requirements Management Leading to Product Acceptance.....................................41Figure 21 Communicating in the Contracting Process ..............................................................42Figure 22 Typical Structure of an RFP .....................................................................................43Figure 23 Selection of the Winning Proposal............................................................................44

Figure 24 Solicitation and Source Selection Process.................................................................47Figure 25 Proposal Evaluation .................................................................................................50Figure 26 Contract Management Process .................................................................................56Figure 27 Contract Management ..............................................................................................57Figure 28 Delivery and Acceptance..........................................................................................58Figure 29 Contract Closeout Process........................................................................................61Figure 30 Contract Closeout.....................................................................................................61


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Public Works and Government Services Canada iii

Tables

Table Title Page

Table 1 PPM in the Project and Procurement Planning Phase...................................................11Table 2 PPM in the Solicitation Planning Phase .......................................................................20Table 3 PPM in the Solicitation and Source Selection Phase ....................................................46Table 4 PPM in the Contract Management Phase .....................................................................55Table 5 PPM in the Contract Closeout Phase............................................................................60

Annexes

Annex Title

A MPSL ServicesB Project Procurement Management (PPM) TemplateC PPM Work Breakdown StructureD The Relationship Between The Complex Procurement Functions and Core Competency

AreasE Life Cycle Wall ChartsF Sample Activity Templates


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Public Works and Government Services Canada iv

ACRONYMS

ABE Automated Buying Environment

ACRO Advisory Committee on Repair

AIT Agreement on Internal Trade

AMESS Aerospace, Marine and Electronics Systems Sector

ASD Alternative Service Delivery

BDP Benefits Driven Procurement

BPR Business Process Renewal

BRU Bid Receiving Unit

CBP Core Best Practice

CCC Canadian Commercial Corporation

CFP Canadian Forces Publication

C/SPMS Cost/Schedule Performance Management Standard

CDRL Contract Data Requirements Lists

CEIL Contract End Items List

CIS Customer Information Service

CITT Canadian International Trade Tribunal

CMF Contract Management FrameworkCMIS Configuration Management Information System

COTS Commercial-Off-The-Shelf

CPAA Contract Planning and Advance Approval

CPP Common Purpose Procurement

CSC Computer Sciences Corporation

DID Data Item Description

DMS Document Management System

DND Department of National Defence

DoD Department of Defense (US)

EPA Effective Project Approval

FAA Financial Administration Act

FTE Full Time Equivalent


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Public Works and Government Services Canada v

GBO Government Business Opportunities

GCRs Government Contract Regulations

GETSGovernment Electronic Tendering System

GFR Government Furnished Resources

IM/IT Information Management/Information Technology

IP Internet Protocol

IPPD Integrated Process and Product Development

IPS Informatics Professional Services

IPT Integrated Procurement Team

IT Information Technology

LOI Letter Of Interest

LSAR Logistics Support Analysis Record

MA&S Material Acquisition and Support

MCP Major Crown Project

MOU Memorandum Of Understanding

MPSL Major Project Service Line

MRP Manufacturing Resource Planning

NAFTA North American Free Trade Agreement

NDI Non-Developmental Item

NSN NATO Stock Number

OBS Organization Breakdown Structure

P&A Price and Availability

P&PP Project and Procurement Planning

PFC Pre-Facilitated Contract

PIP Project Implementation Plan

PMBOK Project Management Body Of Knowledge

PMI Project Management Institute

PMO Project Management Office

PMP Procurement Management Plan

PNs Part Numbers


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Public Works and Government Services Canada vi

PO&M Personnel, Operations and Maintenance

PPA Preliminary Project Approval

PPMProject Procurement Management

PPMS Project Performance Management Standard

PPRA Project Profile and Risk Assessment

PRC Procurement Review Committee

PWGSC Public Works and Government Services Canada

RCI Request for Contractor Information

RFP Request For Proposal

ROM Rough Order of Magnitude

SAR Search and Rescue

SEI Software Engineering Institute

SI System Integration

SOA Special Operating Agency

SOI Solicitation Of Interest

SOO Statement of Operational Objectives

SOP Solution Oriented Procurement

SOR Statement of Operational Requirements

SOSB Supply Operations Service Branch

SOW Statement of Work

SPAC Senior Project Advisory Committee

SRB Senior Review Board

SS(ID) Synopsis Sheet (Identification)

S&SS Solicitation and Source Selection

TB Treasury Board

TPP Total Package Procurement

TQM Total Quality Management

UGD Unique Government Development

WBS Work Breakdown Structure

WTO-AGP World Trade Organization-Agreement on Government Procurement


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Public Works and Government Services Canada 1


1. FOCUS OF THE PPM TEMPLATE

Among a broad range of common services, Public Works and Government Services Canada(PWGSC) provides procurement services to federal government departments and agencies. Ofthe $8 Billion annual expenditure on goods and services, roughly half of this expenditure is inthe area of complex procurement that is characterized by significant technical and business risk.

Project Procurement Management (PPM) is the effective integration of project management

principles and practices in the procurement process. PPM is the PWGSC discipline applied tomajor acquisition and support projects.

The PPM Template presented in this document is based on work processes and the businessenvironment of the Aerospace, Marine and Electronics Systems Sector (AMESS), andspecifically, the Major Project Service Line (MPSL) that manages the government's mostcomplex and sensitive project undertakings, characterized by capital expenditures above $50Million (CAN), with significant risk and project management implications.

Within PWGSC there is a well-known distinction between standard and complex procurement.The former is transaction based, characterized by the purchase of commercial goods and servicesusing automated techniques and customer direct-order supply arrangements, such as standingoffers. Individual transactions are relatively low dollar value and thousands of contractualdocuments are issued1. The focus is on Part Numbers (PNs), NATO Stock Numbered (NSN)items and Commercial-Off-The-Shelf (COTS) procurement. In comparison, complexprocurements are higher dollar value, more complex, often involving development, integration,business process change, or outsourcing. Complex procurement typically results in fewercontractual transactions, and far more effort in project and procurement planning, sourceselection, and contract management.

Figure 1 illustrates both standard and complex procurement types. On the far left of the figure,Client Delegatedprocurement activity is performed locally by the client departments within theirdelegated authority. Catalogued item procurement refers to the simplest type of procurementperformed by Supply Operations Services Branch (SOSB), where technical compliance, priceand availability are the main selection criteria. Simplified procurement is one step up on thecomplexity scale because there may be a simple Statement of Work (SOW) or technicalspecification, or there may be additional selection criteria2.

1 Taken from the SOSB BPR Requirement, 14 September 19982 Taken from the SOSB BPR Requirement, 14 September 1998


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DEGREE OF COMPLEXITYLOW HIGHDELEGATED PROCUREMENT

AUTHORITY

PWGSCEnablers -

Standing

Offers,

Catalogues

LocalPurchase

Orders

SOSB

Facilitated

COMPLEX PROCUREMENT

SOSB

Contracted

SOSB

Contracted

STANDARD PROCUREMENT

Goods &

Services Requests

Client DelegatedProcurement Process

ManufacturersPart Numbers,

NATO Stock Numbers,

Commercial-Off-The-Shelf

Low Risk andComplexity

Simple Spec/SOW

Quick Competitions,

Electronic Business

Via Internet

Catalogued Item

ProcurementProcess

Review Policies Reduce Open Bidding

Times Pre-Qualify Vendors

Use of E-Business

Simplified

ProcurementProcess

Higher Risk,Complex SOW,

Pre-Facilitated Contracts,

Capital Equipment,

Major System Procurement

Integrated

Procurement Team,

Contract Management

Framework based on Risk,

Contract Administration

and Resources onContractors Site

Integrated

Procurement

Team

Figure 1 Procurement Types3

There is only one category of complex procurement shown in Figure 1; however in reality thereare many gradations of complexity. What distinguishes complex procurement is the need forteamwork between SOSB, the client department and industry through an integrated procurementprocess to ensure a successful project. This teamwork involves more extensive and earlierteaming with the client, and consultation with industry in order to better define the procurementrequirements and position the solicitation process.

2. FORCES FOR CHANGE

In Canada complex procurement is an instrument of public policy. The social, industrial andeconomic objectives of federal government procurement projects are identified in Figure 2. Thegovernment Treasury Board has emphasized that all procurement must be guided by principlesof value for money, fairness, openness, and transparency. In large, sensitive procurements the

interests of regional and industrial policy and priorities come into play through a network ofadvocacy organizations.

3 Taken from SOSB BPR Report, dated 14 September 1998


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SOCIAL, INDUSTRIAL AND ECONOMIC OBJECTIVES

Within the constraints of trade agreements, contribute to a favorable balance of

payments, by ensuring that sufficient expenditures occur in Canada to offsetproject expenditures in other countries

Develop the nations industrial base by taking advantage of opportunities

presented by major projects to expand Canadian industrial capability in terms of

technological opportunities, managerial capability, and production capacity

Improve Canadian competitiveness in world markets by stimulating Canadian

exports and promoting replacement of imports

Provide employment, especially in economically disadvantaged regions of the

country

Consistent with government obligations under Comprehensive Land Claims

Agreements, take into account the current capacity and increased ability over

time of aboriginal firms, within settlement areas, to compete for and tosuccessfully complete government contracts.

Figure 2 Social, Industrial and Economic Objectives

Within the last several years, national legislation, international trade agreements and aboriginalland settlement agreements have been added to the procurement context. The North AmericanFree Trade Agreement (NAFTA), the World Trade Organization Agreement on GovernmentProcurement (WTO-AGP), and the Agreement on Internal Trade (AIT) govern much of federalgovernment procurement. The Canadian International Trade Tribunal (CITT) is a quasi-judicialbody that investigates complaints by potential suppliers. When the CITT investigates a

complaint, it makes a determination and recommendations, for example, re-evaluation, re-tendering or providing compensation. The recommendations of the tribunal are generallyimplemented by the government organization in question.

The federal government has been downsizing in recent years. In the Supply Operations ServiceBranch (SOSB), program reviews and employee departure programs have reduced the workforceby about 30%. During this period the procurement environment has become more complex.Both internal and external audits and challenge processes are signalling that some corecompetencies are suffering due to a lack of experienced personnel.

As a result of these environmental changes, there is a need to provide guidance and tools for

complex procurement. The purpose of the Template is to assist procurement managers andtheir teams in perf orming work more eff ectively. Also, it will assist MPSL in identifyingcompetencies, and in related training and professional development initiatives. The template isalso intended to provide an orientation and reference for new employees, customers and otherstakeholders, and to support:


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A more disciplined, repeatable, and measurable process;

PPM competencies;

Training requirements; The capability and approach to benchmark the process; and

The capability to evaluate the process, products (i.e. RFP, Contract) and the peopleworking in complex procurements.

I t is not intended that the Template be used to generate policy for complex procur ement.

The PPM Template focuses on the procurement services of Major Project Service Line (MPSL)organization, although the processes are generic enough to be applicable branch-wide in complexprocurement. Annex A describes the range of MPSL procurement, project and program services

that are available to client departments. Some of the driving forces behind the template are: In conducting complex procurement, sophisticated strategies and models are used to

incorporate a range of business, technical, and program/project management practiceswhich require high skill levels;

The effects of downsizing, outsourcing, and business renewal in PWGSC, clientdepartments and industry means that it is no longer practical to rely exclusively onmentoring to maintain and pass on knowledge; and

There is a growing trend toward "projectising" work, even in program serviceenvironments, supported by knowledge repositories, accessible through Internet Protocol(IP) based technologies.

The PPM Template approach reflects several major initiatives currently impacting PWGSCprocurement operations. The first of these,La Releve is a public sector-wide initiative sponsoredby the Clerk of the Privy Council that seeks to modernize service delivery and re-position thehuman resources to meet present and future needs. The overall PWGSC initiatives supportingLa Releve are to:

Review the procurement process, mechanisms, and technology;

Improve the working environment, increase efficiency, reduce costs, and enhance humanresource skills;

Identify needed productivity improvements; and

Define the impact on PWGSC of the reengineering of PWGSCs largest single customer,the Department of National Defence (DND) and recommend responses that are alsosuitable for other client departments.

Another high profile PWGSC initiative is Benefits Driven Procurement (BDP). BDP is a set ofprocurement principles and processes that recognizes the sources and consequences of risk in


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complex project procurements, and promotes intervention at appropriate times. It has evolvedfrom experience in Information Technology and System Integration procurements. Under BDP,the contractor is brought in early, before the requirements are fully defined. The contractor

works closely with the customer in defining and implementing an appropriate solution. BDPseeks:

A reduction in procurement process time and cost to government and industry;

Long term business relationships between customers and contractors,

Continuous risk management;

Business-case management, and

The use of best practices.

The PPM Template incorporates BDP processes that have been identified for information

technology and systems integration projects.

In September 1998 the SOSB business process renewal study phase was completed. The keymessage in the Report is the need to:

Respond to the Shift

in Business

- from transaction to knowledge-based procurement.

Foster a Results

Oriented Culture

- methods for meeting productivity demands and governmentprocurement objectives will require employees to assume greaterresponsibility and accountability in meeting client needs and

managing contractual risks.

Prepare for

Electronic Business

- select Information Management/Information Technology (IM/IT)tools that ensure a lead role in the selection and management of E-Business tools.

Create a Learning

Organization

- provide the necessary resources to sustain the change effort,communicate best practices, lead communications, and support alearning organization culture.

The Template also considers acquisitionprocess change underway in DND, for example:

Equipment

Management Teams

- organizational alignment by system being procured or supported;

New relationships

with industry

- such as long term business relationships, for example in partnering,support and bundling of procurements using Pre-FacilitatedContracts (PFC);


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Alternative Service

Delivery (ASD)

- provision of non-core services by the most appropriate means.After evaluation of alternatives, a government agency or industrywill be chosen to provide the service whichever is the most cost

effective.

Strong preference for

teaming

- that integrates procurement and project management capabilityoutside functional stovepipes.

The new procurement methods, such as BDP, PFC and ASD are addressed later in the Template.However, it should be noted here that such methods demand a very knowledgeable PWGSCContract Authority able to devote considerable time to individual complex procurements,supported by project management and contract process expertise.

3. THE PPM TEMPLATE AND DESKTOP TOOL

PWGSC and customer procurement personnel do not have a comprehensive, easy-to-useguidance document to assist them in doing their work. This need led to the development of thePPM Template and its presentation on a desktop computer tool.

The idea of the desktop originated in the US Department of Defense (DoD). A Canadian versionis being created by the Department of National Defence (DND) as part of its Acquisition Reforminitiative. The MPSL desktop will be linked in the area of common processes to that of DND, inorder to ensure compatibility, and to maximize the synergy of guidance tools being used by thetwo departments.

The PPM Template has two immediate customers. First, the MPSL has a requirement for theTemplate (and the related training gap and needs assessment) as a deliverable for the BranchBusiness Plan. Second, the branch-wide business renewal process defined a requirement for aContract Management Framework (CMF) in response to various audits, effectiveness studies andfocus group feedback. Detailed activity level templates are being prepared to provide guidancein preparing project and procurement documents, and for different PPM processes, for example,contract management.

The Template will be linked through the MPSL web page4 with information on policy, guidance,training and innovative procurement practices, including a library with search and query

capability.

The Template will also be made available as part of a desktop tool, and in Work BreakdownStructure (Annex C) and wall chart (Annex E) formats. In addition to the template or processview, the desktop tool will contain several other views that allow users to find related

4 MPSL web page: http://www.ames-mpsl.com


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information or ask questions and provide input to the desktop repository. The main view of thedesktop tool is shown in Figure 3.

DESKTOP

MAIN VIEW

PROCESSES

TOOLS

TRAINING

WHATS NEW

LIBRARY

SEARCH

QUERY

People

Processes Tools

EDUCATION AND TRAINING

STRUCTURED BUSINESS PRACTICES

PROJECT PROCUREMENT

MANAGEMENT

Figure 3 Desktop Tool Main View

The desktop tool enables direct support of all those performing procurement activities who needguidance, templates, computer tools, etc. Updates are immediately available to all users, withoutthe previous cost and time delay associated with distribution of paper. Also, feedback can bereadily obtained electronically, enabling lessons learned for example, to be provided when theyoccur rather than months or years later.

4. INTEGRATED PROCUREMENT TEAMS

One of the acquisition reforms in the US, UK and Australia is the introduction of integratedproduct and process teams. Benchmarking studies have concluded that using such teams is aCore Best Practice (CBP) for organizations that manage project business.5 Multi-disciplinaryproject teams improve the effectiveness of project decisions and work delivery. Many customerand contractor organizations have replaced functional stovepipes with teams and integratedprocesses that support this concept. The U.S. Department of Defense (DoD) acquisition projects

use teaming arrangements that involve government and industry in the development ofequipment, software, and business systems.

The IPT is a natural evolution of the industry concept of concurrent engineering that replaces thelengthy, sequential processes of design-production-logistics engineering with a much shorter and

5 Project Management Institute (PMI) Benchmarking Research Report, Page 22.


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more effective and integrated process. The IPT is characterized by physical co-location ofintegrated teams, concurrent design, production and logistics engineering; parallel, incrementalproduct and data releases; electronic data replacing paper, GroupWare and collaborative work

tools; and overall, integrated product teams and management structure

6

. The IPT may alsoinclude joint contractor and customer decision making through alliances or long-term businessrelationships.

In Canada, federal organizations take on very little system design and development. Mostdevelopment effort involves modification of existing products to suit customer needs. In DNDprojects, the IPT has been adapted to the modest scope associated with "development effort", andthe customer does not share design authority responsibility with the contractor. However, theIPT approach has a significant impact on the contractor. With the IPT approach, contractorsneed not write many of the documents now used to describe how it conducts project business.These business practices should be evident to the government team members who participate in

the project along side the contractors personnel. Depending on the contract provisions, projectbusiness processes can be influenced by all team members.

In the Template, the phrase Integrated Procurement Team (IPT) has been used to describe theteam concept. (DND uses the term: Integrated Project Team.) One of the most importantrecommendations from PWGSC and DND business process renewal is the early formation of theIPT. Larger projects often have specialists in functional areas, such as systems engineering andintegrated logistics support. Some teams will have a member from Industry Canada who willaddress Industrial, Regional and Aboriginal Benefits. A few projects will also have a small teamco-located with the contractor. The concept of an IPT is illustrated in Figure 4. Significanteffort needs to be devoted to training procurement personnel in the reform concepts that arebeing implemented, for example the roles of IPT members in relation to departmental mandates.

OperationsTechnicalFinance

Contracting

CLIENT DEPARTMENT

CONTRACTOR

PWGSC

OTHER

DEPARTMENTS

r Use of information technology

r Shared access to computer tools and databases

Figure 4 Integrated Procurement Team

6 Taken from the Canadian Government Procurement Guide, B.F. Hough, CSC.


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"During interviews conducted as part of the PWGSC and DND business process a common

theme was the importance of adequate staffing to manage the procurement. Obtaining qualified

people, ensuring adequate training, avoiding excessive staff turnover, and benefiting from priorproject management experience were all concerns. Human resources deficiencies can adverselyaffect the ability of a project office to progress in a timely and efficient manner.7"

This research suggested that SOSB and client departments no longer have the necessaryexperienced personnel to manage complex procurements. To partially offset this problem, manyproject offices have obtained expertise and assistance by contracting for support. Examples are:

Establishing a cadre of contractor support staff called a Project Management SupportOffice - to provide specialized engineering, logistics and project management support;

Hiring experts in specialized topics where such highly skilled resources are not available

within the Branch; and Hiring consultants to perform or assist with time consuming tasks, such as drafting the

Statement of Work and specifications8.

These concerns are being addressed by MPSL in the competency/gap/training and recruitmentprocess, and in DND through implementation of the Project Management Occupational Analysisand related improvements in training.

Figure 5 illustrates the project procurement life cycle, and the five (5) the PPM phases. IPTmembers work together throughout the project to achieve the procurement objectives.

Objectives &

Constraints

Defined

Solution

Defined

Requirements

Defined

Product

Accepted

Delivery &

Installation

CompleteLogistics

Support

Fielded

Statement of

Requirements

PerformanceSpecification

Detailed

Specifications

TIME

ACQUISITION

MILESTONES

Maintenance

Plan Test &

Evaluation

Reports

Support

Planned

Product

Qualified

Product Baseline

KE Y

DOCUMENTS

EFFORT

INDUSTRY

GOVT

PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5

Figure 5 Complex Procurement Effort Profile

7 DND and PWGSC interviews conducted in 1998.8 Taken from DND Acquisition Reform Guide, Team Leader G. Reinhardus, Author B.F. Hough.


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5. PROJECT PROCUREMENT MANAGEMENT FRAMEWORK

The approach taken in defining the Project Procurement Management (PPM) business process

was a topdown, hierarchical method comprising the following elements:

Governance and

Accountability

Framework

- a review of government, central agency and departmental mission andbusiness planning documents to verify that PPM is an initiativeconsistent with the current vision for the Branch.

PPM Concepts - were developed to link PPM activities with goals, competencies andresponsibilities.

PPM Process

Template

- were defined to relate the objective of each activity to the process and itsoutput/outcome.

PPM Activity

Templates

- are being prepared in order to provide detailed guidance for each PPMprocess. These templates will contain how to information that will becontributed and maintained by subject matter experts.

The PPM processes identified in the Template are shown in a Work Breakdown Structure (WBS)in Annex C. Sample Activity Templates are contained in Annex F.

5.1 Phase 1 - Project and Procurement Planning (P&PP)

The Guide to the Project Management Body Of Knowledge (PMBOK) defines the procurementplanning process as "determining what to buy and when"

9. The process includes identifying

project needs that can be best met by procuring products or services outside the projectorganization.

The concepts presented in Table 1 are aimed at giving a high-level view of PPM in relation to theproject phase goals, responsibilities, and needed competencies. PPM is also linked to inputs,tools and techniques, and outputs of the project phase.

9 PMBOK, Procurement Page 132.


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Table 1 PPM in the Project and Procurement Planning Phase

COMPETENCY AREA GOALS10 RESPONSIBILITY

IPT = Input D = Decision

Financial Management Confirm project priority and affordability D = Strategic, financial and userorganizations

Project/TechnicalManagement

Determine or confirm project feasibility IPTD = Project Leader/Manager/Director

Capability Assessment Assess project organization capability D = Project Leader/Manager

Risk Management Assess the project risks IPTD = Project Manager

Procurement Management Determine allocation and IPTmembership

IPTD = Project Manager

Procurement Management Determine the overall procurementapproach


INPUTS TOOLS & TECHNIQUES OUTPUTS

Program approval to proceedwith planning

System or commoditydesignation

Concept/Development phase outputs

Project and Procurement businesscapital plans and resource forecasts

Planning for P&PP phase anddefinition of project performanceobjectives

File allocated within Branch, and IPTdefined

Business Requirements and Case Business Case Template Life Cycle Costing Model

Statement of Operational

Requirements (SOR)

SOR Template and preliminary

SOW/SPEC

Project Scope Statement and Work

Breakdown Structure (WBS)

COTS, SOP, UGD11 content

Results of Capability & RiskAssessment

Capability and risk impacts Mitigation plans and action

Project constraints andassumptions

Expert judgement Refine/integrate with risk planning

Options analysis, trade-offstudies

Surveys, Market/Product Research,Letter of Interest

Potential Sources of Supply andCapability Assessment

National objectives inprocurement

Industry Canada review Procurement Review Committee12

Record of Decision

Other planning outputs Preliminary WBS, cost, schedule,quality, cash flow, risk management

planning, phasing, gates, ramps

Procurement Management Plan (PMP)- draft

10 The idea of linking PPM processes to goals and inputs-outputs is taken from the BDP Guide (Godcharles, Goulet and Fournier) and thePMBOK.11 Commercial-Off-The Shelf, Solution Oriented Procurement, Unique Government Development these are Treasury Board Secretariat defined

procurement strategies12 For major Crown projects, the Senior Project Advisory Committee; for R&O, the Advisory Committee on Repair and Overhaul


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5.1.1 Validate Requirements

Validate Requirements starts with review and analysis, from a procurement perspective, of the

outputs of the client departments project identification phase. Based on the review of the draftrequirement documents, the procurement responsibilities, including planning and control aredetermined, and the Integrated Procurement Team (IPT) membership is determined.

The process is defined in the Supply Manual Memorandum Of Understanding (MOU) ofProcurement Activities as: the definition of operational needs13. It starts with problemidentification and is completed with the start of the Development Phase when a number ofoptions to satisfy the requirement are examined. Validate Requirements is the first point ofcontact between an SOSB account manager and customer requirements and/or project officestaff. This contact may occur prior to or during the identification/concept phase when the projectobjectives and requirements are being defined. The typical program management activities in

the identification phase are:

Description of the operational deficiency;

Identification of potential solutions in broad terms;

Rough Order of Magnitude (ROM) cost estimate;

Creation of Project Charter;

First Statement of Operational Requirements (SOR) or Business Requirements; and

Identification of cash phasing in the capital planning process.

In DND, the Identification Phase culminates in a Program Decision Document, the SynopsisSheet (Identification) or SS(ID). The purpose of the SS(ID) is to obtain:

Agreement on the deficiency or need;

Agreement on the proposed options to be examined;

Funding for the Development Phase; and

Planning approval for the anticipated capital cost.14

The PPM Process in the Project and Procurement Planning Phase is shown in Figure 6. Eachprocess is then described below.

13 DND/PWGSC Responsibility Matrix, Page 3.14 CFP 125, Chapter 7, Page 46. Note: This is not capital project cost approval.


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PHASE 1 PROJECT AND PROCUREMENT PLANNING15

VALIDATE REQUIREMENTS

Analyze (Review Clients) Requirement

Define Performance Objectives

Determine Allocation and Teaming

Identify and Form Integrated Procurement Team (IPT)

Define Procurement Concept

Identify Sources of Supply

Identify and Define Procurement Concept

Refine Performance Objectives

Prepare Procurement Management Plan (PMP)

Figure 6 Project and Procurement Planning Process

5.1.1.1 Analyze (Review Clients) Requirement

Objective: To understand the problem, deficiency, or opportunity; tounderstand the views of the sponsor and stakeholders; to ascertain the state ofrequirement documents; and to determine the project management required

for the procurement.

Process: Contact the project sponsor and stakeholders. Review thepreliminary requirement documents and background project documentationsuch as the deficiency description, ROM estimates, Project Charter, WorkBreakdown Structure (WBS), and Risk Assessment to determine procurementimplications and obtain inputs for the Procurement Management Plan (PMP).

Output: Customer contact is made, project and requirement documents arereviewed and analyzed, and procurement implications are determined ThePMP is started for the project, with inputs from key documents and contactpoints.

Define Performance Objectives

Objective: To assist the client department in defining the top-levelacquisition objectives of the project.

15 The PPM process is shown without numbering. Annex C contains a numbered of WBS view of PPM.


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Process: Review requirements documents, such as draft Statement ofOperational Requirements (SOR) and the options analysis that identifyalternative ways to satisfy the required capability of the project. Since the

identified options are the basis for Development Phase trade-off decisions, theearlier that all credible solution alternatives are considered, the more quicklythe procurement can proceed. Since project performance objectives typicallyrelate directly to procurement objectives (expressed later as contractperformance requirements), it is essential that there is procurement input tothe customer at this point in the project.

Output: Project objectives expressed in the requirement documents and inthe Project Charter are clarified.

Determine Allocation and Teaming

Objective: To determine which SOSB organization and personnel shouldteam with the client department organizations to conduct the projectprocurement.

Process: The procurement file is allocated based on considerations such assystem or commodity designation, product and project managementcomplexity, and the need for planning, control and risk management expertisein support of the procurement. Teaming within and between sectors also isidentified where procurements cross organization boundaries.

Output: File allocation, SOSB and sector teaming is identified and recordedin the PMP. The Contracting Authority office and individual file holder is

identified as the single point of contact with customer requirements staff andthe Project Manager. Teaming within and between sectors is established. Thesource of particular expertise, for example planning and control, is identified.

Identify and Form Integrated Procurement Team (IPT)

Objective: To identify and assign the IPT members that will be responsibleto execute the end-to-end procurement process, including the transition fromcapital acquisition to operations and support procurement.

Process: The IPT is formed at the call of the Project Manager, and inconjunction with other product or process teams supporting the projectobjectives. The IPT is composed of core members (technical specialist,logistics/financial specialist, operations specialist (user representative),contracting specialist and many supporting specialists that provide, forexample, legal, cost, risk, policy, trade agreements, and security advice.Figure 7 illustrates operation of the IPT.

The IPT operates under the direction of the Project Leader from the clientdepartment. Under the Project Manager, the core team accomplishes the


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many tasks in the procurement process. The specialists provide inputs asneeded. Interaction with industry is via procurement instruments, such as theRequest For Proposals and resulting contract. The selected contractor is

responsible for satisfying the specified requirement by developing/providingthe needed new or enhanced operational capability.

Output: IPT membership and responsibilities are established and recorded inthe PMP.

REQUIREMENT PROCUREMENT PROCESSOPERATION

CAPABILITY

CORE TEAM

Project

Management

Operations Technical

Contracting

Finance

PROJECTLEADERS

DIRECTION

INTERACTIONWITH

INDUSTRY

SPECIALIST SUPPORT

Policy Advise

Risk Assessment

Quality Standards

Expertise

Test and Evaluation

Capability

Configuration Management

Support

Documentation Support

Supply System

Expertise

Security Advice

Legal Advice

Cost Accounting

Figure 7 Integrated Procurement Team Concept

5.1.1.2 Define Procurement Concept

Using the output of Validate Requirements, this process identifies potential sources of supply,links project and procurement objectives, and starts the formal procurement planning process.

Identify Sources of Supply

Objective: Using requirement documents, suppliers are assessed to verify theavailability of products that meet the requirements; their ability to modifyproducts to meet user requirements; and their willingness to propose solutionsthat maximize Commercial Off-The-Shelf (COTS) product and servicecontent.


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Process: Researching sources of supply can involve interaction with users,contacting companies for information, and getting source and productinformation from other users (e.g. allies) or mining the wealth of information

on the internet.

16

In addition to these methods, technical journals, unsolicitedproposals, Price and Availability (P&A), catalogues and conferences, surveys,and plant visits are techniques to identify potential sources. Information onthe historical performance of these sources can also be useful, even at thisstage of planning. This Process should stimulate industry interest in theproject, and focus on their capability to adapt existing (COTS) solutions to theproject requirements. PWGSC provides a valuable service to clientdepartments in assisting with Market Research as suggested by Figure 8.

Output: The potential sources of supply, and the procurement assessment ofthe COTS alternatives identified for the project are recorded in the PMP.

MARKET RESEARCH SERVICE

Before buying goods and services, get to know the market.

Availability of products to meet the requirement as is;

Ability of suppliers to modify their products to meetthe users requirement; and

Flexibility of users to modify their requirements to

allow the purchase of commercial-off-the-shelf goods

and services.

SOURCES OF SUPPLY

USERS ALLIES INTERNET JOURNALS COMPANIES . . .

Figure 8 Market Research Service

Identify and Define Procurement Concept

Objective: To identify and conduct preliminary analysis of considerationsthat will impact the procurement strategy.

Process: The procurement concept includes an examination of topics such as:

Identifying opportunities for using Benefits Driven Procurement(BDP). In this phase the Project Team is:

Preparing a Business Case

16 DND Acquisition Reform Guide, Team Leader G. Reinhardus; Author B.F. Hough.


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Determining if information technology solutions for the needexist

Performing an evaluation of the departments project

management and software process management capability Preparing project scope and risk assessment

Assess applicability of the BDP approach and seeking projectapproval

In addition to BDP considerations, the procurement concept involvesconsideration of:

Canadian vs. off-shore industrial capability, that may requireassessment of major policy and trade legislation issues

Need for Government Furnished Resources (GFR)

Technology transfer, patents, licensing and royalty issues

The overall procurement timeline and process; major projectand contract milestones

Preliminary identification of procurement effort/resource level

Target cost and cash flow

Identification of appropriate authorities (technical, design,system, inspection, quality assurance)

Need for and coordination of interdepartmental or internationalagreements

Identification of relevant standards and templates for technicaland project management disciplines

Project Management needs and capability

Risks and mitigation strategies17

With the introduction of trade agreements like NAFTA, WTO-AGPand AIT, the non-competitive approach to the procurement process iscalled limited tendering. It is a deviation from the competitive processincluding the ability to contact a sole or single supplier or a number ofsuppliers individually. The conditions under which limited tenderingmay be used are very specific, and the Supply Manual, paragraph5.030 should be consulted for the details. In all cases the client mustprovide the rationale for exceptions to competitive procurement beforea procurement strategy that uses limited tendering can be followed.

The appropriate procurement approach for the project depends upon manyfactors, such as the nature of the project, the time and resources that you haveand the market place availability of a solution.

The points of involvement and resulting effort profiles vary, depending uponthe procurement concept selected. For example, under BDP, industry is

17 Canadian Government Procurement Guide, B.F. Hough, CSC.


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brought in when the project objectives are clear, but requirements have not yetbeen specified. The requirements definition work is largely transferred toindustry. Under Commercial-Off-The-Shelf procurement, product

development effort and risk is avoided. However, the specific (logistics)support requirements must still be planned. With Total Package Procurement,life cycle product support is provided by industry, and maintenance planningis simplified18.

Feedback on the Procurement Concept should be sought within the IPT(s) andfrom potential sources of supply.

Output: A preliminary review and analysis of factors contributing to theprocurement concept is recorded in the PMP. In many cases, this analysis willraise questions that may not be answered until later in the procurementprocess, or conditions may change, requiring further review of how thesefactors will influence the procurement.

Refine Performance Objectives

Objective: To review and refine the procurement objectives using feedbackfrom within the IPT and from potential sources of supply.

Process: Using the outputs of early dialogue with industry, requirements andbusiness planning documents, the procurement concept, and the project lifecycle methodology, review and refine the procurement performanceobjectives.

Output: Using project, requirements, and procurement planning and industry

feedback (e.g. homepage, industry days, plant visits, company presentations),update the performance objectives and requirement documents. This resultsin revisions to requirements definition documents, such as Statement ofOperational Requirements, Statement of Objectives, Business Requirementsand any preliminary specifications.

Prepare Procurement Management Plan (PMP)

Objective: To integrate the planning effort of the IPT in a single procurementplan that will be used for overall management, coordination andcommunication of procurement activity, and as the basis for the contractapproval strategy.

Process: Using information gathered in the activities to date, prepare a draftof the PMP and review it within the IPT. The PMP evolves over the life ofthe procurement as it adds content on project, contract management andcontract administration activities. An outline of the PMP is presented in

18 DND Acquisition Reform Guide, Team Leader- G. Reinhardus; Aughor B.F. Hough.


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Figure 9. The PMP is both a plan and a record of the key activities anddecisions during the life of the project procurement.

Output: The draft PMP is prepared.

1. Description

Requirement

Budget and Financial Code

Need Date

2. Policy Issues

Authorization Reference

Risks (Time, Cost, Performance)

Protection of the Crown

Contract Administration

3. Sourcing

Procurement Method

Trade Agreements

Competitive vs Sole Source

Multi-Sourcing

4. Evaluation Criteria

Best Price, Best Value, Best

Technical

Socioeconomic Considerations

5. Procurement Milestones

RFP Issued

Bids Closed

Contract Award

Deliveries Commence

Contract Complete

6. Additional Comments

Any additional information that

the Approval Authority shouldbe aware of.

7. Revisions To The Plan

Approved By:

Figure 9 Procurement Management Plan

5.2 Phase 2 - Solicitation Planning

The PMBOK defines solicitation planning as "documenting the project requirements andidentifying potential sources of supply"19. The process includes preparing all the documents thatwill be necessary in the solicitation and source selection phase. These concepts are presented inTable 2.

19 PMBOK, Procurement, Page 137.


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Table 2 PPM in the Solicitation Planning Phase

COMPETENCY AREA GOALSRESPONSIBILITY

IPT = Input D = DecisionMultidisciplinary Define Procurement Requirements in Bid

Solicitation DocumentsIPTD = Project Manager

Project/Procurement/TechnicalManagement

Determine contract scope (WBS), forexample bundling, PFC, BDP, ASDopportunities

Determine applicability of trade agreements


D Procurement Manager20

Multidisciplinary Define Contract Management andAdministration strategies

IPTD = Procurement Manager

Technical/Procurement/Cost &Pricing Management

Define evaluation methodology and basis ofselecting the winning bid


Procurement Management Obtain advance approval for procurementstrategy

IPTD = Procurement Manager

INPUTS TOOLS & TECHNIQUES OUTPUTS

Scope Documents: WBS,SOW, SPEC, Plans, cash flow

Document templates Requirements documentsconsistent with procurementstrategy and best practices

Draft Contract documents:T&Cs, SOW, SPEC, Plans,DIDs/CDRL, Master Schedule,WBS

Contract documents: T&Cs,SOW, SPEC, Plans,DIDs/CDRL, Master Schedule,WBS

Evaluation Methodology andBasis of Selection

Document templates Evaluation Plan- Methodologies,criteria (attributes, weighting,thresholds) and basis ofselection. Evaluation teamresources.

Potential Sources of Supply Guidance documents: Communication withindustry- Industry Days, feedback on draftsolicitation documents, site visits and

presentations

Suppliers aware of pendingprocurement, knowledgeableabout requirements in relation tocapabilities

Risk Mitigation Plans andResults

Procurement risk assessment, risk tools Update mitigation plans

Life Cycle Costing andpreliminary Estimates

Expert judgement, estimating techniques Independent estimates

20 In this context Procurement Manger is the PWGSC lead IPT position. Finance and logistics represents the DND procurement position.


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Solicitation planning processes are grouped under:

Define Procurement Requirements; and

Define Procurement Strategy.

Part I, the PPM Process in the Solicitation Planning Process, is shown in Figure 10. Eachprocess is then described below.

PHASE 2 SOLICITATION PLANNING (PART I)

DEFINE PROCUREMENT REQUIREMENTS

Define Business and Technical Requirements

Define Project Management Strategy

Define Risk Management Strategy

Define Contract Management StrategyDefine Delivery and Acceptance StrategyDefine Quality Assurance Strategy

Define Financial Management StrategyDefine Government Furnished Resources (GFR) Strategy

Define Bid Solicitation Strategy

Define Contract Administration Strategy

Define Scope of Contract(s)

Define Reporting Strategy

Define Approval Strategy

Define Change Management Strategy

Figure 10 Solicitation Planning Process Part I

5.2.1 Define Procurement Requirements

This group of processes involves developing procurement strategies and preparing thesolicitation documents and resulting contract(s). The emphasis is on defining strategies, withinthe IPT, for project and risk management, contract management and administration.

These strategies are defined during the project Development Phase when the selected options arebeing studied in detail. The process provides the Rough Order of Magnitude (ROM) costs(capital and personnel, operating and maintenance costs). It also identifies the benefits, risks and

opportunities of each option with a view to finding the best option to further define in detail, ifnecessary, during a Definition Phase. Options analysis is conducted in an iterative fashion,starting with an assessment of the various ways of meeting the need. For example, anoperational capability (e.g. sovereignty patrol) could be carried out in many different ways.Figure 11 illustrates options analysis and provides basic advice. In the development phase, onewould examine the options selected during the identification phase, before selecting long range


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patrol aircraft, and then define the particular aircraft that will best meet the operationalrequirement.

Define operational need

Identify options

Analyse each option

Select preferred option

Note: Stay at high level. Leave

implementation details to

industry.

Example:

0 50 100 150 200 250

6

5

4

3

2

1

0

TotalSystemC

ostPerPoundof

PayloadonStation

Aircraft Payload Weight (Thousands lbs.)

Antisubmarine Warfare Patrol Aircraft Operations

Source: Cost Considerations in Systems Analysis, G.H. Fisher, Rand, 1971

Conventional Jet Aircraft

Small Long-Endurance

Aircraft

Large Long-EnduranceAircraft

Figure 11 Options Analysis

Key program management activities in the Development Phase are:

Options analysis/feasibility studies to examine the capability levels that would beprovided by the options;

Cost estimates of both acquisition and life cycle support;

Assessment of industry capability in terms of technology, personnel and priorities;

Socio-economic21 and market studies;

Price and availability studies;

Refinement of the SOR;

Project Profile and Risk Assessment (PPRA)22 for large projects;

Shift of project leadership from sponsoring organization to the implementingorganization; and

Substantive estimate of the Definition Phase cost.23

21 Typically these are Industry Canada assessments of the project potential to generate Industrial Regional Benefits22 This is an assessment used by the Treasury Board Secretariat to determine how the project should be managed23 CFP 125, Chapter 7, Project Approval, a substantive estimate is one that is sufficiently accurate to support entering into contract


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5.2.1.1 Define Business and Technical Requirements

Objective: To define, in terms suitable for contracting, the operationalrequirement or business case, and the technical description of the operational

need, including applicable portions of specifications and standards.

Process: The definition of technical requirements is an iterative process thatstarts with operations/user personnel describing their needs in a Statement ofOperational Requirements (SOR) or in a Business Requirements document. AStatement of Operational Objectives (SOO) may also be used to define theprimary performance, operational and support system objectives of theproject. This permits earlier contractor participation in defining performancespecifications. In general, requirement documents should state performanceor functional objectives rather than require design solutions.24

In this phase, the SOR or Business Requirements should be refined with user,

stakeholder, and potential supplier input. Potential suppliers will need keyoperations, system and support information to assist in providing input on theSOR or Business Requirements, and or to help in preparing or validatingspecifications. 25

Many departments now require business case methodology to obtain approvalfor any capital major expenditure. Preparation of the Business Case, inconjunction with the business requirements document is commonplace inInformation Technology projects. Figure 12 describes a business caseanalysis approach that can be used to establish and maintain a businessrequirements baseline for the project.

24 Canadian Government Procurement Guide, B.F. Hough, CSC.25 Canadian Government Procurement Guide, B.F. Hough, CSC.


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BASELINE CURRENTPARAMETERS

IDENTIFYALTERNATIVES

FORMULATEASSUMPTIONS

2.

3.

4.

DETERMINEBENEFITS OF EACH

ALTERNATIVE

DETERMINECOSTS OF EACHALTERNATIVE

6.5.

COMPAREALTERNATIVES

PERFORMRISK ANALYSIS

MAKE

DECISION

IDENTIFYRISKS

8.7.

9.

10.

MAINTAINBUSINESS CASE

11.

DEFINEOBJECTIVES

1.

Figure 12 Business Case Analysis

The process of preparing a business case involves:

Define

Objectives

- Define the required capability.

BaselineCurrent

Parameters

- Record the life cycle costs and benefits/shortcomings of the existing situation to provide abaseline against which to measure future costs andbenefits.

Identify

Alternatives

- Identify viable alternatives. (This step is iterative main alternatives are addressed first, then sub-alternatives.) Collect, organize, evaluate andsummarize necessary data.

Formulate

Assumptions

- Identify important assumptions up front. (These

become evident as the business case is developed.)

Determine

Costs

- Identify and estimate life cycle costs for eachalternative. Perform crosscheck analysis to validateimportant data.


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important to ensure adequate resources are available to the IPT to supportcontract management, for example, in the area of earned value management.

Output: The IPT defines and records in the PMP the project, risk and

contract management strategies that will be used in the contracting process.

Define Risk Management Strategy

Risk management is recognized by client departments as an important aspect of theacquisition process. A risk assessment is required as part of the project approval process.

Bidders are often required to identify significant risks and risk mitigation methods in their

proposals. Project implementation often involves preparation and implementation of a risk

management plan.27

Objective: To apply continuous risk management in the project procurement.

Process: Figure 13 illustrates the principles behind the Software Engineering

Institute (SEI) Continuous Risk Management model which has beenspecifically developed to apply to complex procurement projects, particularlyprojects involving significant design, development, and integration effort.These projects often involve risk to cost/schedule/performance objectives.Process, methods and tools that encourage communication and teamwork arepart of the full SEI model.

Source: SEI Continuous Risk Management Guidebook

COMMUNICATE

CON

TROL

IDEN

TIFY

ANALYZE

PLANCONTINGENCIES

TRA

CK

Figure 13 SEI Continuous Risk Management Model28

27 DND Acquisition Reform Guide, Team Leader G. Reinhardus; Author B.F. Hough.28 Continuous Risk Management Guide. Carnegie Melon University, Software Engineering Institute. Page 267.


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The steps in the SEI Continuous Risk Management Model are:

Identify Risks- Search for and capture risks before they become

problems. Capture statement of risk and context.

Analyze Risk

Data

- Transform risk data into decision-makinginformation. Determine what is important and setpriorities. Evaluate impact, probability, andtimeframe; and, classify and prioritize risks.

Plan

Contingencies

- Translate risk information into decisions andmitigation plans and implementation.

Track Risks

and Responses

- Monitor risk indicators and mitigation plans/actions.

Acquire, compile and report data on risk mitigation.

Control

Mitigation

- Correct for deviations from the mitigation plans.Corrective actions impact process and product.Change plans as needed. Analyze tracking data andmake decisions.

Communicate - Provide information and feedback on current andemerging risks. This is the key function that linksand drives the others. Steps are iterative, and eachstep is a vehicle for the communication of risk.

Given that much of the project risk occurs within the procurement process, itis important that risk management is a continuous process. Figure 14indicates the some methods that can be used to identify and manage risks, anda short discussion of techniques follows the figure.


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EXPERIENCE-BASED RISK MANAGEMENT

RISK IDENTIFICATION RISK ANALYSIS

Brainstorming

Structured Walk-Throughs

Problem Reporting

RISK TRACKING AND CONTROL CONTINGENCY PLANNING

Estimated Impact On:

Technical

Schedule

Cost

Socio-Economic Benefits Other

Technical Margins and Fallbacks

Slack in Schedule Contingency in Budget

Flexibility in Economic Benefits Risk Mitigation Planning

Risk Matrix in Bid

Risk Management Plan Risk Tracking Process

COMMUNICATION

Figure 14 Dealing with Risk29

Brainstorming is effective during early project planning. Whatproblems were experienced with similar projects? Are all stakeholderson side? Is the schedule overly optimistic? Is the state of the art being

exceeded?

Once a project plan has been developed, a structured walk-through ofproject information the work breakdown structure, critical pathmethod schedule, product breakdown structure, etc. can be used toidentify potential problem areas.

During project implementation, a problem reporting process should beestablished. Typically the government project manager and industrycounterpart can designate issues as risks to be entered into a problemtracking database. Each identified risk is assigned to someone, getwell plans are formulated and the risk is tracked to resolution.30

The project plan should include contingencies to allow for technical problems,work slippage, cost over-runs, and difficulties in accomplishing economicbenefits goals.

29 Systems Engineering Management, B.F. Hough, CSC.30DND Acquisition Reform Guide


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Define Delivery and Acceptance Strategy

Objective: To develop and record the strategy for continuous monitoring,

including feedback and corrective action, of activities associated with deliveryand acceptance.

Process: The strategy should address all mechanisms that will be used tomonitor delivery and perform acceptance, for example:

Establishing credible product/service delivery and in-service dates

Preparing acceptance criteria for deliverables

Monitoring of contractor progress reports; master, support, and special

schedules; earned value data; and the effectiveness of related projectmanagement processes including change control;

Packaging, Handling, Support, Transportation (PHST) (e.g. hazardous

materials) planning; and

Expediting and follow-up on delivery status and delays, andunsatisfactory performance until final delivery.31

Output: Strategy prepared by the IPT and recorded in the PMP of allmechanisms that will be used to monitor delivery performance and performacceptance.

Define Quality Assurance Strategy

Objective: To develop and record the Quality Assurance Strategy that will be

used to monitor contractor performance. Process: Quality Assurance processes include the ISO 9,000, 10,000 and

14,000 series standards and guidelines, proprietary approaches (e.g. Deming,Juran, Crosby) and non-proprietary approaches such as Total QualityManagement (TQM) and Continuous Improvement.

Quality Assurance is typically a technical specialist function, and a subjectmatter expert should form part of the IPT and should lead the effort to definethis strategy. The strategy should address the following elements:

Quality Planning (identification of standards and tailoring);

Quality Assurance (ensuring project/contract activity meets standards);

and Quality Control (monitoring project/contract results for compliance,

and resolving unsatisfactory performance).32

31 BPR Team #1 Report.32 PMBOK. Quality Assurance.


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With the cancellation by the US DoD of its military standards and the growinguse of international and commercial standards, it is becoming more difficult todefine quality and process related requirements. There are many competing

standards to choose from. Just staying informed about what standards exist,which are widely accepted, and what is the latest version, is a real challenge.Also, selection of any given set of standards may have unintended effects oncompanies ability to bid. This new challenge, highlighted in Figure 16,applies to quality assurance, engineering and logistics, and projectmanagement disciplines.

Output. Strategy prepared by the IPT and recorded in the PMP for QualityPlanning, Assurance and Control.

CHOOSING FROM A PLETHORA OF STANDARDS

- A NEW CHALLENGE IN PROCUREMENTINTERNATIONAL STANDARDS

INTERNATIONAL ASSOCIATION

AND INSTITUTIONS STANDARDS

PROPRIETARY

GUIDANCE

ISO 9,000 Series ISO 10,000 Series

ISO 14,000 Series

SEI - Capability Maturity Model

SEI - Continuous Risk Management

EIA - Configuration Management SAE - Failure Modes, Effects and

Criticality Analysis

IEEE - Systems Engineering

SOLE - Supportability

Deming

Juran

Crosby etc.

NON-PROPRIETARY

GUIDANCE Total Quality

Management

Continuous

Improvement

Figure 16 Choosing From a Plethora of Standards

Define Financial Management Strategy Objective: To develop and record the Financial Management Strategy that

will be used to monitor contractor performance.

Process: The strategy should address all mechanisms that will be used tomonitor delivery performance, for example:


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Verify the time, cost elements and other factors charged to thecontract;

Ensure that contract billings are in accordance with contract

provisions; Ensure that the work is performed; that products and services have

been delivered, or (in the case of progress payments) that work inprogress is reasonable and payment is in accordance with contractprovisions;

Correlate progress and earned value status and projections with actualand planned billings;

Monitor time recording system and cost accounting system;

Monitor contractor financial and cost/schedule performance; and

Verify financial input to contract closeout.

Output: Strategy prepared by the IPT and recorded in the PMP formanagement of cash flow, funds, budget, payment, cost, price and ratedetermination, and performance management.

Define Government Furnished Resources (GFR) Strategy

Objective: To develop and document the GFR Strategy that will be used tomonitor contractor performance.

Process: GFR should be provided on an exception basis only whencontractors cannot provide the appropriate resources. Coordination of theprovision of GFR may impose significant administrative effort on the IPT.

The timeliness and quality of GFR delivery brings with it contract risk and theneed to track the availability of incoming/outgoing resources in order to avoidconsequential delays and cost growth. The strategy should address allmechanisms that will be used to manage the GFR, for example:

GFR requirements in the form of information, materials, testequipment, system assets and personnel;

Agreements in the form of loans or other formal agreements; and

Tracking mechanisms to coordinate resource movements, repairs,upgrades, and corrective action at operational units/supply locationsand contractor facilities.

Terms and Conditions that specify rights and obligations with regardto GFR.

Output: Strategy prepared by the IPT and recorded in the PMP for GFRmanagement.


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Define Bid Solicitation Strategy

Objective: To develop and record the Bid Solicitation Strategy that will beused to solicit bids, evaluate proposals, select the winning contractor, and

negotiate an acceptable contract package.

Process: The strategy should address all mechanisms that will be used tomanage the bid solicitation, for example:

The main elements of the Solicitation Document (Certifications,Terms and Conditions, Statement of Work, Evaluation Criteria, Basisof Selection, Attached Documents);

The evaluation elements (e.g. Technical Proposal, Presentation andInterviews, Historical Performance and Risk Assessment, CostEvaluation);

The basis of selection (e.g. best price, best value, best technical)

The evaluation methodology (e.g. criteria, attributes, weighting,thresholds);

The evaluation plan (detailed process and scoring formats that thevaluation team uses);

Evaluation team (core members, subject matter experts, challengecommittee);

Debriefing unsuccessful bidders; and

Negotiation strategy and process.

Output: Strategy prepared by the IPT and recorded in the PMP for bid

solicitation.

Define Contract Administration Strategy

Objective: To develop and document the Contract Administration Strategythat will be used to administer the contract.

Process: The strategy should address all mechanisms that will be used toadminister the contract. Whereas contract management is concerned withperformance monitoring, contract administration deals with the day-to-dayadministration of the contract: verification and payment of claims/invoices;filing and data management; loan administration; and contract reporting.

Preparing for administration includes: Review of the procurement file to identify anticipated contract

provisions and preparation of a list of administrative functions;

Allocating contract administrative functions to various team members;

Providing notice and instructions to those involved in administration;


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After contract award, ensuring the contractor is notified of personnel,roles and delegated authority, and having contractor counterpartsnamed with their authorities; and

Considering past performance and issues that have occurred with thecontractor in performing contract administration.33

It is important that all team members know their administrative roles. Some

redundancy may be desirable in key areas. However, duplication between IPTmembers should be avoided.

Output: Identification of contract management and administration functionsto be performed, and the resources necessary to perform them, prepared by theIPT and recorded in the PMP.

5.2.1.3 Define Scope of Contract(s)

Objective: To develop and record the strategy for Pre-Facilitated Contracting(PFC), designation as a Benefits Driven Procurement, Alternative ServiceDelivery, Total Package Procurement, or other scope alternatives.

Process: Dramatically different contract scopes are now available to choosefrom. Opportunities to bundle and establish pre-facilitated contracts are nowbeing examined across systems and commodity classes on an ongoing basis.However, new opportunities will occur as acquisitions move into a supportmode, and personnel are encouraged to exploit these opportunities in order tomove from repetitive transactions into higher value contracting activity.

Figure 17 presents four different contract scopes. Each of these approaches

involves establishing a long term relationship with the contractor. EarlyPWGSC participation in planning is essential.

Output: Strategy prepared by IPT for Pre-Facilitated Contracts (PFC),Benefits Driven Procurement (BDP) application of Total PackageProcurement (TPP), Alternative Service Delivery, or some other approach,recorded in the PMP.

33 BPR Team #1 Report.


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CONTRACT SCOPE - CONSIDERATIONS

ALTERNATIVE SERVICE DELIVERY

Non-core services are competed between

industry and in-house provider

Costs are reduced for both retained and

contracted-out services

Logistics support is greatly simplified

BENEFITS DRIVEN PROCUREMENT

Contractor selection is based on

capability and track record

Contractor is brought in early before

requirements are fully defined

Government prepares statement ofobjectives in lieu of SOW/Specification

PRE-FACILITATED CONTRACTS

Related goods and services are bundled

Number of contracting transactions are

greatly reduced

Based on long term relationships with

competent supplier

TOTAL PACKAGE PROCUREMENT

Contract is for system and life cycle support

Basis of source selection is life cycle cost

Contractor guarantees reliability and bears cost

of excessive repairs/overhauls

Figure 17 Determining Contract Scope

5.2.1.4 Define Reporting Strategy

Objective: To develop and document the Reporting Strategy that will be usedto administer the contract.

Process: To define the format and content of contract management andadministration reports that will be required of the contractor. Care should betaken to minimize the reporting burden by tailoring required reports to thescope and complexity of the anticipated contract. Government and industryresources for oversight are limited, and it is important that reporting (indeedall contract data requirements), are reviewed before being specified in thecontract. Templates of Data Item Descriptions (DIDs) and Contract DataRequirements Lists (CDRLs) are often available from previous contracts,however each data item should be challenged as to its need and costeffectiveness.

Output: Strategy prepared by IPT and recorded in the PMP for contract andproject reporting.


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5.2.1.5 Define Approval Strategy

Objective: To define and document the Approval Strategy.

Process: To define and document the approval strategy applicable to theprocurement. Unless appropriate approval lead time is planned for, theprocess can impose delays on the overall procurement time-line pushing outcontract award and contractor delivery dates. BPR has recommendedincreased delegation, and a simplified approval and reporting system,however, these recommendations apply to complex procurements withindepartmental approval limits. Many complex procurements will requireTreasury Board Approval because of the size and sensitivity of publicexpenditure involved.

Output: Strategy prepared by IPT and recorded in the PMP for procurementstrategy approval, and contract approval and signing authorities.

5.2.1.6 Define the Change Management Strategy

Objective: To define and document the change management strategy thatwill be u