Project Management Professionals Hot Topics & Challenges 4 ... · PMP Webinar , Netcom Learning, Sohel Akhter (PMP, ISMS, CCNA) 1 Project Management Professionals Hot Topics & Challenges

PMP Webinar , Netcom Learning, Sohel Akhter (PMP, ISMS, CCNA) 1

Project Management Professionals

Hot Topics & Challenges – 4 procurement management

processes

Presenter: Sohel Akhter, PMP, CCNA,ISMS

PMP Instructor, Netcom Learning

Adjunct Professor , MBA program, CUNY

Topic: Understand PMI's 4 procurement management

processes in detail.

PMP Webinar , Netcom Learning, Sohel Akhter (PMP, ISMS, CCNA)

Agenda

4 Procurement management processes

1. Plan Procurement Management

2. Conduct Procurements

3.Control Procurements

4. Close Procurements

Questions?

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processes


Includes the processes to purchase or acquire the products, services, or results needed from outside the project team to perform the work. The organization can be either the buyer or seller

Includes the contract management and change control processes required to administer contracts or purchase orders issued by authorized project team members

Most large organizations have procurement departments that are ultimately responsible for soliciting, negotiating, administering and closing contracts

Also includes administering any contract issued by an outside organization (the buyer) that is acquiring the project from the performing organization (the seller), and administering contractual obligations placed on the project team by the contract

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processes


The Procurement

Management

Process

Done During Used For Key Outputs

1. Plan

Procurement

Management

Planning The process of documenting

project purchasing decisions,

specifying the approach, and

identifying potential sellers

Procurement Mgmt . Plan

Statement of Work(SOW)

Procurement Document

2. Conduct

Procurements

Executing The process of obtaining seller

responses, selecting a seller, and

awarding a contract

Selected Sellers

Agreements

3.Control

Procurements

Monitoring &

Control

The process of managing

procurement relationships,

monitoring contract performance,

and making changes and

corrections as needed

Work Performance Information

Change requests

Project Management Plan

Updates

4. Close

Procurements

Closing The process of completing each

project procurement.

Closed Procurements



processes


Make a make-or- buy

Decision

Create a procurement

mgmt Plan

Create the procurement

SOW

Select the appropriate

contract type

Create terms and

conditions, including

standard and special

conditions

Create procurement

documents

Create source selection

criteria

Find potential sellers

through advertising or the

internet

Send procurement

documents

Hold a bidder conference

Answer sellers’ questions

Seller makes a decision to

bid/propose

Seller creates the

proposals

Receive the proposals

Compare the proposals to

source selection criteria

using a weighting or

screening system to

pick/shortlist sellers

Receive presentations

from seller(s)

Compare to independent

estimates

Hold negotiations

Award Contract

Plan Procurement Conduct Procurement Control Procurement Close Procurement

Understand the legal

implications of your actions

Hold procurement

performance reviews

Request changes and

administer claims

Manage interfaces among

sellers

Report performance

Monitor performance

against contract

Review cost submittals

Make payments

Perform inspections and

audits

Maintain records of

everything

Perform a procurement

audit

Reach a negotiated

settlement

Create lessons learned

Complete final contract

performance reporting

Verify the product

Issue formal acceptance

Update records

Create a procurement file

Perform financial closure

Close Contract



processes


Project Procurement Management

Plan Procurement Management

Goals

• Is the process of documenting project purchasing decisions, specifying the approach, and identifying potential sellers. It identifies those project needs which can best be met by acquiring products, services, or results outside of the project organization, versus which can be accomplished by the project team

Inputs

• Project Management Plan

• Requirements Documentation

• Risk Register

• Activity Resource Requirements

• Project Schedule

• Activity Cost Estimates

• Stakeholder Register

• Enterprise Environmental Factors

• Organizational Process Assets

Tools and Techniques

• Make or Buy Analysis

• Expert Judgment

• Market Research

• Meetings

Outputs

• Procurement Management Plan

• Procurement Statements of Work

• Procurement Documents

• Source Selection Criteria

• Make or Buy Decisions

• Change Requests

• Project Documents Updates

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Plan Procurement Management: Outputs

Procurement Management Plan: Describes how project procurements will be managed, including

– What service, product or result will be produced.

– Types of contracts to be used.

– Who will prepare independent estimates and when.

– What procurements the project team may make on its own.

– Which standard procurement documents will be used.

– List prequalified sellers if there is any.

– How the sellers will be selected.

– How sellers’ performance will be measured.

– How procurement will be coordinated with other project aspects (scheduling, performance reporting).

– Assumptions and constraints related to procurements.

Procurement Statement of Work: Describes the subject item in sufficient detail to allow prospective sellers to determine offerings (bids, proposals, etc.)

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Plan Procurement Management: Outputs Procurement Documents: Used to solicit proposals from prospective sellers. Well-

designed procurement documents help in easier comparison of seller responses, more complete proposals, more accurate pricing and decrease in the amount of changes in the project.

– Request For Proposal (RFP): Buyer’s request to all potential sellers for the details of how work will be performed. May include specific questions regarding performance of work and aspects of the seller’s business (e.g. service capabilities, experience in this work, warranties, financing, etc. as well as

– Background information about the project goal, objective etc from buyer’s prospective.

– Procedure for applying.

– Guidelines for preparation of the response.

– Exact format of response required.

– Evaluation criteria that the buyer will use to evaluate the sellers.

– Pricing forms.

– Procurement Statement of Work.

– Terms and conditions.

– Invitation For Bid ( IFB or Request for Bid, RFB): Request from buyer for all potential sellers to submit a total price bid for work to be performed.

– Request for Quotation (RFQ): Request a price quote per item, hour, foot or other unit of measure.

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Plan Procurement Management: Outputs

Source Selection Criteria

– Developed and used to rate or score seller proposals, and can be objective or subjective.

– Understanding of need

– Overall or life-cycle cost

– Technical capability

– Risk

– Management approach

– Technical approach

– Warranty

– Financial capacity

– Production capacity and interest

– Business size and type

– Past performance of sellers

– References

– Intellectual property rights

– Proprietary rights

Change Requests

– Request for changes to the project management plan and other subsidiary plans or components

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Noncompetitive Forms of Procurement

– The project is under extreme schedule pressure

– A seller has unique qualifications

– There is only one seller who can provide the goods or services

– A seller holds a patent for the item you need

– Other mechanisms exist to ensure that the seller’s price is

reasonable

Two Types Noncompetitive Forms of Procurement

– Single Source (Preferred Seller)

– Sole Source (only seller)

Exercise: What type of issues might occur in term of scope, cost, quality, schedule, customer satisfaction and risk etc in a noncompetitive procurement that would not be as significant in a competitive environment?

Letter of Intent: A letter of intent is a letter expressing the intention of the buyer to hire the seller.

Privity: Contractual relationship

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Plan Procurement Management : Outputs



Conduct Procurements

Goals

• Is the process of obtaining seller responses, selecting a seller, and awarding a contract

• The team will receive bids or proposals and will apply previously defined selection criteria to select one or more sellers

Inputs

• Procurement Management Plan


• Source Selection Criteria

• Seller Proposals

• Project Documents

• Make or Buy Decisions

• Procurement Statement of work

• Organization Process Assets

Tools & Techniques

• Bidder Conferences

• Proposal Evaluation Techniques

• Independent Estimates

• Expert Judgment

• Advertising

• Analytical Techniques

• Procurement Negotiations

Outputs

• Selected Sellers

• Agreements

• Resource Calendars

• Change Requests

• Project Management Plan Updates

• Project Document Updates

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Conduct Procurements: Tools & Techniques

Bidder Conferences (Also called contractor conference, vendor conference, pre-bid conference)

– Intended to assure all sellers have a clear, common understanding of the procurement (technical requirements, contractual requirements, etc.)

– Can be THE key to making sure the pricing in the seller’s response matches the work that needs to be done

– Answers to questions may result in amendments to contract documents

During a Bidding Conference the project manager must be on the alert so that:

– There is no collusion among sellers and / or buying agents

– Sellers don’t save questions for later private meetings in order to gain a competitive advantage

– All questions are submitted in writing and issued to sellers as an addendum to the procurement document so all sellers respond to the same scope of work

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Conduct Procurements: Tools &Techniques

Proposal Evaluation Techniques: Many different techniques are used to evaluate proposals; all will use some expert judgment and some form of evaluation criteria.

– Evaluation criteria includes objective and/or subjective components and usually includes assigned predefined weightings.

– Proposal evaluation usually includes input from multiple reviewers who review input that is obtained during the Select Sellers process. Any significant differences in scoring are resolved at this point.

– An overall weighting system that determines the total weighted score for each proposal.

– Evaluation techniques can also include a screening system and utilize data from a seller rating system.

Weighting System: A method for quantifying qualitative data to minimize the effects of personal prejudice. Usually follows these steps:

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Assigning numerical weight to

each of the evaluation

criteria

Rating the prospective sellers on

each criterion

Multiplying the weight by

the rating (Optional)

Totaling the results to compute

overall score



Conduct Procurements: Tools& Techniques

Independent Estimates

– Sometimes known as in house cost estimates

– Often provided by consulting services

– These estimates may help judge whether the SOW was adequate in its description or the Seller fully understood or responded fully to the SOW

Expert Judgment

– Used to evaluate proposals

– Proposals are evaluated by multi-discipline review team with expertise in each of the areas covered by the procurement documents and proposed contract.

Advertising

– Seller lists may be expanded by placing advertisements in general circulation publications such as newspapers or professional journals

– Some Government procurements require this

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Conduct Procurements : Tools &Techniques

Screening System – A set of minimum criteria Seller must meet to be considered such

as:

– Proficiency with certain products or techniques

– Safety record

Past Performance History – Looking at the seller’s past history with the buyer

Presentations – Some of the sellers will be asked to make presentations of their

proposal so that the buyer can pick the most appropriate one

– Provides the seller with an opportunity to present their proposal, team and approach to completing the work

– Buyer get a chance to see the team that they may hire and assess competency, knowledge and ability

– Most often used when a cost reimbursable contract is used

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Conduct Procurements : Tools &Techniques

Procurement Negotiation

– Clarification and agreement on structure and requirements of contract prior to signing.

– Topics may include (among many):

– Responsibilities and Authorities

– Applicable terms and law

– Technical and Business Mgt. Approaches

– Price

– Contract financing

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Conduct Procurements: Outputs

Selected Sellers: The selected sellers are those who are in a competitive range based on the outcome of the proposal or bid evaluation and have been negotiated all the procurement related items, terms and conditions etc with.

Agreements: An agreement which is also called an understanding, a contract, a subcontract, or a purchase order is a legally binding, formal agreement between two parties which obligates the seller to provide the specified product, service or result and obligates the buyer to compensate for it.

Resource Calendars: A document containing the quantity and availability of resources and the dates each specific resource can be available or idle.

Change Requests: Changes Requested including changes to the project management plan and subsidiary plans/components.

Project Management Plan Updates: Cost, scope and schedule baseline in addition to procurement management plan can be updated.

Project Document Updates: Requirement document, requirement traceability matrix and risk register along with other relevant documents may need to be updated.

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Control Procurements

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Goals

•A Process of the Monitoring & Controlling Process Group

•The process of ensuring the Seller’s performance meets contractual requirements

•Usually undertaken by both the project team and the procurement department

•A key aspect of this process is managing the interfaces among the various providers

Inputs

• Project Management Plan


• Agreements

• Approved Change Requests

• Work Performance Reports

• Work Performance data

Tools & Techniques

• Contract Change Control System

• Procurement Performance Review

• Inspections and Audits

• Performance Reporting

• Payment System

• Claims Administration

• Records Management System

Output

• Work Performance Information

• Change Requests

• Project Management Plan Updates

• Project Documents Updates

• Organizational Process Assets Updates



Close Procurements

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Goals

•One of the two processes of the Closing Group

•Supports the Close Project process

• Involves:

•Product Verification

•Administrative Closeout (of the contract)

•Contract terms may prescribe specific procedures for closure

•Early Termination is a “special case” of Contract Closure

Inputs

•Project Management Plan

•Procurement Documentation

Tools & Techniques

•Procurement Audit

•Procurement Negotiations

•Records Management System

Outputs

•Closed Procurements

•Organizational Process Assets Updates



Close Procurements: Outputs

Closed Procurements

– The party responsible for contract administration provides the seller with formal written notice that the contract has been completed

– Requirements for formal acceptance and closure are usually defined in the contract

– Termination

– The contract should have provisions for stopping the work before completion

– It can be for a cause or convenience

– The buyer may terminate a contract for cause if a seller breaches the contract

– The buyer can terminate the contract if they no longer want the work done

– Rare for seller to terminate a contract but can happen

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Questions?

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processes

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