Procurement Management

Procurement Management Plan Procurement Management is the systematic approach used to acquire goods or services are from outside the organization. Procurement Management starts with a plan to ensure the needed goods are acquired from the proper supply without disrupting the project life cycle. Qualified suppliers become key stakeholders while a contract is active. Procurement Management Plan Project Name: Project Manager: Date: What Why When Who Other Description Type Reason Timing Owner Status Comments

If procurement is managed well, value can be added to the project and save time and money. Plan. First the PMP must figure out what is needed to achieve the project goals. This can be done by analyzing stakeholder needs, current capabilities of the team, or customer needs. Sustainability Cost Quality Delivery Align. Keep the team motivate and informed on project progress. A PMP should also continually evaluate the team to make sure they have the right people in the right positions. Some training, motivation, and resources may be needed. Procure. An efficient process should be set up to support the team and ensure the project goals are not delayed from the procurements. Actions here include finding suppliers, having RFPs prepared, and having a plan to evaluate suppliers. Manage. Make sure procurement process is going well and keep team leaders as well as stakeholders aware of the progress. Having a transparent overview of the process will help ensure accountability and coordination throughout the team.

The PMP must manage procurement throughout the entire cycle. Make or Buy Create Statement Of Work (SOW) Issue Request for Quote (RFQ) Receive Proposals Accept and Close Procurement Administer Procurement Select Sellers No Procurement Required Make Buy

First, the PMP creates a Statement of Work (SOW). Scope of Work: Statement of expectations as the client Period of Performance: Time period over work will be performed Place of Performance: Where the work will be done by the supplier Work Requirements: Description of all tasks required Milestones: Schedule of the deliverables Acceptance Criteria: How the deliverables will be accepted Other Requirements: Special instructions should be described here

There are several contracts that a PMP can create in the SOW. Some common contracts include: 1. Firm Fixed Price (FFP) – the price of the product or service is fixed and the specification are well known. Most risk is on the seller. 2. Fixed Price Incentive Fee (FPIF) – provides incentives for a fast or better services that what in the contract. 3. Purchase Order – for goods that come straight off the shelf with known rates that are published. 4. Cost Reimbursable (CR) – this contract is the buying of the expertise not of products. Here the outcome is hazy and there is risk for the buyer. 5. Performance – a contract point where the seller agrees to what the final product should be able to accomplish. 6. Functional – a contract where the seller agrees to what the end purpose of the product should be. 7. Design – a contract where the seller agrees to complete work per the design agreed upon with buyer.

The PMP must manage procurement throughout the entire cycle. Make Buy Make or Buy Create Statement Of Work (SOW) Issue Request for Quote (RFQ) Receive Proposals Accept and Close Procurement Administer Procurement Select Sellers No Procurement Required

Next, the Procurement Documents are created. Procurement documents are detailed enough to ensure that the work request to each seller is consistent and allows for comparable responses between sellers. These documents should also allow enough flexibility to allow the seller to make suggestions for a more efficient way to complete the requirements. Common Procurement Documents: Invitation for Bid (IFB) Invitation for Negotiation Request for Proposal (RFP) Contractor Initial Response Request for Quotation (RFQ) Tender Notice

Request for Quote (RFQ) A common Procurement Document is a Request for Quote, which includes all information the supplier needs to quote the work required. Request for Quote (RFQ) Summary and Background: High level description of the purpose of the RFQ Quote Guidelines: Description of what each vendor response should contain Project Purpose: Description of project work to be performed Project Scope: Details of requirements Project Timeline: Schedule of deadlines Budget: Request the vendor’s price to complete the work Bidder Qualifications: Description of criteria for a successful bidder Quote Evaluation Criteria: Description of how the quotess will be evaluated

The PMP must manage procurement throughout the entire cycle. Make or Buy Create Statement Of Work (SOW) Issue Request for Quote (RFQ) Receive Proposals Accept and Close Procurement Administer Procurement Select Sellers No Procurement Required Make Buy

Next, sellers send back the completed procurement documents. Receive Proposals: By the time frame given, vendors should send back their RFQs to be reviewed by the project manager. Returned procurement documents are prepared packages by the seller that includes all of the information asked by the buyer. The proposals should be received and reviewed in an unbiased manner. Criteria to look at when receiving supplier proposals: Past Performance of Supplier Technical capability and approach Understanding of Needs for Project Risk Overall or life cycle cost Management approach Financial stability and capacity Reference

The PMP must manage procurement throughout the entire cycle. Make or Buy Create Statement Of Work (SOW) Issue Request for Quote (RFQ) Receive Proposals Accept and Close Procurement Administer Procurement Select Sellers No Procurement Required Make Buy

The remaining steps are to receive proposals, select a vendor, administer procurement, and then accept and close procurement. Select Seller: The project manager will then select a seller based on predetermined criteria: cost, time frame, references Methods of selecting a seller include: Weighting System. This method involves adding numeric weight to qualitative data to minimize personal preference on sellers. The seller selection is based on the total weight. Independent Estimates. This method is used to compare the offered price by the procuring organizations estimates. Screening System. This method establishes a minimum performance criteria that is used to provide a weighted ranking from the best to worst of the proposed sellers. Contract Negotiation. This method involves clarifying the structure and requirements of the contract to reach a mutual agreement prior to signing the contracts.

Business Process Impact Typically a weighting system is used to determine which seller proposal to chose. An example of what a seller weighting spreadsheet can look like the following: Seller Criteria Scoring Business Process Impact Weight Seller 1 Seller 2 Seller 3 Technical Feasibility 3 Maturity of Solution 2 Resources Required Constraints Impact 1 Time Frame 4 Total

The PMP must manage procurement throughout the entire cycle. Make or Buy Create Statement Of Work (SOW) Issue Request for Quote (RFQ) Receive Proposals Accept and Close Procurement Administer Procurement Select Sellers No Procurement Required Make Buy

Once a seller is chosen, the formal contract is issued and the contracted work is started. Administer Procurement: Start contract with chosen seller. The PMP should keep open lines of communication with seller to ensure that the schedule will be met and that the project will not be delayed. Performance reports can be created to monitor the progress of the contract. The key parts of administering the procurement are the finalized contract, supplying of other procurement documents needed, and providing the work performance information. Two key elements are the work performance reports and the contract change control system. Work performance reports are often provided by the seller that states what work they have completed and any required technical reports. The contract change control system defines the process that should be followed if the agreed upon contract is modified. Both systems include paperwork, tracking systems, conflict resolution procedures, and any necessary approvals.

The PMP must manage procurement throughout the entire cycle. Make or Buy Create Statement Of Work (SOW) Issue Request for Quote (RFQ) Receive Proposals Accept and Close Procurement Administer Procurement Select Sellers No Procurement Required Make Buy

The remaining steps are to receive proposals, select a vendor, administer procurement, and then accept and close procurement. Accept and Close: Once the work is completed and receive, the contract can be closed out by the PMP. This last phase of procurement involves verifying that all the contracted work is completed to the satisfaction of the buyer. A formal, written notice should be sent from the buyer to the seller to confirm that the contracted work has been accept and the contract has been closed. A procurement contract can be closed when the contract reaches its deadline or is completed or when the contract is terminated for other reasons without completing the work. The closure of procurement documents can happen several times throughout a project if more than one procurement contract is issued.

Knowledge Check Start www.prolearninghub.com

1. Stakeholder communication requirements are captured in: A. Stakeholder Management Plan B. Communications Management Plan C. Procurement Documents D. A and B www.prolearninghub.com

2. The fixed price contract is advantageous to the buyer because it: A. Requires extremely well defined specifications B. Requires formal procedures for scope changes C. Seller assumes financial and technical risk D. Has a known cost www.prolearninghub.com

3. From a contract management perspective, the project manager must consider the: A. Acquisition process B. Contract administration C. Ecological environment D. A and B www.prolearninghub.com

4. The contract administration function includes: A. Funding Management B. Managing Relationships and Interfaces C Performance Control D. All of the Above www.prolearninghub.com

5.  From a contract management perspective, the project manager must consider the: A. Acquisition Process B. Contract Administration C. Offer, Acceptance, and Consideration D. A and B www.prolearninghub.com

6. The process of managing procurement relationships, monitoring contract performance, and making changes as appropriate is called: A. Plan Procurement Management B. Control Procurements C. Close Procurements D. Conduct Procurements www.prolearninghub.com

7. Which contract type places the most risk on the seller? A. Cost Plus Percentage Fee B. Cost Plus Incentive Fee C. Cost Plus Fixed Fee D. Firm Fixed Price www.prolearninghub.com

8. What is the last item a project manager must do to finalize the project closing? A. Reassign the Team B. Contract Completion C. Complete Lessons Learned D. Archive the Project Records www.prolearninghub.com

9. The inputs used in the process of Conduct Procurements includes all except: A. Seller Proposals B. Procurement Statement of Work C. Source Selection Criteria D. Agreements www.prolearninghub.com

10. The type of hybrid contracts which influences the Plan Procurement project is called: A. Time and Material Contracts (T&M) B. Cost-Reimbursable Contracts C. Both A & B D. Fixed Price Contracts www.prolearninghub.com

The Results