15-1 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e CHAPTER 15 Project Procurement.

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15-1 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e CHAPTER 15 Project Procurement Management

15-2 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Procurement and Project Management

15-3 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Procurement and Project Management (cont.) Long lead-time items Large capital items Make or Buy decision

15-4 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Procurement Management Plan Governance Organisational policy and procedures in relation to procurement, contracting and legal processes Requirements of long lead-time items and large capital-purchase items Purchasing assumptions Risk analysis of procurement decision Review of procurement lessons learned from previous projects

15-5 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Common Tender Types

15-6 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Outsourcing Project Work If the decision is to ‘buy’ into the project, one of the most frequently used phases is to outsource.

15-7 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Outsourcing Project Work (cont.) Advantages Cost reduction Faster project completion High level of expertise Flexibility Disadvantages Coordination breakdowns Loss of control Conflict Security issues

15-8 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Outsourcing Project Work (cont.) Best practices Well-defined requirements and procedures Extensive training and team-building activities Well-established conflict management processes in place Frequent review and status updates Co-location when needed Fair and incentive-laden contracts Long-term outsourcing relationships

15-9 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Contracting and Contract Types Infrastructure ‘type’ contracts  Build, Own, Operate, Transfer (BOOT)  Build, Own, Operate (BOO)  Build, Operate, Transfer (BOT) Partnerships Time and material contracts

15-10 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Contracting and Contract Types (cont.) Fixed Price Contracts  Firm fixed price (FFP)  Fixed price incentive fee (FPIF)  Fixed price with economic price adjustment (FP- EPA) Cost Reimbursable Contracts  Cost plus fixed fee (CPFF)  Cost plus incentive fee (CPIF)  Cost plus award fee (CPAF)

15-11 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Summary of Contract Types

15-12 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Essential Elements of a Contract 1. Offer and acceptance (agreement). 2. Intention to create legal relations. 3. Consideration. 4. Legal capacity. 5. Consent. 6. Illegal and void contracts.

15-13 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e The Art of Negotiating

15-14 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Project Procurement Integration continued

15-15 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Project Procurement Integration (cont)

15-16 Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e Key Terms BATNA closed tender contract law contract types large capital items long lead-time items make or buy (decision) open tender Outsourcing partnering charter principled negotiation procurement six essential elements of a contract tender process

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