12.1 Plan Procurement: Introduction

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12.1 Plan Procurement: Introduction The process of documenting project purchasing decisions, specifying the approach and identifying potential suppliers. It identifies project needs that are best met by acquiring products or services from outside of the project organisation. It considers potential suppliers and the contractual arrangements that may be required to manage these external parties to achieve the project objectives. Closely related to Risk Management Occurs during Planning Initiation Planning Execution Close Monitor Control Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Inputs Inputs to Plan Procurements Scope Baseline - Scope Statement and WBS Requirements documentation Project Schedule Teaming Agreements - with third parties Risk Register Activity Resource Requirements Activity Cost Estimates Cost Performance Baseline Enterprise Environmental Factors Marketplace conditions and products/services available Suppliers past performance Typical terms and conditions Organisational Process Assets Formal procurements policies and procedures Preferred Supplier Agreements Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Tools and Techniques Tools and techniques to Plan Procurements – Preferred Supplier Agreements Make or Buy Analysis Contract Types Procurement Approach Expert Judgement Procurement Policies & Procedures Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Tools and Techniques Make or Buy Analysis Determines whether particular work can be accomplished by the project team or must be purchased from outside sources The capability may exist internally but may be committed to other projects Budget constraints can influence make or buy decisions Make or buy decisions need to cover the following – Purchase versus lease Related costs – direct costs and indirect support costs Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Tools and Techniques Expert Judgement Consulting procurement and legal professionals May be internal or external to the project organisation Preferred Supplier Agreements Many organisations (particularly government) negotiate agreements with pre-qualified suppliers of regularly purchased products or services The project team then needs to select the supplier from the preferred supplier agreement It makes it much easier to find reputable suppliers and reduces requests for information within the market Exceptions normally need to be approved by an internal Procurement Department Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Tools and Techniques Procurement Approach Once the Buy decision has been made, many different approaches can be used to procure the required products or services Three Quotes – traditionally three quotes are obtained for certain trades and then the cheapest is selected, depending on conditions Previous Supplier – may be related to preferred supplier agreements, a well known supplier that has been used in the past is automatically chosen Tender Processes – can be open to the entire market or closed to specific suppliers often from the preferred supplier list Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Tools and Techniques Procurement Policies and Procedures Most large organisations and all government departments will have extensive policies and procedures to govern purchasing These often include – Preferred Supplier Agreements Purchase Ordering and Supply processes Delegated authorities for approval of expenditure Contract Types Fixed Price Cost Reimbursable Time and Materials Click here to view different contract types in detail Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Outputs Outputs of this process include – Procurement Management Plan Procurement Statements of Work Derived from the project scope baseline That portion of project scope to be included in the particular contract Make or Buy Decisions Included as a table of decisions in the Procurement Management Plan Procurement Documents Requests for Tender Seller Evaluations Contracts Source Selection Criteria: detailed in previous slides Change Requests Initiation Planning Execution Close Monitor Control Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Procurement Management Plan The Procurement Management Plan describes how the procurement processes will be managed. It is critical that it is linked to relevant industry regulations and organisational policies and procedures. Common inclusions in the Procurement Management Plan – Links to organisational procurement management policies and procedures Types of contracts to be used and contract templates Delegated authorities and required involvement from internal purchasing, finance and legal experts/departments Tender document templates Assumptions, constraints and risks related to procurement Schedules of contracted deliverables Preferred supplier lists Procurement metrics and performance measurements Adapted from PMBOK 4th Edition

12.1 Plan Procurements: Procurement Management Plan It is often very useful to document all procurement approaches and decisions in a table known as the Procurement Planning Register Includes information about the sourcing approach, type of contract, selection criteria, requirements, risks etc Content can be tailored to organisational policies and procedures Procurement Item Manager Requirements Sourcing Approach Summary Selection Criteria Contract Type Major Risks Key Dates Budgeted Amount Name of the item being purchased Summary requirements for the product or service Primary criteria on which the selection will be made Summary of Risks Major date and dependencies Name and position of the person responsible for managing the procurement – often NOT the Project Manager Approach selected for the procurement e.g. – three quotes, preferred supplier, tender Fixed Price, Cost reimbursable or Time and Materials, often includes performance criteria Budget estimate or allowance

12.1 Plan Procurements: Procurement Management Plan Selection criteria are often included as part of tender documents and are used to rate or score different suppliers Facilitate and provides justification for procurement decisions Can be limited to purchase price for commodity type items or can also include other selection criteria such as reputation, financial viability, fit with requirements etc Often weighted based on relative importance Management Approach Risk Technical Capability Understanding Of Requirements Overall or Lifecycle Costs Technical Approach Industry Experience Business Size & Type Financial Viability Production Capacity Warranty Past Performance & References Intellectual Property