1. Project Management Institute - Long Island Chapter PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.0 PMP Study Group Procurement Management

2. PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.0 Project Procurement Management - Definition Is engaging in the systematic “processes necessary to purchase or acquire products, services, or results needed from outside the project team “. PMBoK® Guide, 4th Edition 2

3. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.03 Knowledge Area Project Management Process Groups InitiatingPlanningExecuting Monitoring & Controlling Closing 12. Project Procurement Management - 12.1 Plan Procurements 12.2 Conduct Procurements 12.3 Administer Procurements 12.4 Close Procurements Across Project Management Process Groups Project Procurement Management Processes

4. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.04 Contracts are formal and legally binding between a buyer and seller Contracts can be simple or complex All requirements (product, project, etc.) should be specifically spelled out in the contract If included in the contract, it must be done If not in the contract, does not have to be done Formal change is the only way to add or remove items from the contract Changes must be in writing Contracts should reduce project risk Most contracts are backed by the government which provides a court process for dispute resolution Guiding Principals - Contract

5. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.05 PM’s Team Role in Procurement Know the procurement process; seek support early from specialists in contracting, purchasing, law, and technical disciplines. Involvement should begin at the start of the procurement process Understand contract terms and conditions Ensure the contract contains all project management requirements and scope for the product or services being procured. Identify risks and incorporate ways to avoid, mitigate, transfer to seller, or share the potential risk within the contract. Fit the schedule for completion of the procurement process into the schedule for the project Be engaged during contract negotiation to establish a relationships with the seller. Manage the entire project, not just the contract statement of work Work with the contract or procurement manager to manage contract change control

6. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.06 You are the Project Manager for a new, very visible, and big income producer project. In your preliminary analysis, you find out the following:  This project will have multiple interfaces to various systems and hardware for internal and external customers.  This project is a discretionary project and you will need some help from a team of specialists within your organization.  In your meeting with the manager of the specialists, you find out that they have a non-discretionary project that is number one on their list of priorities. This other project was dictated to the financial organization by the Federal Reserve Bank. Non- compliance with this other project places the firm under severe penalties. Exercise 1 - Background

7. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.07 In the meeting, the head of the support group told you the following: They currently have a 10 person staff Approximately 200 hours a week (work effort) for the Federal Reserve Bank Project. The Federal Reserve Bank project must be completed in four months. Their staff is working approximately 100 hours a week on maintenance. Maintenance of current systems takes priority over everything. The number of hours available will vary from week to week The head of the support group says, “…off the top of my head, and the limited information you have, similar types of projects have taken approximately 1000 hours to complete”. You were assured that when they were not working on the Federal Reserve Bank project or maintenance you will have first priority. Exercise 1 – Background (continued)

8. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.08 1.Is it better to have the in-house people do it or send it outside? 2.If you decide to seek a contract from a outside vendor, what items do you want to place in this contract? Exercise 1 – Background (continued)

9. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.0 9 12.1 Plan Procurements 12..1.1.1Scope Baseline 12..1.1.2Requirements Documentation 12.1.1.3Teaming Agreements 12.1.1.4Risk Register 12.1.1.5 Risk-Related Contract Decisions 12.1.1.6 Activity Resource Requirements 12.1.1.7Project Schedule 12.1.1.8Activity Cost Estimates 12.1.1.9Cost Performance Baseline 12.1.1.10 Enterprise Environmental Factors 12.1.1.11Organizational Process Assets 12.1.2.1Make-or-Buy Analysis 12.1.2.2Expert Judgment 12.1.2.3Contract Types 12.1.2.4Expert Judgment 12.1.3.1 Procurement Management Plan 12.1.3.2 Procurement Statement of Work 12.1.3.3Make-or-Buy Decision 12.1.3.4Procurement Documents 12.1.3.5Source Selection Criteria 12.1.3.6Change Requests InputsTools & TechniquesOutputs Definition: “process of documenting project purchasing decisions, specifying the approach, and identifying potential sellers” PMBoK® Guide, 4th Edition

10. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.010 12.1.1 Plan Procurements: Inputs 12.1.1.1 Scope Baseline Describes the need, justification, requirements, etc.. for the project and is inclusive of the following: Scope Statement: contains the description of services, list of deliverables, acceptance criteria, and important information regarding technical issues that could impact cost estimating. WBS: provides the relationship among all the components of the project and deliverables. WBS Dictionary: – provides detailed statements of work that provide an identification of the deliverables and a description of the work within each WBS component required to produce ach deliverable. 12.1.1.2 Requirements Document Information about the project that is required during planning for procurement (project and requirements with contractual and legal implications) 12.1.1.3 Teaming Agreements Legal agreements between two or more entities to form a partnership, joint venture, or other arrangement as defined by the parties.

11. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.011 12.1.1.4 Risk Register Includes risk-related information (identified risks, risk owners, and risk mitigation/responses) 12.1.1.5 Risk-related Contract Decisions Include agreements related to insurance, bonding, services, and other items as appropriate that are prepared to specify each party’s responsibility. 12.1.1.6 Activity Resource Requirements Contain information on specific needs such as people, equipment, or location 12.1.1.7 Project ScheduleContains information on timelines or mandated deliverable dates 12.1.1.8 Activity Cost Estimates Cost estimates which are used to evaluate the reasonableness of the bids or proposals received from potential sellers 12.1.1.9 Cost Performance Baseline Provides detail on the planned budget over time 12.1.1 Plan Procurements: Inputs (continued)

12. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.012 12.1.1.10 Enterprise Environmental Factors Factors that can influence the Plan Procurements process such as the conditions of the marketplace and what products, services and results are available form the marketplace, from whom and under what terms and conditions. 12.1.1.11 Organizational Process Assets provide the existing formal and informal procurement related policies, procedures, guidelines and management systems that are considered in developing the procurement management plan and selecting the contract types to be used 12.1.1 Plan Procurements: Inputs (continued)

13. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.013 12.1.2 Plan Procurements: Tools and Techniques 12.1.2.1 Make-or-Buy Analysis Technique that can be used to determine whether a particular product or service can be produced by the project team or must be purchased from outside sources. This analysis include all related costs; both direct and indirect costs. 12.1.2.2 Expert Judgment Used to assess the inputs and outputs from this process. Can be used to develop or modify the criteria that will be used to evaluate the seller proposal such as legal, technical, business, and procurement management judgment. 12.1.2.3 Contract Types Fixed-Price Contracts (FP) Cost-Reimbursable Contracts (CR) Time and Material Contracts (T&M)

14. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.014 12.1.2.3 Plan Procurements: Contract Types Contract – “a mutually binding agreement that obligates the seller to provide the specified product or service or result and obligates the buyer to pay for it.” PMBoK® Guide, 4th Edition

15. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.015 What makes a Contract? An offer is made An offer is accepted All parties are legally allowed to sign All parties receive “consideration” (Money, property, chicken, etc.) The contract covers a legal activity 12.1.2.3 Plan Procurements: Contract Types

16. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.016 Why Contracts? Avoid misunderstandings Define and agree upon Deliverables / Specifications Delivery Schedule Payment Schedule Verify specifications are met Avoid changing key resources - Bait and Switch Get the best deal for your organization 12.1.2.3 Plan Procurements: Contract Types

17. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.017 12.1.2.3 Fixed-Price Contracts Involves setting a fixed total price for a defined product or service to be provided. May also incorporate financial incentives for achieving or exceeding objectives. 1. Firm Fixed Price Contracts (FFP): Most commonly used type of fixed price contract where the buyer pays the seller a set amount (as defined by the contract), regardless of the seller’s costs. 2. Fixed Price Incentive Fee contracts (FPIF): Type of contract where the buyer pays the seller a set amount (as defined by the contract), and the seller can earn an additional amount if the seller meets defined performance criteria (usually achieving agreed upon metrics). 3. Fixed Price with Economic Price Adjustment Contracts (FP-EPA): Type of contract used whenever the seller’s performance period spans a considerable period of years. It contains a special provision allowing adjustments to the contract price due to changed conditions, such as inflation, cost increases (or decreases) for specific commodities. 12.1.2 Plan Procurements: Contract Types

18. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.018 12.1.2.3 Cost- Reimbursable Contracts Involves payment to the seller for the seller’s actual costs, plus a fee typically representing seller’s profit. Often these contracts include incentive clauses where if the seller meets or exceeds the selected objectives, then the seller receives from the buyer an incentive or bonus payment. 1. Cost Plus fixed Fee Contracts (CPFF): Type of contract where the buyer reimburses the seller for the seller’s allowable costs plus a fixed amount of profit (fee). 2. Cost Plus Incentive Fee Contracts (CPIF): Type of contract where the buyer reimburses the seller for the seller’s allowable costs and the seller earns its profit if it meets defined performance criteria. 3. Cost Plus Award Fee Contracts (CPAF): Type of contract where the seller is reimbursed for all legitimate costs, but the majority of the fee is earned based on the satisfaction of certain broad performance criteria which is defined in the contract. Fee is based on subjective determination of seller performance by the buyer and is generally not subject to appeals. 12.1.2 Plan Procurements: Contract Types

19. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.019 12.1.2.3 Time and Material Contracts Hybrid contractual arrangement containing aspects of both cost- reimbursable and fixed-price contracts. Resemble cost-reimbursable contract type agreements in that they are open ended. Resemble fixed-price contracts because unit rates can be preset by the buyer and seller when both parties agree on the rates for a specific resource category 12.1.2 Plan Procurements: Contract Types

20. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.020 Contract TypePro’sCon’s FIXED-PRICEMost commonly used Reduce cost uncertainty Motivates seller to control costs Motivates seller to complete Statement of work and responsibilities must be clearly defined Higher costs for additional scope (extra’s) Seller may look for extras or consider items “out of scope” if losing money COST- REIMBURSABLE Allows forward movement when details are uncertain (typical for massive government design/build contracts) Typically lower cost then FP since seller does not need to compensate for as much risk More work to manage Higher risk (price is known and seller has a moderate incentive to control costs) TIME & MATERIALS No lengthy contractual issues Duration is usually brief Scope is not fully defined Hard to avoid front-end loading Contractor may stall; no incentive to control costs Needs careful monitoring and oversight for improper charges 12.1.2 Plan Procurements: Contract Types Buyers Point of View

21. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.021 12.1.2 Plan Procurements: Contract Types Sellers Point of View Contract TypePro’sCon’s FIXED-PRICEWork guaranteed Easier to claim extras for poorly defined work if statement of work is not clearly defined Highest risk Especially risky for a new products. COST-REIMBURSABLENo lengthy contractual issues Easier to add work to contract No cost risk No guarantee of work TIME & MATERIALSNo lengthy contractual issues Easier to add work to contract No cost risk No guarantee of work or length of engagement

22. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.022 12.1.3.1 Procurement Management Plan Describes how the procurement processes will be managed from developing procurement documentation through contract closure. 12.1.3.2 Procurement Statement of Work Developed from the project scope baseline and defines only that portion of the project scope that is to be included within the contract. Describes the procurement item in enough detail to allow prospective sellers to determine if they can provide the product, service or results. 12.1.3.3 Make-or-Buy decision Documented the conclusion reached regarding what products, services or results will be either acquired or will be developed by the project team. 12.1.1.4 Procurement Documents Documents used to solicit proposals from prospective sellers such as: RFI: Request for Information IFB: Invitation for Bid RFP: Request for Proposal RFQ: Request for Quotation 12.1.3 Plan Procurements: Outputs

23. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.023 12.1.1.5 Source Selection Criteria Criteria developed to rate or score seller(s) proposals such as: Understanding of need Cost Technical Capability Risk Approach (Technical, Staffing, Management) Warranty Financial Capacity Production Capacity Size of organization Past Performance References Intellectual Property and Proprietary Rights 12.1.1.6 Change Request Requested changes to the project management plans and subsidiary plans may result from the Plan Procurement process. 12.1.3 Plan Procurements: Outputs (continued)

24. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.024 Knowledge Area Project Management Process Groups InitiatingPlanningExecuting Monitoring & Controlling Closing 12. Project Procurement Management - 12.1 Plan Procurements 12.2 Conduct Procurements 12.3 Administer Procurements 12.4 Close Procurements Project Procurement Management Processes Across Project Management Process Groups

25. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.025 Definition: The process of obtaining seller responses, selecting a seller and awarding a contract. PMBoK® Guide,4 th Edition 12..2.1.1 Project Management Plan 12..2.1.2 Procurement Documents 12.2.1.3 Source Selection Criteria 12.2.1.4 Qualified Sellers List 12.2.1.5 Seller Proposals 12.2.1.6 Project Documents 12.2.1.7 Make-or-Buy decisions 12.2.1.8 Teaming Agreements 12.2.1.9 Organizational Process Assets 12.2.2.1 Bidder Conferences 12.2.2.2 Proposal Evaluation Techniques 12.2.2.3 Independent Estimates 12..2.2.4 Expert Judgment 12.2.2.5 Advertising 12.2.2.6 Internet Search 12.2.2.7 Procurement Negotiations 12.2.3.1 Selected Sellers 12.2.3.2 Procurement Contract Award 12.2.3.3 Resource Calendars 12.2.3.4 Change Requests 12.2.3.5 Project Management Plan Updates 12.2.3.6 Project Document Updates Inputs Tools & Techniques Outputs 12.2 Conduct Procurements Process

26. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.026 Source: PMBoK® Guide,4th Edition, p.329 12.2 Project Procurement Management Data Flow Diagram

27. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.027 1.How and where do I find the best contractor for this piece of the project? 2.How do I get the needs of the project and product across to the contractors? 3.What would be your selection criteria for vendor selection? 4.Does each item have the same weight? Does each item have the same weight? Exercise #2

28. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.028 12.2.1.1 Project Management Plan Section 4.2.3.1 12.2.1.2 Procurement Documents Section 12.1.3.4 12.2.1.3 Source Selection Criteria Section 12.1.3.5 12.2.1.4 Qualified Sellers List Sellers who have been previously pre-screened based on qualifications and past experience 12.2.1.5 Seller Proposals Prepared in response to a procurement document package form the basic set of information that will be used by evaluation body to select one or more successful bidders. 12.2.1.6 Project Documents Items that will assist in selecting the appropriate supplier; may include the Risk Register or Project Scope Documents 12.2.1 Conduct Procurements: Inputs

29. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.029 12.2.1.7 Make-or-Buy Decisions (Section 12.1.3.3) 12.2.1.8 Teaming Agreements (Section 12.1.1.3) 12.2.1.9 Organizational Process Assets (Section 12.1.1.11) 12.2.1 Conduct Procurements: Inputs (continued)

30. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.030 12.2.2.1 Bidder Conferences Meetings with prospective sellers prior to preparation of a bid or proposal 12.2.2.2 Proposal Evaluation Techniques Techniques can be used to rate and score proposals, but all will use expert judgment and some form of evaluation criteria 12.2.2.3 Independent Estimates Costs prepared by the buyer’s organization using non-biased factors or an outside firm to provide a benchmark value to evaluate received responses 12.2.2.4 Expert Judgment Relies on prior experience for similar requirements to select sellers 12.2.2.5 Advertising Existing lists of potential sellers can often be expanded by placing advertisements in general circulation publications 12.2.2.6 Internet Search Has a major influence on most project procurements 12.2.2.7 Procurement Negotiations Clarify the structure, requirements and other terms of purchases to solidify a mutual agreement between the buyer and seller. These items need to be resolved prior to signing a contract. 12.2.2 Conduct Procurements: Tools and Techniques

31. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.0 Sample: Contract Items to Negotiate Deliverables Schedule Period of Performance Pricing Payment Terms Warranty Penalties/Incentives Change Procedures 12.2.2 Conduct Procurements: Tools and Techniques

32. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.032 Sample: Contract Criteria 12.2.2 Conduct Procurements: Tools and Techniques Who establishes the target date? Who approves the requirements? Who is allowed to change requirements? What is procedure for making changes? How closely is progress tracked? Are there any mandatory meetings What are the milestones?

33. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.0 Who are the players? Who’s time are you buying - “Key Person” Clause may be required (Make sure to have everything in writing!) Sample: Contract Criteria 12.2.2 Conduct Procurements: Tools and Techniques

34. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.034 12.2.3.1 Selected Sellers Sellers who have been judged to be in a competitive range based upon the outcome of the proposal or bid evaluation, and who have negotiated a draft contract, which will be the actual contract when an award is made 12.2.3.2 Procurement Contract Award Mutually binding legal agreement that obligates the buyer to pay the seller 12.2.3.3 Resource Calendars The availability and pool of contracted resources with dates they can be called upon to use. 12.2.3.4 Change Requests Changes to the project management plan and its subsidiary plans and other components, such as the project schedule and procurement management plan, may result from the Select Sellers process 12.2.3.5 Project Management Plan Updates Elements of the Project Management Plan that may be updated such as; cost, scope, schedule baselines, and procurement management plan 12.2.3.6 Project Document Updates Project documents that need to be updated such as requirements document, risk register, and requirements traceability documents 12.2.3 Conduct Procurements: Outputs

35. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.035 Exercise #3: The Choice Potential Contractor 1.  Company Started: 1982  Size: Large  Reputation: Good  On time performance: Good  Cost: expensive to very expensive  Quality: Good  Project Manager: Experienced Potential Contractor 2.  Company Started: 2003  Size: Small  Reputation: Not established  On time performance: Unknown  Cost: Inexpensive  Quality: unknown  Project Manager: PMP Potential Contractor 3.  Company Started: 1999  Size: Medium  Reputation: Excellent  On time performance: Good  Cost: Expensive  Quality: Excellent  Project Manager: often changed in the middle of the project

36. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.036 Knowledge Area Project Management Process Groups InitiatingPlanningExecuting Monitoring & Controlling Closing 12. Project Procurement Management - 12.1 Plan Procurements 12.2 Conduct Procurements 12.3 Administer Procurements 12.4 Close Procurements Across Project Management Process Groups Project Procurement Management Processes

37. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.037 12.3 Administer Procurements Process Definition: “Ensures that the sellers performance meets procurement requirements and that the buyer performs according to the terms of the legal contract.” PMBoK® Guide,4 th Edition 12.3.1.1Procurement Documents 12.3.1.2Project Management Plan 12.3.1.3Contract 12.3.1.4Performance Reports 12.3.1.5Approved Change Requests 12.3.1.6Work Performance Information 12.3.2.1Contract Change Control System 12.3.2.2 Procurement Performance Reviews 12.3.2.3Inspections and Audits 12.3.2.4Performance Reporting 12.3.2.5Payment Systems 12.3.2.6Claims Administration 12.3.2.7Record Management System 12.3.3.1Procurement Documentation 12.3.3.2 Organizational Process Assets Updates 12.3.3.3Change Requests 12.3.3.4 Project Management Plan Updates Inputs Tools & Techniques Outputs

38. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.038 12.3 Administer Procurements Data Flow Diagram Source: PMBoK® Guide,4th Edition, p.336

39. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.039 12.3.1.1 Procurement Documents Supporting documentation including contract, statement of work, etc 12.3.1.2 Project Management Plan Section 12.1.3.1 12.3.1.3 Contract Section 12.2.3.2 12.3.1.4 Performance Reports Documents provided within the terms of the contract such as Seller developed technical documents and performance reports 12.3.1.5 Approved Change Requests Documents modifications to the terms and conditions to the contract, including the contract statement of work, pricing, and description of the products, services, or results to be provided. 12.3.1.6 Work Performance Information Collected as part of Execution and highlights the extent to which qulity standards are met, cost incurred/committed, and invoicing 12.3.1 Administer Procurements: Inputs

40. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.040 12.3.2.1 Contract Change Control System Defines the process by which the procurement can be modified. 12.3.2.2 Procurement Performance Reviews Structured review of the seller’s progress to deliver project scope and quality, within cost and on schedule, as compared to the contract. 12.3.2.3 Inspections and Audits Required by the buyer and supported by the seller as specified in the procurement contract, can be conducted during the execution of the project to verify compliance in the seller’s work processes or deliverables. 12.3.2.4 Performance Reporting Provides management with information about how effectively the seller is achieving the contractual objectives. 12.3.2.5 Payment Systems Includes certification of satisfactory work by an authorized person on the project team, and the payments are made in accordance with the terms of the contract 12.3.2 Administer Procurements: Tools and Techniques

41. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.041 12.3.2.6 Claims Administration Contested changes and constructive changes are those changes where the buyer and seller cannot agree on compensation for the change, or cannot agree that a change has occurred. If the parties themselves do not resolve the claim, it may be handled in accordance with the dispute resolution procedures established in the contract. 12.3.2.7 Record Management System Specific set of processes, related control functions, and automation tools that are consolidated and combined as part of the project management information system. (Section 4.3.2.2) 12.3.2 Administer Procurements: Tools and Techniques (continued)

42. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.042 12.3.3.1 Procurement Documentation The contract along with all supporting schedules Requested unapproved contract changes Approved change requests Any seller-developed technical documentation and other work performance information, such as; deliverables, seller performance reports, warranties, financial documents (invoices, payment records, results of contract-related inspections). 12.3.3.2 Organizational Process Assets Updates Correspondence: Contract terms and conditions often require written documentation of certain aspects of buyer/seller communications, such as warnings of unsatisfactory performance and requests for contract changes or clarification. Payment schedules and requests. Seller performance evaluation documentation. Such performance evaluation documents the sellers ability to continue to perform work on the current contract, indicate if the seller can be allowed to perform work on future projects, or rate how well the seller is performing the project work 12.3.2 Administer Procurements: Outputs

43. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.043 12.3.3.3 Change Requests Includes direction provided by their buyer, or actions taken by the seller, that the other party considers a constructive change to the contract. 12.3.3.4 Project Management Plan Updates Procurement management plan - is updated to reflect any approved change requests that affect procurement management. Baseline schedule - is updated if there are any slippages that impact overall project performance 12.3.2 Administer Procurements: Outputs (continued)

44. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.044 Knowledge Area Project Management Process Groups InitiatingPlanningExecuting Monitoring & Controlling Closing 12. Project Procurement Management - 12.1 Plan Procurements 12.2 Conduct Procurements 12.3 Administer Procurements 12.4 Close Procurements Across Project Management Process Groups Project Procurement Management Processes

45. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.045 12.4 Close Procurements Process Definition: The process of completing each project procurement. PMBoK® Guide,4 th Edition 12.4.1.1 Project Management Plan 12.4.1.2 Procurement Documentation 12.4.2.1 Procurement Audits 12.4.2.2 Negotiated Statements 12.4.2.3 Records Management System 12.4.3.1 Closed Procurements 12.4.3.2 Organizational Process Assets Updates Inputs Tools & Techniques Outputs

46. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.046 12.4 Close Procurements Data Flow Diagram Source: PMBoK® Guide,4th Edition, p.342

47. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.047 Definitions from PMP Exam Prep Arbitration A method to resolve disputes that uses private third parties to render a decision on the dispute. Breach/Default A breach occurs when an obligation of a contract is not met. Watch out, a breach on the sellers part cannot be fixed by a breach on the buyers part, e.g. not completing an item in the contract statement of work (sellers breach) cannot be handled by the buyer by stopping ALL Payments (buyers breach). Material Breach A breach so large that it may not be possible to complete the work under contract.

48. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.048 Exercise Its not done until the paperwork is complete... It is finally over. Some good things happened but of course, some not so good things happened. What information would you like to save about this aspect of the project?

49. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.049 12.4.1.1 Project Management Plan (Section 4.2.3.1) 12.4.1.2 Procurement Documentation All procurement documentation is collected, indexed, and filed 12.4.1 Close Procurement Process: Inputs

50. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.050 12.4.2.1 Procurement Audits Supporting documentation including contract, statement of work, etcis a structured review of the procurement process originating from the Plan Procurements process (Section 12.1) through Administer Procurements (Section 12.3). 12.4.2.2 Negotiated Statements When settlement cannot be achieved through direct negotiation (mediation, arbitration, etc.) 12.4.2.3 Records Management System Section 12.3.2.7 12.4.2 Close Procurement Process: Tools and Techniques

51. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.051 12.4.3.1 Closed Procurements The buyer, usually through its authorized procurement administrator, provides the seller with formal written notice that the contract has been completed. 12.4.3.2 Organizational Process Asset Updates Procurement file: A complete set of indexed contract documentation, including the closed contract, is prepared for the inclusion with the final project files. Deliverable acceptance: The buyer, usually through its authorized procurement administrator, provides the seller with formal written notice that the deliverables have been accepted or rejected. Lessons learned Documentation: Lessons learned, what has been experienced, and process improvement recommendations are developed for the project file to improve future procurements 12.4.3 Close Procurement Process: Outputs

52. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.052 Summary and Helpful Hints

53. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.053 As you prepare, don’t be afraid to walk away Know your BATNA (Best Alternative To a Negotiated Agreement) Use the Legal Department Be prepared to give direction Performance Clause Payment/Penalty Clause Contract Type Key Person Clause Are there Approved Vendors? Associated Procedures?

54. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.054 Key on deliverables Specifications are detailed and clearly defined Payment schedules are detailed and clearly defined

55. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.055 Contract Be careful what you say or do! Verbal agreements Violating terms of an existing agreement Forfeiture of agreement rights Payment Requests vs. Payments

56. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.056 Project Manager Responsibilities Require plans Project / Subproject Internal / Vendor Dates Deliverables Define the reporting structure Vendor and Project organization Progress metrics Performance metrics Create and implement status reporting Deflate any Us/Them relationships Correct deviations from the plan

57. Procurement Management PMP Prep Course – Project Procurement Management - PMBOK 4 th Edition – Version 1.057 Project /Contract Completion Facilitate the transfer of knowledge Should be in original contract! Ensure proper closure Security Documentation Products Status of process Status of product Maintenance Agreement? Key person? Enhancement vs. fix Replacement vs. fix Response time