1. Project Management – PTM712S
Faculty of Computing and Informatics
21 October 2017
Project Management – PTM712S
Lesson 11 – Project procurement management

2. Project risk management
Faculty of Computing and Informatics
Project risk management
Introduction to project procurement management
Project procurement management processes
Procurement planning tools and techniques
Types of contracts
Statement of work
Solicitation planning

3. Introduction to project procurement management
Faculty of Computing and Informatics
Introduction to project procurement management
Procurement (purchasing, outsourcing) means acquiring goods and/or services from an outside source
Organisations who provide procurement services are referred to as suppliers, vendors, subcontractors, sellers
Make-or-buy decision – organisations decide if it is to their best interest to make products within or outside
Project procurement management are processes required to acquire goods and services for a project from outside the performing organisation

4. Introduction to project procurement management cntd.
Faculty of Computing and Informatics
Introduction to project procurement management cntd.
Many organisations are turning to outsourcing to:
Reduce both fixed and recurrent costs
Allow the client organisation to focus on its core business
Access skills and technologies
Provide flexibility – extra staff during peak workloads
Increase accountability – well-written contracts that are mutually binding

5. Project procurement management processes
Faculty of Computing and Informatics
Project procurement management processes
Procurement planning – determining what to procure and when
Solicitation planning – documenting product requirements and identifying potential source – Request for Proposal Document
Solicitation – obtaining quotations, bids, offers or proposals as appropriate
Source selection – choosing from among potential suppliers through a process of evaluating prospective suppliers, negotiating contract and awarding contract
Contract administration – involves managing the relationship with the supplier, i.e., monitoring contract performance, making payments, awarding contract modifications
Contract close-out – involves completion and settlement of the contract including resolution of any open items i.e. product verification, formal acceptance and contract audit

6. Faculty of Computing and Informatics
Procurement planning
Procurement planning – is the process of identifying which project needs can be best met by using products and services in the organisation
Deciding whether to procure, how to procure, what to procure, how much to procure and when to procure
Inputs needed for procurement planning include project scope statement, product descriptions, market conditions, constraints and assumptions

7. Procurement planning tools and techniques
Faculty of Computing and Informatics
Procurement planning tools and techniques
Tools and techniques of procurement management include performing make-or-buy analysis and consulting experts
Make-or-buy analysis is a technique to determine whether an organisation should make or perform a particular product or service inside the organisation or buy from someone else
It involves estimating internal costs versus the cost of outsourcing

8. Faculty of Computing and Informatics
Types of contracts
Fixed price/lump sum – involves a fixed total price for a well-defined product/service – minimum risk to buyer
Cost-reimbursable contracts – involve payment to supplier for direct and indirect actual costs
Time and material contracts – a hybrid of both fixed-price and cost-reimbursable contracts. Used when services are needed, when work cannot be clearly specified and total costs cannot be estimated in a contract
Unit price contracts – requires the buyer to pay the supplier a predetermined amount per unit of service and the total value of the contract is a function of the quantities needed to complete the work – volume discounts

9. Types of cost-reimbursable contracts
Faculty of Computing and Informatics
Types of cost-reimbursable contracts
Cost plus incentive fee (CPIF) contract – the buyer pays the supplier for allowable performance costs along with a predetermined fee and an incentive bonus, e.g., if the final cost is less than the expected cost, both buyer and supplier benefit form the cost-saving
Cost plus fixed fee (CPFF) contract – The buyer pays the supplier for allowance performance costs plus a fixed fee payment usually based on a % of estimated costs – this fee does not vary unless the scope of the contract changes
Cost plus percentage of costs (CPPC) contract – The buyer pays the supplier for allowable performance costs along with a predetermined percentage based on total costs – the supplier has no incentive to decrease costs – risks borne by buyer

10. Faculty of Computing and Informatics
Statement of work
Description of work required for procurement to allow prospective suppliers to determine if they are capable of providing the goods and services required for the procurement
SOW structure
Scope of work – work to be done, hardware-software environment
Location of work
Period of performance –when work will start and end
Deliverables schedule
Applicable standards – standards relevant for performing the work
Acceptance criteria – describe how the buyer organisation will determine if the work is acceptable
Special requirements, e.g. hardware/software certification, experience level of personnel

11. Solicitation planning
Faculty of Computing and Informatics
Solicitation planning
Involves preparing the document needed for solicitation and determining the evaluation on the contract award
Two examples of solicitation documents – Request for Proposal (RFP) and Request for Quotes (RFQ)
Request for Proposal (RFP) – a document used to solicit proposals from prospective suppliers
Request for Quotes (RFQ) – a document used to solicit quotes or bids from prospective suppliers
Other documents include invitations for bid, negotiation and initial contract responses

12. Request for proposal (RFP) outline
Faculty of Computing and Informatics
Request for proposal (RFP) outline
Purpose of RFP
Organisation’s background
Basic requirements
Hardware and software environment
Descriptions of RFP process
Statement of work and schedule information
Possible appendices
A. Current system overview
B. Systems requirements
C. Volume and size of data
D. Required contents of vendor’s response to RFP
E. Sample contract

13. Faculty of Computing and Informatics
Solicitation
Involves obtaining proposals or bids from prospective suppliers
Source selection is evaluating bidders proposal and choosing the best one, negotiating the contract and awarding the contract
Weighted scoring model – sample proposal evaluation sheet
Proposal 1
Proposal 2
Weight
Rating
Score
Technical approach
30%
Management approach
Past performance
20%
Price
Total score
100%

14. Contractual administration
Faculty of Computing and Informatics
Contractual administration
Contract administration ensures that the suppliers’ performance meets contractual requirements
Subject to state laws
Adequate change control on projects that involve outside contracts required
- Changes to any part of the project need to be reviewed, approved and documented
- Evaluation of any change should include an impact analysis on scope, time, cost and quality of goods
- Changes must be documented in writing

15. Faculty of Computing and Informatics
Contract close-out
Includes product verification to determine if all work was completed correctly and satisfactorily
Includes administrative activities to update records to reflect final results and archiving information for future use
Procurement audits are done at this stage to identify lessons learnt
Outputs are a contract file and formal acceptance and closure

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Windhoek
NAMIBIA T: F: E: W:
Faculty of Computing and Informatics
Thank You.