1. Module : Project Procurement Management
Objectives
Understand the importance of project procurement management and the increasing use of outsourcing for information technology projects
Describe the procurement planning process, procurement planning tools and techniques, types of contracts, and statements of work
Discuss what is involved in solicitation planning and the difference between a request for proposal and a request for quote
Explain what occurs during the solicitation process
Describe the source selection process and different approaches for evaluating proposals or selecting suppliers
Discuss the importance of good contract administration
Describe the contract close-out process

2. Procurement Management
Procurement means acquiring goods and/or services from an outside source.
We outsource for the following reasons:
To reduce both fixed and recurrent costs
To allow the client organization to focus on its core business
To access skills and technologies
To provide flexibility
To increase accountability

3. Project Procurement Management Processes
Procurement planning: determining what to procure and when
Solicitation planning: documenting product requirements and identifying potential sources
Solicitation: obtaining quotations, bids, offers, or proposals as appropriate
Source selection: choosing from among potential vendors
Contract administration: managing the relationship with the vendor
Contract close-out: completion and settlement of the contract

4. Procurement Planning
Procurement planning involves identifying which project needs can be best met by using products or services outside the organization. It includes deciding
whether to procure
how to procure
what to procure
how much to procure
when to procure

5. Make-or-buy analysis
Make or Buy Example: Assume you can lease an item you need for a project for $150/day. To purchase the item, the investment cost is $1,000, and the daily cost would be another $50/day. How long will it take for the lease cost to be the same as the purchase cost? If you need the item for 12 days, should you lease it or purchase it?
Set up an equation so the “make” is equal to the “buy.” In this example, use the following equation. Let d be the number of days to use the item.
$150d = $1,000 + $50d
Solve for d as follows:
Subtract $50d from the right side of the equation to get
$100d = $1,000
Divide both sides of the equation by $100
d = 10 days
The lease cost is the same as the purchase cost at 10 days. If you need the item for 12 days, it would be more economical to purchase it

6. Cost Reimbursable Contracts
Cost plus incentive fee (CPIF): the buyer pays the seller for allowable performance costs plus a predetermined fee and an incentive bonus
Cost plus fixed fee (CPFF): the buyer pays the seller for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs
Cost plus percentage of costs (CPPC): the buyer pays the seller for allowable performance costs plus a predetermined percentage based on total costs

7. Statement of Work
A statement of work is a description of the work required for the procurement
Many contracts, or mutually binding agreements, include SOWs
A good SOW gives bidders a better understanding of the buyer’s expectations

8. Solicitation planning
Solicitation planning involves preparing several documents:
Request for Proposals: used to solicit proposals from prospective sellers
Requests for Quotes: used to solicit quotes for well-defined procurements
Invitations for bid or negotiation and initial contractor responses are also part of solicitation planning

9. Sample Proposal Evaluation Sheet

10. Quality Management Program
Quality management planning and implementing policies, procedures, and requirements.
Quality control ensuring that work is being performed and that work is being checked prior to its acceptance.
Quality assurance verifying that quality control tasks are being performed.
Continuous quality improvement continually pursuing improvement in the quality of the project process.
Quality costs redoing a project item even when this increases the item's cost.

11. Tools and Techniques for Quality Control
Pareto Analysis
Steps to identify the important causes using Pareto analysis
Step 1: Form a table listing the causes and their frequency as a percentage.
Step 2: Arrange the rows in the decreasing order of importance of the causes i.e. the most important cause first
Step 3: Add a cumulative percentage column to the table
Step 4: Plot with causes on x- and cumulative percentage on y-axis
Step 5: Join the above points to form a curve
Step 6: Draw line at 80% on y-axis parallel to x-axis. Then drop the line at the point of intersection with the curve on x-axis. This point on the x-axis separates the important causes and trivial causes.

12. Six Sigma It requires an organization-wide commitment
Six Sigma organizations have the ability and willingness to adopt contrary objectives, like reducing errors and getting things done faster
It is an operating philosophy that is customer-focused and strives to drive out waste, raise levels of quality, and improve financial performance at breakthrough levels

13. Project Human Resources
Human resource planning: Identifying and documenting project roles, responsibilities, and reporting relationships.
Acquiring the project team: Getting the needed personnel assigned to and working on the project.
Developing the project team: Building individual and group skills to enhance project performance.
Managing the project team: Tracking team member performance, motivating team members, providing timely feedback, resolving issues and conflicts, and coordinating changes to help enhance project performance.

14. Abraham Maslow on Motivation

15. Herzberg’s Motivational and Hygiene Factors

16. McClelland’s Acquired-Needs
Achievement: People with a high need for achievement seek to excel and thus tend to avoid both low-risk and high-risk situations.
Affiliation: Those with a high need for affiliation need harmonious relationships with other people and need to feel accepted by other people.
Power: A person's need for power can be one of two types - personal and institutional.

17. McGregor’s Theory X and Theory Y

18. Thamhain and Wilemon’s Ways to Have Influence on Projects
1. Authority: the legitimate hierarchical right to issue orders
2. Assignment: the project manager's perceived ability to influence a worker's later work assignments
3. Budget: the project manager's perceived ability to authorize others' use of discretionary funds
4. Promotion: the ability to improve a worker's position
5. Money: the ability to increase a worker's pay and benefits
6. Penalty: the project manager's ability to cause punishment
7. Work challenge: the ability to assign work that capitalizes on a worker's enjoyment of doing a particular task
8. Expertise: the project manager's perceived special knowledge that others deem important
9. Friendship: the ability to establish friendly personal relationships between the project manager and others

19. Different types of people
Meyers-Briggs Type Indicator (MBTI)
Extrovert/Introvert (E/I)
Sensation/Intuition (S/N)
Thinking/Feeling (T/F)
Judgment/Perception (J/P)
Social Styles Profile
Drivers
Expressives
Analyticals
Amiables

20. General Advice on Teams
Be patient and kind with your team.
Fix the problem instead of blaming people.
Establish regular, effective meetings.
Allow time for teams to go through the basic team-building stages.
Limit the size of work teams to three to seven members.
Plan some social activities to help project team members and other stakeholders get to know each other better.
Stress team identity.
Nurture team members and encourage them to help each other.
Take additional actions to work with virtual team members.