1. Project Procurement & Contract Administration Jiwei Ma
Project Management
Project Procurement
&
Contract Administration
Jiwei Ma

2. Content Project procurement concept Planning of project procurement
Source selection and solicitation
Bid evaluation methods
Contract administration
Construction project procurement

3. Project Procurement Concept
Definition
Project procurement and operation procurement
Project procurement categories
Types of contract
Basic procedure of project procurement

4. Project Procurement Concept
Definition
Project management tasks to deal with part of the project's scope of work which will be bought from another organization, sometimes the result of company teaming arrangements, but most typically resulting from contracting or subcontracting project scope.

5. Project Procurement Concept
Project procurement and operation procurement
Both purchase products and services from another organization
Usually through solicitation and competition bid or negotiation
Usually under the format of contract or mutual agreement
Sometimes form stable relationships, such as alliance or partnering
The process needs to be monitored, managed, and finally audited

6. Project Procurement Concept
Operation procurement
Continuous on-going production environment
Mature organization with stabilized position
Long-term cooperation
Mostly bulk quantity purchase
Minimized nonstandard product
Project procurement
Non-repetitive, progressive environment
Temporarily established organization
Short-term cooperation
Mostly low-volume quantity
Usually customized product or service

7. Project Procurement Concept
Project procurement categories
Materials or products
Equipment or tools
Labors
Professional services
Entirely engineered system

8. Project Procurement Concept
Types of contract
Lump sum contract
Customized product or complicated system
Unit price contract
Commodities or standard services without predefined quantity
Cost + fee contract
Professional services or labors

9. Project Procurement Concept
Basic procedure of project procurement
Define the project scope: produce or procure
Draft of project procurement plan
Source selection and solicitation
Proposal evaluation and negotiation
Supplier selection
Mutual agreement or signing of contract
Contract administration
Close out of the contract

10. Planning of Project Procurement
Basic rules
Clearly defined scope is the basis of procurement
Different categories of procurement need different types of procedures and methods
Procurement itself costs time and money
Items on critical path and long-lead items are critical to project implementation
Long-term relation with supplier makes difference
Early supplier involvement is important to project’s success
Variations to contract might contain serious impact on project

11. Planning of Project Procurement
Procedure
Define the scope of procurement
Categorize and list procurement items
Select contract type, accordingly
Determine principles of source selection
Determine solicitation methods, respectively
Determine proposal evaluation method, respectively
Define contract administration responsibilities and tasks
Define contract closeout procedures

12. Planning of Project Procurement
Content of project procurement plan
Scope of procurement
Procurement responsibilities of project team members
Procedure of procurement
Source selection and solicitation
Evaluation method or criteria
Types of contracts or agreements
Monitoring and managing of procurement contract
Closeout of contract

15. Source Selection and Solicitation
Based on selection procedure
Open
Invited
Exclusive
Based on supplier category
Domestic, joint venture or foreign company
Company or individual
Based on supplier identification
Vendor or service provider
Distributor or dealer/agent

16. Source Selection and Solicitation
Methods
Public announcement (media)
Selected invitation (with prequalification)
Selected invitation (without prequalification)
Direct negotiation (long-term partners)
Principles
Selection of the solicitation methods: characteristics of products or services
Public funded project: “selective” and “non-discriminative” solicitation

17. Bid Evaluation Methods
By evaluation criteria
Low price
Cost effectiveness
Performance
By procedure
Competitive bid
Negotiation
Technical feasibility evaluation + price selection
By executive body
Procurement management personnel
Third party or consulting personnel

18. Contract Administration
Overall responsibilities
Preparation and negotiation of contract
Monitoring and managing contract
Managing supplier communication
Managing supplier relationship
Managing procurement change

19. Contract Administration
Key tasks
Set up contract administration team and working procedure
Plan for strategies and tactics to deal with suppliers based on their contract types
Identify and analyze risks associated with various types of contracts and plan for mitigation strategies
Develop and enforce key performance indicators
Establish supplier reporting requirements

20. Contract Administration
Key tasks
Monitor contract execution progress and find any variations to contract in a timely manner
Manage variations to contracts, including cost, quality, scope, delivery and any breaches of terms and conditions
Make payment schedule and monitor payment procedure
Deal with claims and find appropriate resolution
Manage contract closeout and final auditing
Select historical procurement file for documentation

21. Construction Project Procurement
Overview
Scope of procurement
Procurement system
Procurement method

22. Construction Project Process Overview
Design Preparation
Design
Construction
Startup
Warrantee
Decision Making
Project Proposal
Feasibility Study
Design Specification
Preliminary Design
Design Development
Construction Document
Acceptance
TIME
Decision Making
Implementatio n
Business Analysis
Technical Description
Technical and implementation planning
Input of labor, materials, equipment, services, etc.
Testing, inspection, evaluation, etc.
Accounting, resolution of claims, etc.

23. Construction Project Procurement
Scope of procurement
Professional services
Financial, technical feasibility analysis, project management, technical consulting, geological survey, design, inspection, testing, legal services, etc.
Engineered system
Entire system, part of a system, etc.
Material
Bulk materials, special products, etc
Equipment leasing
Equipment, tools, etc.
Labor supply
Skilled, non-skilled, etc.

24. Construction Project Procurement
Procurement system
Designer led competitive tender
Designer led construction works managed for fee
Package deal
Project manager/client’s representative-led

25. Construction Procurement System
Construction Project
Procurement System
Designer Led
Competition Tender
Designer Led Construction Managed for a Fee
Package
Deal
Project Manager/Owner’s Representative Led
Separate Contracts
General Contract
Turnkey
Design-Build
Management Contracting
Construction Management

26. Designer Led Competitive Tender
- Separate Contracts
Owner
Designer
Contractor 1
Contractor 2
Contractor m
Supplier 1
Supplier 2
Supplier n

27. Designer Led Competitive Tender
- General Contractor
Owner
General Contractor
Designer
Supplier
Subcontractor *
Subcontractor
*Owner outsourced tasks

28. Construction Project Procedure
Design
Bidding
Construction
TIME

29. Designer Led Construction Management for a Fee
- Managing Contractor/Construction Management
Owner
MC/CM * *
Designer
Supplier
Subcontractor
Subcontractor 1
Subcontractor 2
Subcontractor m
Supplier 1
Supplier 2
Supplier n
*Owner outsourced tasks

30. Construction Project Procedure
Conceptual Design
Preliminary Design
Construction Document
MC/CM Bidding
。。。
Subcontractor Bidding
。。。
TIME

31. Turnkey/Design-build Contractor
Package Deal – Turnkey/Design-build
Owner
Turnkey/Design-build Contractor
Designer
Supplier
Subcontractor

32. Construction Project Procedure
Conceptual Design
Preliminary Design
Construction Document
Turnkey/D-B Bidding
。。。
Subcontractor Bidding
。。。
TIME

33. Construction Project Procurement
Procurement method
Competitive bid
Performance based procurement

34. Construction Project Procurement
Competitive bid
The contractor is selected on the basis of competition
Detailed design has to be finished
Low bidder preferred, in most cases
Usually adopted for the selection of contractor, subcontractor, material supplier, equipment vendor and special service provider
Not applicable for professional services, such as design, engineering, consulting, etc.
Not applicable for labors
Mandatory for public funded project in some countries

35. Scenario of Competitive Bid
Owner
Designer
General Contractor m
General Contractor 1
General Contractor 2
General Contractor 3
Subcontractor 1
Subcontractor 2
Subcontractor i
Service Pvd 1
Service Pvd 2
Service Pvd j
Supplier 1
Supplier 2
Supplier m
Vendor 1
Vendor 2
Vendor n

36. Competitive Bid Advantages Disadvantages Lowest bid price selected
Simplified bid evaluation method
Open and justified contract award procedure
Disadvantages
Possible mistakes and missed items due to hasty bid preparation
Contradictory view on quality standard between owner and contractor
Quality of the work controlled only by project design and specification
Potential risks of project not identified
Qualification of the contractor not evaluated
Project experiences not used for future reference

37. Construction Project Procurement
Performance based procurement
The contractor is selected on the combined basis of contractor’s performance and owner’s expectation
Contractor’s overall performance level has been evaluated based on the past performance and ability to minimize the project risks
Owner’s priority of objectives or perception of risks has been taken into account of contractor selection
Final output of contractor’s performance and owner’s satisfaction will be rated and utilized for future reference

38. Performance Based Procurement
Procedure
Collection of the contractors’ past performance information
Request for and rating of risk assessment plan with a final shortlist
Interview with project team and the key personnel with prioritized list
Pre-award negotiation and contractor selection
Reporting and rating of contractor’s performance in the project

39. Performance Based Procurement Procedure
Past
Performance
Information
Risk Assessment Plan & Short List
Interview &
Prioritization
Pre-Award
Period
Construction
Reporting & Final
Rating
Time
Number of Competitive Firms

40. Performance Based Procurement Procedure
Past
Performance
Information
Risk Assessment Plan & Short List
Interview &
Prioritization
Pre-Award
Period
Construction
Reporting & Final
Rating
Number of Competitive Firms
Time

41. Past Performance Information
Past Performance Information will be collected on all critical team components, which may include:
The Contractor
Critical Individuals (Project Manager, Site Superintendent)
Critical Subcontractors (Mechanical, Electrical, Roofing, etc)
The performance of ALL components will impact the overall value of the performance level.
The team components cannot be changed/modified after the proposal is submitted.

43. Performance Based Procurement Procedure
Past
Performance
Information
Risk Assessment Plan & Short List
Interview &
Prioritization
Pre-Award
Period
Construction
Reporting & Final
Rating
Number of Competitive Firms
Time

44. Risk Assessment Plan Contents
The RA Plan should clearly address the following items:
List and prioritize major risk items (areas that may cause the project to not be completed on time, not finished within budget, generate any change orders, or may be a source of dissatisfaction for the owner).
Explain how the builder will avoid / minimize the risk.
Provide a general project schedule documenting general milestones.
Propose any options that could increase the value (expectation or quality) of their work.

45. Short List
All of the information collected will be inputted into a evaluation model
Past performance information (all components)
RA Plan rating
The model will prioritize the bidders based on the information and predetermined weights
The Owner will use the information to identify the firms to be shortlisted

46. Performance Based Procurement Procedure
Past
Performance
Information
Risk Assessment Plan & Short List
Interview &
Prioritization
Pre-Award
Period
Construction
Reporting & Final
Rating
Number of Competitive Firms
Time

47. Interviews The Owner will interview all key personnel.
They will be interviewed separately and then as a group.
No substitutions will be allowed after proposals are submitted
Interview period is used to identify how well the personnel understand the project and potential risks.

48. Selecting the Best-Value
The interview score (along with the RA Plan Score and Past Performance Information), will be inputted into a final evaluation model
The owner will review and analyze the prioritization in the model
The owner may select the highest-ranked proposal, or another option based on perceived risk
The best-valued firm will be invited to the pre-award meeting

49. Performance Based Procurement Procedure
Past
Performance
Information
Risk Assessment Plan & Short List
Interview &
Prioritization
Pre-Award
Period
Construction
Reporting & Final
Rating
Number of Competitive Firms
Time

50. Objective of Pre-Award Period
Review all identified risks and develop a plan to minimize all risks.
Provide a detailed project schedule.
Coordinate the requirements in detail with all critical elements and client.
Work out any conflicts.
Answer any questions by client.
Provide their QC/QA procedures (quality measurements, housekeeping, etc).
Identify what they will do if any problems arise.

51. Pre Award Meeting
The firm will be responsible for identifying how they will minimize all risks
The firm will provide the QA/QC document
If the best-valued firm cannot minimize all of the identified risks (without modifying their time proposal or exceeding the budget), the bidder may withdrawal without penalty

52. Performance Based Procurement Procedure
Past
Performance
Information
Risk Assessment Plan & Short List
Interview &
Prioritization
Pre-Award
Period
Construction
Reporting & Final
Rating
Number of Competitive Firms
Time

53. Weekly Reporting & Post Construction Rating
Contractor will document relative information on a weekly basis
Accuracy and timeliness of contractor’s performance will be factored into the final close out rating of the firm
The owner will evaluate the performance of the project upon completion
The rating will be based on completing the project with no change orders ($$$ and time), and overall quality
All team components will receive the same rating
The rating will be incorporated into the system and used as reference for future projects

54. Jiwei Ma jiweima@hotmail.com
Thank You
Jiwei Ma