1. Project Procurement Management

2. 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, offer, or proposals, as appropriate
Source Selection : choosing from among potential sellers
Contract Administration : managing the relationship with the seller
Contract Closeout : completion and settlement of the contract, including resolution of any open items.

3. Project Procurement Management

4. Procurement Planning
The process of identifying which project needs can be best met by procuring products or services outside the project organization.
It involves consideration of
whether to procure
how to procure
what to procure
how much to procure
when to procure

5. Procurement Planning

6. Inputs to procurement planning
Scope statement:
describes the current project boundaries
provides information about project needs than strategies to be considered
should include:
project justification
project product
project deliverables
project objectives

7. Inputs to procurement planning
Product descriptions:
provides important information about any technical issues or concerns need to be considered
describes the ultimate end-product of the project

8. Inputs to procurement planning
Procurement resources:
organization or project level
Market conditions:
consider what products or services available in the market
product or service providers
terms and conditions

9. Inputs to procurement planning
Other planning output:
preliminary cost and schedule estimates
quality management plan
cash flow projections
work breakdown structures
identified risks
planned staffing

10. Inputs to procurement planning
Constraints:
factors that limit buyer option, eg funds availability
Assumptions:
factors that will be considered to be true, real, or certain

11. Tools & techniques Make or buy analysis: Expert Judgement:
use of engineering economic analysis
Expert Judgement:
other units within the performing organization
consultants
professionals & technical associations
industry groups

12. Tools & techniques Contract type selection:
fixed price or lump sum contracts:
a well-defined product
little or no modification can be developed for the plans and specifications
may include incentives

13. Tools & techniques Contract type selection:
cost reimbursable contracts:
design documentation is not complete at time of negotiation
Cost + fee:
Cost + percent of cost
Cost + fixed fee
Cost + fixed fee + profit-sharing clause (guaranteed maximum price)
Cost + sliding fee

14. Tools & techniques Contract type selection: unit price contracts:
flexibility in meeting variations in the amount and quantity of work
based on the guide quantity specified

15. Contract strategy considerations
Procurement strategy will depend upon:
type of project
particular emphasis in terms of scope
quality
time & cost
degree of uncertainty

16. Risk sharing principles
Principles for allocating risk among the parties to a project:
which party is the source of the particular risk and hence best able to control the events that may lead to it happening in the first place?
which party can be best manage the risk, if it occurs?
Is it or is it not preferable for the client to retain an involvement in the management of the risk in questions?

17. Risk sharing principles
Principles for allocating risk among the parties to a project:
if it cannot be controlled, which party can or should carry the risk?
Will the cost incurred, or premium charged, by the recipient of the risk be reasonable and cost-effective
will the recipient be capable of sustaining the consequences of the risk, if it occurs?
Or will it lead to the possibility of the risk of a different nature being transferred back again

18. Risk sharing principles

19. Risk Implication (Client’s perspective)

20. Risk Implication (Client’s perspective)

21. Risk Implication (Client’s perspective)

22. Good condition of contract in respect of risk:
Clear definitions of risk and their assignment
Positive incentives linked to risk assignment
Flexibility for different assignment of different risks between parties
strong emphasis on good management practices designed to avoid unnecessary risks

23. Solicitation planning
Involves preparing the documents needed to support solicitation

24. Solicitation planning

25. Output of Procurement planning as Inputs to solicitation planning
Procurement management plan:
describe how the remaining procurement process will be managed:
type of contract to be used
needs of independent estimates
scope of works: proc. Dept. vs project team
standardized procurement documents
management of multiple providers
procurement coordination related to other project aspects
may be formal or informal, detailed or broad, based on project needs

26. Output of Procurement planning as Inputs to solicitation planning
Statement of work (SOW):
describes the procurement item in sufficient details to allow perspective sellers to determine if they are capable of providing the item
should clear, complete and concise
SOW vs SOR:
Product or service to be provided vs problems to be solved

27. Tools & techniques for solicitation planning
Standard forms:
standard contracts
standard description of procurement items
Expert judgement:
other units within the performing organization
consultants
professionals & technical associations
industry group

28. Output from solicitation planning
Procurement documents:
used to solicit/request proposals
bid/quotation for price-driven
proposal for non-financial consideration
common names:
Invitation for Bid (IFB)
Request for Proposal (RFP)
Request for Quotation (RFQ)
Invitation for Negotiation
Contractor initial response

29. Output from solicitation planning
Procurement documents:
should be structured
include relevant SOW, description of response, contractual provisions
should be rigorous but flexible

30. Output from solicitation planning
Evaluation criteria:
to rate or score proposal
often included as part of procurement documents
limited vs integrated criteria:
understanding of needs
overall or life cycle costs
technical capability
management approach
financial capacity