Project Procurement Management Midterm Study PDF

**Project Procurement Management** Project Procurement Management includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team. Project Procurement Management includes the management and control processes required to develop and...

**Project Procurement Management** Project Procurement Management includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team. Project Procurement Management includes the management and control processes required to develop and administer agreements such as contracts, purchase orders, memoranda of agreements (MOAs), or internal service level agreements (SLAs). The personnel authorized to procure the goods and/or services required for the project may be members of the project team, management, or part of the organization's purchasing department if applicable. (PMBOK 6th Edition) Procurement Management Selecting the appropriate relationships and contract approaches for each type of purchased goods or outsourced service Preparing requests for quotes (RFQs) and requests for proposals (RFPs) and evaluating partnership opportunities Evaluating RFQs, RFPs, and partnerships Awarding and signing contracts Managing quality and timely performance Managing contract changes Closing contracts Plan Procurement Management Plan Procurement Management is the process of documenting project procurement decisions, specifying the approach and identifying potential sellers (PMBOK 6th edition). Plan Procurements The first step in the procurement process: -- the planning for purchases and acquisitions, specifically the development of a procurement plan that states what to procure, when, and how. This process includes the following: -- Defining the need for the project -- Development of the procurement statement of work, specifications, and work breakdown structure -- Preparing a WBS dictionary, if necessary -- Performing a make or buy analysis -- Laying out the major milestones and the timing/schedule Plan Procurements First step cont'd: -- Cost estimating, including life-cycle costing -- Determining whether qualified sellers exist -- Identifying the source selection criteria -- Preparing a listing of possible project/procurement risks (i.e., a risk register) -- Developing a procurement plan and obtaining authorization and approval to proceed Plan Procurements Statement of Work (SOW) -- is a narrative description of the work to be accomplished and/or the resources of work to be supplied. -- Must be as clear, complete and concise as possible, and must describe ALL the work and activities the seller is required to complete. Identification of work is paramount -- During the 1970s and 1980s, small companies were bidding on megajobs only to subcontract out more than 99 percent of all of the work. -- Lawsuits were abundant and the solution was to put clauses in the SOW requiring that the contractor identify the names and resumes of the talented internal resources that would be committed to the project, including the percentage of their time on the project. Plan Procurements Statement of objectives (SOOs) for projects that are designed as "performance-based" effort. -- Performance-based projects are now the preference in the federal government. -- SOOs are used when the procuring organization wants to leverage the advanced technologies, capabilities, and expertise of the potential contractors in the marketplace. SOW describes in specific detail to the contractor what work needs to be performed and how it should be performed SOO only describes the end objectives of the project (what are the project's end objectives). Plan Procurements Specifications are written, pictorial, or graphic information that describe, define, or specify the services or items to be procured. There are three types of specifications: -- Design Specifications: These detail what is to be done in terms of physical characteristics. The risk of performance is on the buyer. -- Performance Specifications: These specify measurable capabilities the end product must achieve in terms of operational characteristics. The risk of performance is on the contractor. -- Functional Specifications: This is when the seller describes the end use of the item to stimulate competition among commercial items, at a lower overall cost. This is a sub-set of the performance specification, and the risk of performance is on the contractor. Plan Procurements Options on how an end item can be obtained Feasible procurement alternatives include: -- Make or buy -- Buy or rent -- Lease or rent Make-or-buy analysis The costs (direct and indirect) involved in managing the procurement should be considered as part of the decision, in addition to the direct costs of the product or service to be procured. Use "Decision Tree" to do make-or-buy analysis. Make or Buy The make decision -- Less costly (but not always!!) -- Easy integration of operations -- Utilize existing capacity that is idle -- Maintain direct control -- Maintain design/production secrecy -- Avoid unreliable supplier base -- Stabilize existing workforce The buy decision -- Less costly (but not always!!) -- Utilize skills of suppliers -- Small volume requirement (not cost effective to produce) -- Having limited capacity or capability -- Augment existing labor force -- Maintain multiple sources (qualified vendor list) -- Indirect control Bid documents Request for Proposal (RFP) -- Also known as Request for Tender (RFT) -- RFPs request a detailed proposal on how the work will be accomplished, who will do it, resumes, company experience, price, etc. Invitation for Bid (IFB) -- Also known as Request for Bid (RFB) -- Usually just request a total price to do all the work. Bid documents Request for Quotation (RFQ) -- Request a price quote per item, hour, meter, or other unit of measure. Request for Information (RFI) -- RFI is to get info whereas procurement docs are to buy something. -- It might be used before procurement docs are created. To bid or not to bid The most important factors to be considered -- Cost of Bid -- Probability of winning bid -- Margin of profit -- Time for Payment Once seller understands the factors, make decision based on -- Profitability -- Capability -- Historical Analysis -- Long-term Strategy -- Risk Assessment Align Process to Business Need 19 Request for Proposal (RFP) Historically used on projects of significant value, complexity, and risk. Now more frequently used in quantitative, rather than qualitative, where best/lowest price is a primary driver. Request for Qualification (RFQ) Used to pre-qualify suppliers who are interested in a future opportunity (preferred list of suppliers) Request for Expression of Interest Used to solicit supplier interest in helping buyer achieve business outcomes on a risk/gain sharing basis-- might, or might not, result in a contract. Often a shortlisting tool. Sole Source / Direct Award Use is self explanatory; great care is taken to avoid abuse Non- PreQualified Vendor Quote (NPQVQ) Used to expedite procurement process when total contract value \