Procurement Management
12.3. Administer Procurement: T&T 7. Records management systems
- A contract is a formal, legal document so thorough records relating to the contract must be kept.
12.4. Close Procurement: T&T 3. Records management
- A contract is formal, legal document so thorough records relating to contract must be kept.
12.1. Procurement Plan: T&T What do we have in the contract?
- Acceptance: how will we know the work is acceptable? - Bonds: performance bonds, payment bond (bao lanh thuc hien hop dong, dat coc) - Breach/Default: occurs when any obligation of the contract is not met. A Breach is an extremely serious event => cancel hop dong - Changes: how changes would be handled? - Dispute resolution: how will dispute regarding the contract be settled? (len toa an xu ly ) - Force majeure: An act of God: fire or storm, earthquake (truong hop bat kha khang) - Intellectual property: so huu tri tue - Liquidated damages: muc phat, vi du trong xay dung phat 100tr neu cham tien do - Warranties: bao hanh san pham cua hop dong
12.3. Administer Procurement: T&T 5. Payment systems
- All payments should be made and documented in strict accordance with the terms of the contract - Payments to the seller are typically processed by the accounts payable system after certification of satisfactory work by an authorized person on the project team.
12.1. Procurement Plan: Inputs 3. Teaming agreements:
- Between two sellers - Between buyer ans seller
Fixed Price Award Fee: FPAF
- Buyer pays a fixed price plus an award amount base on seller's performance - Similar to FPIF, except the total possible award amount is determined in advance (thuong theo nguong, fix tu truoc)
Cost Plus Award Fee (CPAF)
- Buyer pays actual costs plus a award (or penalty) amount that based on performance of the seller (stated in the contract)
Cost Plus Incentive Fee (CPIF):
- Buyer pays actual costs plus a fee that based on performance of seller (stated in the contract) (theo tien do, % performance)
Cost Plus Fixed Fee (CPFF):
- Buyer pays actual costs plus a negotiated fee that is fixed before the work begins - The fee does not vary with actual cost (thuong them 1 khoan co dinh da thoa thuan)
Cost Plus Fee (CPF) or Cost Plus Percentage of Costs (CPPC)
- Buyer to pay for all cost plus % cost as a fee - Bad for buyer everywhere => may not allowed to use
12.1. Procurement Plan: Output 6. Change requests
- Change requests to PMP
12.2 Conduct Procurement: Outputs 4. Change request
- Change requests to the PMP
12.2 Conduct Procurement: T&T 1. Bidder conferences
- Contractor conferences, vendor conferences or pre-bid conferences
12.2 Conduct Procurement: Outputs 5. PMP updates
- Cost baseline - Scope baseline - Schedule baseline - Procurement management plan
12.1. Procurement Plan: Output 5. Source Selection Criteria
- Criteria are developed and used to rate or score proposals (Tieu chi chon nha thau, cham thau)
12.1. Procurement Plan: Outputs 1. Procurement management plan
- Describe how the procurement process will be planned, execute and controlled - Is part of PMP
12.1. Procurement Plan: Output 2. Procurement Statement of Work
- Determine the scope of work to be done on each procurment - Type of Procurment statement of work: Performance, Functional, Design + Performance: what the final procduct should be able to accomplish rather than how it should be built + Functional: end purpose or result rather than the specify procedure or approach. Functional statement may include a statement of the minimum essential characteristics of the product + Design: conveys precisely what work is to be done
12.1.Plan Procurement :
- Determine which components of services (product or result) of a project will need to be performed or made internally, at which of those will need to be procured for an external source - How will we purchase them? and who are potential seller? The Plan procurement process includes: - Preforming make or buy analysis - Creating a procurement management plan - Creating a procurement statement of work (ho so moi thau) for each procurement - Selection a contract type for each procurement - Creating procurement documents - Determining the source selection criteria
12.1. Procurement Plan: T&T 3. Contract types - Fixed price contracts
- Fixed price contracts: FP or Lump Sum or Firm Fixed Price + Used? When we have a well defined procurement state ment of work + Who will bear the additional cost? Seller has most cost risk + This is most common type of contract + Type of Fixed price contract: Firm Fixed Price: FFP Fixed Price Incentive Fee: FPIF Fixed Price Award Fee: FPAF Fixed Price Economic Price Adjustment: FP-EPA Purchase Order: PO
12.1. Procurement Plan: T&T 3. Contract types
- Fixed price contracts: gia fix - Cost reimbursable contracts: lam den dau tra tien den day - Time and Material Contracts (T&M): labor
12.3. Administer Procurement: T&T 6. Claims administration
- Handing claims: documented, processed, monitored and managed throughout the contract life cycle. Usually addressed through the contract change control system. - The best way to settle claims is through negotiation or the use of the dispute resolution process specified in the contract. Many claims are not resolved until after the work is completed.
12.3. Administer Procurement: T&T 1. Contract change control system
- Handle the changes in procurement - This system includes change procedure, form, dispute resolution processes (quy trinh giai quyet tranh chap) and tracking system and is specified in the contract. - This system is integrated with the change control system
12.1. Procurement Plan: T&T 1. Make or buy analysis
- It is better to "Make" if" + Have an idle equipment or workforce + You want to retain control + THe work involves proprietary information or procedure (ban quyen, so huu tri tue) - Buy or Lease: nen mua hay thue
12.3. Administer Procurements
- Managing the relationship between the buyer and seller and assuring the both parties perform as required by the contract + Managing procurement relationships + Monitoring contract performance + Making changes and corrections as needed.
12.2 Conduct Procurement: T&T 7. Procurement Negotiations
- Negotiations clarity the structure, requirements and other teams of the purchases that mutual agreement can be reached prio to signing the contract. - Obtain a fair and reasonable price. - Develop a good relationship with the seller.
12.4. Close Procurement
- Procurement are closed: + When contract is completed + Contract is terminated before the work is completed - Verifying that all work and deliverable are accepted - Finalizing open claims - The buyer will provide the seller with formal notice that the contract has been completed - There may be some continuing obligations, such as warranties.
12.4. Close Procurements: outputs 2. OPA updates
- Procurement file - Deliverable acceptance - LL documentation
12.3. Administer Procurement: T&T 4. Performance reporting
- Provides management with information about how effectively the seller is achieving the contractual objectives
12.2 Conduct Procurement: Outputs 6. Project document updates
- Requirements documentation - Requirements trace-ability documentation - Risk register
12.4. Close Procurement: T&T 1. Procurement Audits
- Review only the procurement process: how the whole procurement process run. - The result is the lesson learned of the procurement process can help improve other procurement - How can we handle negotiations betters? - How can we make the bidding process easier for sellers
12.2 Conduct Procurements
- Sending the procurment documents that created in Plan Procurements to sellers (Ban ho so moi thau) - Anwsering the sellers' questions - Having sellers to prepare the responses. - Reviewing the seller responses to select the sellers - Awarding a contract to the selected seller (ky hop dong)
12.2 Conduct Procurement: Outputs 1. Selected sellers
- Shortlist: the sellers who have negotiated a draft contract that will become the actual contract when an award is made.
Purchase Order: PO
- Simpliest type of fixed price contract, used for simple commodity procurement. (Dung de mua nhung cai don gian trong du an)
12.2 Conduct Procurement: T&T 2. Proposal evaluation techniques
- Source selection will be made based on seller responses to previously defined weighted criteria.
12.2 Conduct Procurement: T&T 3. Independent estimates
- The buyer must have their own estimates to check reasonableness and cannot solely rely on the seller's cost estimates - Buyer's estimate can be created in-house or with outside assistance.
12.4. Close Procurement: T&T 2. Negociated settements
- The final settlement of all claims, invoices and other issues may be handled through negotiations or through the dispute resolution process previously set up in the contract. - Whenever settlement cannot be archived through direct negotiation => what next? (Kien cao, thu no)
Fixed Price Incentive Fee: FPIF
- The incentives is adjusted base on the seller meeting specified performance criteria such as getting work done faster or better (Thuong theo % vuot tien do)
12.4. Close Procurement: outputs What are differences between close procurement and close project and phase?
- The may be many procurement in one project so the will be many procurement closures but closure only happen at the end of project or phase. - Close procurement before the final project closure
12.2 Conduct Procurement: T&T 4. Expert Judgment
- This information may be part of OPAs or the project team can develop it - The project documents are then sent only to the pre-qualified seller
12.1. Procurement Plan: T&T 3. Contract types Cost Reimbursable (CR)
- Used: when we do not have a well defined procurement statement of work , the cost cannot be estimated accurately enough to effectively use a FP contract - Buyer has most cost risk because the total cost are unknown - CR requires the seller to have an accounting system that can tract costs by project - Type of CR contract: + Cost contract: not profit. Performed by nonprofit organization (has not mentioned in PMBOK) + Cost Plus Fee (CPF) or Cost Plus Percentage of Costs (CPPC) => co loi cho seller + Cost Plus Fixed Fee (CPFF): theo tien do, % performance + Cost Plus Incentive Fee (CPIF): theo tien do, % performance + Cost Plus Award Fee (CPAF): theo nguong, buoc nhay lon
12.1. Procurement Plan: T&T 3. Contract types - Time and Material (T&M) or Unit Price
- Used? The buyer pays on a per hour or per item basis. Used for service effort in which the level of effort cannot be defined when the contract is awarded. - It is the hybrid type of FP (fixed price per hour) & CR (material costs and the fact that the total cost is unknown) - Seller's profit is build into the rate so they have no incentive to get the work done quickly or efficiently. So, use this type of contract for: + Work value is small and short amount of time + may put a "not to exceed" clause in the contract
12.3. Administer Procurement: T&T 2. Procurement performance reviews
- during the Administer Procurement process, the buyer's project manager analyzes all available data to verify that the seller is performing as they should. - Determine if changes are needed to improve the buyer/seller relationship and the processes being used. - Formal changes to the contract may be requested as a result of this meeting
What is procurement management?
- when we need to purchase or acquire products, services or results needed from outside of the project - Includes contract management & change control process - Procurement management also administers any contract issued outside organization
12.3. Administer Procurement: Inputs 2. PMP
...
12.2 Conduct Procurement: ITTO (9-7-6) T&T (7)
1. Bidder conferences: lam ro ho so moi thau 2. Proposal evaluation techniques 3. Independent estimates: tu minh dua ra gia thau 4. Expert judgment 5. Advertising 6. Internet search 7. Procurement negotiations
Terms to know: 1. Buyer or Seller
1. Buyer or Seller - Buyer: client, customer, prime contractor, contractor, purchaser - Seller: contractor, subcontractor, provider, vendor, supplier
Terms to know: 3. Centralized/Decentralized contracting
1. Centralized contracting - There is one procurement department and Procurement manager may handle procurement on many projects - Advantages: + Procurement managers has higher levels of expertise + Clearly defined career path in procurement, continuous, improvement, training and shared lesson learnt - Disadvantages: + Procurement manager must divide his/her attention among many project + It more difficult for the PM to obtain contracting help when needed 2. Decentralized contracting - A procurement manager is assigned to one project full time and reports directly to the PM - Advantages: + PM has easier access to contracting expertise + Procurement Manager has more loyalty to the project - Disadvantages: + No "home" for Procurement Manager + It is more difficult to maintain a high level of contracting expertise in the company.
12.3. Administer Procurement: ITTO (6-7-4) 2. T&T (7)
1. Contract change control system 2. Procurement performance reviews 3. Inspection & audits (process) 4. Performance reporting: bao cao ve review performance ... 5. Payment systems: doa khong thanh toan neu ko lam .. 6. Claims administration: doi boi thuong khi co issue trong hop dong 7. Records management system: cac tai lieu formal can duoc record lai
12.3. Administer Procurement: Administer Procurement for different contract types
1. Fixed Price Contract + Watch for the seller cutting scope, check for scope misunderstandings + Watch for the seller cutting quality + Watch for overpriced change orders 2. T&M Contract + Provide day-to-day direction to the seller, make sure the project length is not extended + Attempt to get concrete deliverable + Make sure the number of hours spent on work is reasonable. 3. Cost Reimbursable Contract + Audit every invoice + Make sure the seller's work is progressing efficiently + Watch for the seller adding resources to your project that do not add value or perform real work + Watch for seller charges that were not part of the original plan. + Re-estimate the cost of the project.
12.4. Close Procurement: ITTO (2-3-2)
1. Inputs - PMP - Procurement documentation 2. T&T - Procurement audits - Negotiated settlements - Record management system 3. Outputs - Closed procurements - OPA updates
12.4. Close Procurement: Inputs (1-2)
1. PMP 2. Procurement documentation - Outputs from Admnister Procurments - All procurement documentation is collected, indexed and filed + Contract schedule, scope, quality and cost performance + Contract change documentation + Payment records and inspectioin results - This information can be sued for lessons learned and as basis for evaluating contractors for future contracts
12.2 Conduct Procurement: ITTO (9-7-6) Inputs (9)
1. PMP 2. Procurement documents 3. Source selection criteria 4. Qualified seller list 5. Seller proposals 6. Project documents 7. Make or buy decisions 8. Teaming agreements 9. OPAs
12.2 Conduct Procurement: Inputs (1-4)
1. PMP: - The Procurement management plan 2. Procurement documents - RFI - IFB, RFP, RFQ - Invitation for negociation 3. Source Selection criteria 4. Qualified Seller list: - This information may be part of OPAs or the project team can develop it - The project documents are then sent only to the pre-qualified seller.
Procurement processes: key outputs
1. Procurement Plan: - Procurement Management Plan - Procurement Statements of work/Make or buy decisions - Source selection criteria/change request (tieu chuan lua chon nha thau) 2. Conduct Procurement - Selected sellers/Procurement contract award - Resource calendars/Change request - Project management plan & docs updates 3. Administer procurement - Procurement documentation /change requests - OPA & PMP updates 4. Close procurement - Closed procurement/OPA udpates
12.1. Procurement Plan: T&T 3. Contract types & procurement documents
1. Procurement Statement of work: Performance or functional: => Contract types: CR, Procurement document: RFP 1. Procurement Statement of work: Design => Contract types: FP, Procurement document: IFB (Invitation For Bid) 1. Procurement Statement of work: Any => Contract types: T&M, Procurement document: RFQ (Request For Quotation)
12.3. Administer Procurement: Outputs 1. Procurement documentation 2. OPAs updates
1. Procurement documentation - Procurement contract: approved/unapproved change requests - Seller performance reports, warranties, financial documents (invoices and payment records), result of contract-related inspections 2. OPAs updates - Seller performance evaluation documentation - Lessons learned 3. Change requests 4. PMP updates - Procurement management plan - Schedule baseline
12.3. Administer Procurement: ITTO (6-7-4) 3. Output (4)
1. Procurement documentation: vi du bien ban nghiem thu, moi giai doan khac nhau thi document khac nhau 2. OPA updates 3. Change requests 4. PMP updates: change request co the anh huong den scope => PMP
12.3. Administer Procurement: Inputs (1-3)
1. Procurement documents - Contain complete supporting records for administration of the procurement processes, includes procurement contract awards and the statement of work. 2. PMP: - Procurement Management Plan 3. Contract
12.3. Administer Procurement: ITTO (6-7-4) 1. Inputs (6)
1. Procurement documents 2. PMP 3. Contract 4. Performance reports 5. Approved change requests: noi dung change request lien quan den hop dong 6. Work performance information
Terms to know: 2. Role of Procurement Manager and Project Manager
1. Role of Procurement Manager - Manage procurement processes to obtain goods/services required by project - Make sure organizational policies on purchasing are followed - Determine type of contracts, procurement document - Negotiate terms, contracts 2. Project Manager - Involve in procurement process to make sure contract contains the project need - Integrate contracts's work into the project - Manage risk that come along with the contract - Work with procurement management to manage changes to to the contract
12.1. Procurement Plan: Inputs 1. Scope baseline 2. Requirement documentation
1. Scope baseline - Scope statement - WBS - WBS dictionary 2. Requirement documentation - Project documents that is considered during planning for procurement. - Requirements: health, safety, security, performance, environment, insurance, intellectual property...
12.2 Conduct Procurement: ITTO (9-7-6) Outputs (6)
1. Selected sellers 2. Procurement contractor award 3. Resource calendars 4. Change requests 5. PMP updates 6. Project document updates
12.1. Procurement Plan: Inputs 10. EEFs 11. OPAs
10. EEFs - Marketplance condition - Prodocts, services, and result that available in the rmarket place - Suppliers, including past performance 11. OPAs - Formal procurement policies, procedure and guidelines - LL
Procurement Management Processes (4)
12.1 Plan Procurement (Planning) 12.2. Conduct Procurement (Executing) 12.3 Administer Procurement (M&C) 12.4 Close Procurement (Closing)
12.3. Administer Procurement: Inputs (4-6)
4. Performance reports - Seller performance reports: which deliverable have been completed and which have not. 5. Approved change request 6. Work performance information - Quality standards are being satisfied - Costs have been incurred or committed. - Seller invoices have been paid.
12.1. Procurement Plan: Output 3. Make or by decision 4. Procurement Documents
4. Procurement Documents - IFB: Invitation For Bidding - RFP: Request For Proposal - RFQ: Request For Quotation
12.2 Conduct Procurement: T&T 5. Advertising 6. Internet search
5. Advertising: Quang cao dau thau - To attract sellers, an advertisement may be placed in newspapers, on the internet or in other types of media. 6. Internet search
12.1. Procurement Plan: Inputs 4. Risk register 5. Risk related contract decisions
5. Risk related contract decisions - Decision to transfer risk (insurance ...) - Result of mitigating or transferring part or all of the threat or enhancing or sharing part or all opportunity.
12.2 Conduct Procurement: Inputs (5-9)
5. Select proposals - Sellers response to procurement documents 6. Project documents - Risk register - Risk related contract decisions 7. Make of by decisions 8. Teaming agreements 9. OPAs - Listing of prospective and previously qualified sellers - Information on relevant past experience with sellers
12.1. Procurement Plan: Inputs 6. Activity resource requirement 7. Project schedule
6. Activity resource requirements Contain specify needs: people, equipment 7. Project schedule - requireed deliverable date
12.1. Procurement Plan: Inputs 8. Activity cost estimates 9. Cost performance baseline
8. Activity cost estimates - used to evaluate the reasonableness of the bids or proposals received from potential sellers 9. Cost performance baseline - used to evaluate the reasonableness of the bids or proposals received from potential sellers
12.2 Conduct Procurement: Outputs 3. Resource calendar
Hang khi nao ve - The quantity and availability of contracted resources and those date on which each specific resource can be active of idle are documented.
12.1. Procurement Plan: ITTO (11-3-6) Inputs
Inputs (6) 1. Scope baseline 2. Requirement documentation 3. Teaming agreements 4. RIsk register 5. Risk related contract decisions 6. Activity resource requirements 7. Project schedule 8. Activities const estimates 9. Cost performacne baseline 10. EEFs 11. OPAs
12.3. Administer Procurement: T&T 3. Inspection and audit
Inspections and audits can be conducted during execution of the project to verify compliance in the seller's work processes and deliverables - Inspection: (Nghiem thu deliverable cua seller) - Audit: check seller process
12.2 Conduct Procurement: Outputs 2. Procurement Contract award
Ky hop dong - A contract is mutually binding legal agreement that obligates the seller to provide the specified products, services or results and obligates the buyer to compensate the seller.
12.2 Conduct Procurement: T&T 7. Procurement Negotiations: Main items to negotiate
Main items to negotiate: + Scope + Schedule + Price, payment schedule + Responsibilities + Authority: cac ben co quyen lam gi + Applicable law + Project management process to be used
12.2 Conduct Procurement: T&T 7. Procurement Negotiations: Negotiation tactics:
Negotiation tactics: + Attacks:Doa phu dau + Personal insults: miet thi + Deadline: lam nhanh len + LImited authority: tao chi duoc quyet the nay thoi + Missing man: sep di vang, cu xu ly di roi tinh tiep + Withdrawal: lam cao + Fair and reasonable: "let's be fair and reasonable, accept this offer as it stands" + Delay: chua dam phan duoc thi cu de lai xu ly sau + Extreme demands: dua ly do hoi cun. Ex: "we planed to give you a Pentium III to meet the requirement to deliver "a computer" in the contract"
12.1. Procurement Plan: T&T PTA: Point of Total Assumption
Only refer to FPIF contract - Price: amount the seller charge the buyer - Target price: target cost + target fee. Target price is a measure of success. - Ceiling price: highest price the buyer will pay (gia cao nhat nguoi mua se tra) - Cost: how much an item costs the seller to create , develop or purchase - Sharing ratio: incentives are usually expressed by ratio (vuot qua cost thi moi ben an chia bao nhieu). Ex: 90/10 ~ buyer/seller. + The sharing ratio describe how the cost saving or cost overrun will be shared. - PTA: refers to the amount above which the seller bears all the loss of a cost overrun (seller will not have profit) + Costs that go above the PTA are assumed to be due to mismanagement + Seller monitor their actual costs against the PTA to make sure they are still receiving a profit for completing the project
PTA formula
PTA = [(Ceiling price - target price)/Buyer's share ratio] + Target cost
Fixed Price Economic Price Adjustment: FP-EPA
Thay doi theo gia thi truong
12.4. Close Procurements: outputs 1. Closed procurements
The buyer will provide the seller with formal notice that the contract has been completed