Project Procurement Management

Why outsource?

-To access skills and technologies -To reduce both fixed and recurrent costs -To allow the client organization to focus on its core business -To provide flexibility -To increase accountability

Project Procurement Management Processes

1. plan procurement management 2. conduct procurements 3. control procurements 4. close procurements

urban onshoring

A recent approach to bring IT jobs back to the U.S., especially for functions like software testing

Project Procurement Management

Acquiring goods and services for a project from outside the performing organization

Closing procurements

Completing and settling each contract or agreement, including resolving of any open items Main outputs include: closed procurements, organizational process assets updates

Types of Cost-Reimbursable Contracts

Cost plus Incentive fee (CPIF) Cost plus fixed fee (CPFF) Cost plus percentage of costs (CPPC)

Conducting procurements

Deciding whom to ask to do the work Sending appropriate documentation to potential sellers Obtaining proposals or bids Selecting a seller Awarding a contract

Procurement Management Plan

Describes how the procurement processes will be managed, from developing documentation for making outside purchases or acquisitions to contract closure

Planning procurement management

Determining what to procure and when and how to do it. Identifying which project needs can best be met by using products or services outside the organization. Main outputs include: Procurement Management Plan

Tools for planning purchases/acquisitions

Expert Judgement Market Research Make-or-buy Analysis

Make-or-buy Analysis

General management technique used to determine whether an organization should make or perform a particular product or service inside the organization or buy from someone else

Time and material contracts

Hybrid of both fixed price and cost reimbursable contracts, often used by consultants

Contract Statement of Work (SOW)

If a SOW is used as part of a contract to describe only the work required for that particular contract. It is a type of a scope statement A good SOW gives bidders a better understanding of the buyer's expectations

Fixed price or lump sum contracts

Involve a fixed total price for a well-defined product or service

Cost reimbursable contracts

Involve payment to the seller for direct and indirect costs

Controlling procurements

Managing relationships with sellers, monitoring contract performance, and making changes as needed (using change requests) Main outputs include: Work performance information, change requests, project management plan updates, project document updates, organizational process assets updates

Conducting procurements

Obtaining seller responses, selecting sellers, and awarding contracts Main outputs include: Selected sellers, agreements, resource calendars, change requests, project management plan updates, project document updates.

Approaches for procurements

Organizations can advertise to procure goods and services in several ways: • Approaching the preferred vendor • Approaching several potential vendors • Advertising to anyone interested

Seller Selection

Organizations often do an initial evaluation of all proposals and bids and then develop a short list of potential sellers for further evaluation • Sellers on the shortlist often prepare a best and final offer (BAFO) • Final output is a contract signed by the buyer and the selected seller

PTA formaula

PTA = (ceiling price - target price)/government share + target cost

Tools to Assist in Contract Closure

Procurement audits identify lessons learned in the procurement process Negotiated settlements help close contracts more smoothly A records management system provides the ability to easily organize, find, and archive procurement-related documents

Unit Price contracts

Require the buyer to pay the seller a predetermined amount per unit of service

Cost plus fixed fee (CPFF)

The buyer pays the supplier for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs

Cost plus Incentive fee (CPIF)

The buyer pays the supplier for allowable performance costs plus a predetermined fee and an incentive bonus

Cost plus percentage of costs (CPPC)

The buyer pays the supplier for allowable performance costs plus a predetermined percentage based on total costs

request for proposals

Used to solicit proposals from prospective sellers

request for quotes

Used to solicit quotes or bids from prospective suppliers

Software that assists in Project Procurement Management

Word Processing Software E-procurement software organizations software

termination clause

a contract clause that allows the buyer or supplier to end the contract

Statement of work

a description of the work required for the procurement - part of planning process

proposal

a document prepared by a seller when there are different approaches for meeting buyer needs

contract

a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them

procurement

acquiring goods and/or services from an outside source. Also known as purchasing and outsourcing

bid

also called a tender or quote (short for quotation), is a document prepared by sellers providing pricing for standard items that have been clearly defined by the buyer

organizations software

also use other Internet tools to find information on suppliers or auction goods and services

constructive change orders

are oral or written acts or omissions by someone with actual or apparent authority that can be construed to have the same effect as a written change order

Urban Development Center model

develops the infrastructure, resources, and jobs in low-income urban neighborhoods to provide technology education, training, and job placement services for over 4,500 unemployed and low-income adults in New York City

E-procurement software

does many procurement functions electronically

word processing software

helps write proposals and contracts, spreadsheets help evaluate suppliers, databases help track suppliers, and presentation software helps present procurement-related information

Point of Total Assumption (PTA)

the cost at which the contractor assumes total responsibility for each additional dollar of contract cost. Contractors do not want to reach the point of total assumption, because it hurts them financially, so they have an incentive to prevent cost overruns

Why are contracts important?

they can clarify responsibilities and sharpen focus on key deliverables of a project Also because contracts are legally binding, there is more accountability for delivering the work as stated in the contract