Quick Recap

1. Monitoring and Controlling Quick Recap

2. PROJECT RISK MANAGEMENT OVERVIEW • Risk Identification • Inputs • Product Description • Other Planning Outputs • Historical Information • Tools & Techniques • Checklists • Flowcharting • Interviewing • Outputs • Sources of Risk • Potential Risk Events • Risk Symptoms • Inputs to other Processes • Risk Quantification • Inputs • Stakeholder risk tolerances • Sources of Risk • Potential Risk Events • Cost Estimates • Activity Duration Estimates • Tools & Techniques • Expected Monetary Value • Statistical Sums • Simulation • Decision Trees • Expert Judgment • Outputs • Opportunities to pursue, threats to respond to • Opportunities to ignore, threats to accept • Response Development • Inputs • Opportunities to pursue, threats to respond to • Opportunities to ignore, threats to accept • Tools & Techniques • Procurement • Contingency Planning • Alternative Strategies • Insurance • Outputs • Risk Management Plan • Inputs to other Processes • Contingency Plans • Reserves • Contractual Agreements • Response Control • Inputs • Risk Management Plan • Actual Risk Events • Additional Risk Identification • Tools & Techniques • Workarounds • Additional Risk Response Development • Outputs • Corrective Action • Updates to Risk Management Plan

3. Lesson 8: Planning Project ProcurementsTopic 8A: Plan Project ProcurementsTopic 8B: Prepare a Procurement Statement Of WorkTopic 8C: Prepare a Procurement Document

4. in Project Procurement Management Key indicators forMonitoring and controlling

5. Learning Objectives • Understand the importance of project procurement management and the increasing use of outsourcing for information technology projects. • Describe the work involved in planning purchases and acquisitions for projects, the contents of a procurement management plan and contract statement of work, and calculations involved in a make-or-buy analysis. • Discuss what is involved in planning contracting, including the creation of various procurement documents and evaluation criteria for sellers.

6. Learning Objectives (cont’d) • Understand the process of requesting seller responses and the difference between proposals and bids. • Describe the seller selection process and recognize different approaches for evaluating proposals or selecting suppliers. • Discuss the importance of good contract administration. • Describe the contract closure process. • Discuss types of software available to assist in project procurement management.

7. Importance of Project Procurement Management • Procurement means acquiring goods and/or services from an outside source. • Other terms include purchasing and outsourcing. • Experts predict that global spending on computer software and services will continue to grow. • India is the leading country for U.S. offshore outsourcing.

8. Debates on Outsourcing • Some companies, such as Wal-Mart, prefer to do no outsourcing at all, while others do a lot of outsourcing. • Most organizations do some form of outsourcing to meet their IT needs and spend most money within their own country. • The U.S. temporary workforce continues to grow as people work for temporary job agencies so they can more easily move from company to company.

9. Why Outsource? • To reduce both fixed and recurrent costs. • To allow the client organization to focus on its core business. • To access skills and technologies. • To provide flexibility. • To increase accountability.

10. Contracts • A contract isa mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them. • Contracts can clarify responsibilities and sharpen focus on key deliverables of a project. • Because contracts are legally binding, there is more accountability for delivering the work as stated in the contract. • A recent trend in outsourcing is the increasing size of contracts.

11. Project Procurement Management Processes • Project procurement management: Acquiring goods and services for a project from outside the performing organization. • Processes include: • Planning purchases and acquisitions: Determining what to procure, when, and how. • Planning contracting: Describing requirements for the products or services desired from the procurement and identifying potential sources or sellers (contractors, suppliers, or providers who provide goods and services to other organizations).

12. Project Procurement Management Processes (cont’d) • Requesting seller responses: Obtaining information, quotes, bids, offers, or proposals from sellers, as appropriate. • Selecting sellers: Choosing from among potential suppliers through a process of evaluating potential sellers and negotiating the contract. • Administering the contract: Managing the relationship with the selected seller. • Closing the contract: Completing and settling each contract, including resolving any open items.

13. Planning Purchases and Acquisitions • Identifying which project needs can best be met by using products or services outside the organization. • If there is no need to buy any products or services from outside the organization, then there is no need to perform any of the other procurement management processes.

14. What Went Right? • Several organizations, such as The Boots Company PLC in England, outsource their IT services to save money compared with the cost of running the systems themselves. • Carefully planning procurement can also save millions of dollars, as the U.S. Air Force did by using a unit pricing strategy for a large office automation project.

15. Tools and Techniques for Planning Purchases and Acquisitions • 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. • Often involves financial analysis. • Experts, both internal and external, can provide valuable inputs in procurement decisions.

16. Make-or-Buy Example • Assume you can lease an item you need for a project for $800/day. To purchase the item, the cost is $12,000 plus a daily operational cost of $400/day. • How long will it take for the purchase cost to be the same as the lease cost?

17. Make-or Buy Solution • Set up an equation so both options, purchase and lease, are equal. • In this example, use the following equation. Let d be the number of days to use the item: $12,000 + $400d = $800d Subtracting $400d from both sides, you get: $12,000 = $400d Dividing both sides by $400, you get: d = 30 • If you need the item for more than 30 days, it is more economical to purchase it.

18. Types of Contracts • Different types of contracts can be used in different situations: • 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. • Time and material contracts: Hybrid of both fixed price and cost reimbursable contracts, often used by consultants. • Unit price contracts: Require the buyer to pay the seller a predetermined amount per unit of service. • A single contract can actually include all four of these categories, if it makes sense for that particular procurement.

19. Contract Clauses • Contracts should include specific clauses to take into account issues unique to the project. • Can require various educational or work experience for different pay rights. • A termination clause is a contract clause that allows the buyer or supplier to end the contract.

20. Procurement Management Plan • Describes how the procurement processes will be managed, from developing documentation for making outside purchases or acquisitions to contract closure. • Contents varies based on project needs.

21. Contract Statement of Work (SOW) • A statement of work is a description of the work required for the procurement. • If a SOW is used as part of a contract to describe only the work required for that particular contract, it is called a contract statement of work. • A SOW is a type of scope statement. • A good SOW gives bidders a better understanding of the buyer’s expectations.

22. Figure 12-2. Statement of Work (SOW) Template

23. Industry Example for Procurement

24. Basic Principles In accordance with organization Financial Regulations and Rules, the following general principles must be given due consideration while executing procurement on behalf of the organization: • Best Value for Money • Fairness, Integrity, Transparency • Effective International Competition • The Interest of the organization

25. Best Value for Money • In the context of the procurement process, obtaining “best value for money” means selection of the offer, which presents the optimum combination of life-cycle costs and benefits, which meet the organization Agency’s [program] needs. • Best value for money should not be equated with the lowest initial price option rather requiring an integrated assessment of technical, organizational and pricing factors in light of their relative importance (i.e., reliability, quality, experience, reputation, past performance, cost/fee realism and reasonableness).

26. Best value for Money The Agency’s parameters can also include social, environmental and other strategic objectives defined in the procurement plan. The principle of best value for money is applied at the award stage to select the offer that effectively meets the stated requirement.

27. Best Value for Money To ensure that best value for money is obtained, the process of soliciting offers and selecting a Contractor should: • maximize competition; • minimize the complexity of the solicitation, evaluation, and the selection process; • ensure impartial and comprehensive evaluation of solicited offers; and • ensure selection of the Contractor whose offer has the highest degree of realism and whose performance is expected to best meet the specs, statement of works/ terms of reference.

28. Fairness, Integrity and Transparency As competition is the basis for efficient, impartial and transparent procurement, organization Agencies are responsible for ensuring the integrity of the procurement process and maintaining fairness in the organization treatment of all offers.

29. Fairness, Integrity and Transparency So organization procurement (i.e., openness of the process; probity; complete and accurate records; accountability of organization; confidentiality) establishes and then maintains rules and procedures that are attainable and unambiguous.

30. Effective Competition • The objective of competitive processes as described in these Guidelines is to provide all eligible prospective Offers with timely and adequate notification of the procuring entity’s requirements and an equal opportunity organization to tender for the required goods, civil works and services. Procurement organization should ensure that restrictions are not placed on the competitive processes limiting the pool of potential Offers.

31. Interest of the organization • In practice, the specific procurement rules and procedures established for the implementation of a program are contingent upon the individual circumstances of the particular case; however the following four considerations generally guide the organization interest for the acquisition of inputs: • The need for economy and efficiency in the implementation of the programe, including the procurement of goods, civil works and services involved.

32. Interest of the organization • the access to procurement opportunities for all interested and qualified Offers worldwide. • giving all eligible Offers the same information and equal opportunity to compete in providing goods, civil works or services; and • the importance of transparency in the procurement process

33. Procurement Ethics As organization are entrusted to the public at large, it is imperative that all transactions committing organization are carried to the highest degree of public trust and should be conducted with the highest degree of integrity.

34. Award of Procurement contracts • The award of a contract shall be made after due consideration has been given to the general principles described in Regulation 21.02 and in accordance with the following: • When a formal invitation to bid has been issued, the procurement contract shall be awarded to the qualified bidder whose bid substantially conforms to requirements set forth in the solicitation documentation and offers the lowest cost to The organization;

35. Award of procurement contracts • When a formal request for proposals has been issued, the procurement contract shall be awarded to the qualified proposer whose proposal, all factors considered, is the most responsive to the requirements set forth in the solicitation documentation.

36. Evaluation of offers • In selecting the members of the evaluation team, the type of procurement being carried out should be considered. In particularly complex procurement cases, an external expert may be included to assist in the evaluation process as one of the team members.

37. Evaluation of offers • In these cases it is important to identify the need for an expert early in the process (i.e., during the planning stage) in order to avoid organization unnecessary delays and to ensure that proper funds are budgeted

38. Evaluation of offers • The work of the evaluation team is strictly confidential and information about submissions or proposals shall not be publicly revealed • Representatives from the funding source, the client organization, or national representatives may participate in the evaluation process only as observers.

39. Conflict of Interest Evaluation Team members must be instructed to immediately indicate if they are in a potential conflict of interest situation with one of the suppliers (e.g., owing shares in the supplier’s company, familiar relationship with suppliers, etc)

40. Conflict of Interest All observers or participants in the evaluation team who are non-organization staff must sign confidentiality and no conflict of interest statements.

41. How do the organization procurement regulations and rules impact on specific questions

42. Disclosure of Information Organization should be committed to making information about their programs and operations available to the public. considers public access to information a key component of effective participation of all stakeholders, including the public, in the human development process.

43. Disclosure of Information Organization should recognizes that there is a positive correlation between a high level of transparency through information sharing and public participation in organization-supported development activities

44. Disclosure of information Public access to comprehensive and timely information held or generated by organization will continue to facilitate the transparency, accountability and national ownership of organizational programes and operations.

45. Disclosure of information To the extent that much of organization information is already available to the public through various means, including through the corporate website and individual Office websites, this Policy codifies existing principles, practices and procedures.

46. Principles of confidentiality • Information under the following categories is deemed confidential and not available to the public: • Information received from or sent to third parties, under an expectation of confidentiality. • Information whose disclosure is likely to endanger the safety or security of any individual, violate his or her rights, or invade his or her privacy;

47. Principles of confidentiality • Information whose disclosure is likely to endanger the security of Member States or prejudice the security or proper conduct of any operation or activity of organization; • Information covered by legal privilege or related to access to internal audit reports; • Internal inter-office or intra-office documents, including e-mails and draft documents;

48. Principles of confidentiality • Internal inter-office or intra-office documents, including e-mails and draft documents; • Commercial information where disclosure would harm either the financial interests of organization or those of other parties involved; • Information which, if disclosed, in organization view would seriously undermine the policy dialogue with Member States or implementing partners. • Abusive, excessive or vexatious requests may be denied.

49. Request for submission of procurement plans • Based on the organization decentralized structure, consolidated procurement plans are developed at different levels, including Corporate, Business unit and Country Office. • Procurement planning will also take place at the project level or even at the activity level, depending on the complexity of the activity and the number of interrelated procurement actions.

50. Request for submission of procurement plans • All procurement plans are based on the Annual Work Plans (AWP’s). AWP’s are agreed in consultation with Government. • Procurement plans are internal documents and under the confidentiality clause (e), are not for public disclosure.