Project Procurement Management

Project Procurement Management KEC Dhapakhel Lalitpur Pushpa Thapa

Outline • Procurement Management Process flow • Plan purchases and acquisition process • Enterprise environmental factor • Organizational process assets • Plan Contracting process • Standard forms • Evaluation Criteria • Request seller response process • Select seller process • Contract administration process • Contract closure process Pushpa Thapa

Procurement Management • Procurement means acquiring goods and/or services from an outside source. • Procurement Management is a group of processes required to purchase or to acquire the products, service or results needed from outside the project team to perform the work. Pushpa Thapa

Project Procurement Management Processes 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) 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 Pushpa Thapa

Project Procurement Management Pushpa Thapa

Procurement Management Process Flow Need for Procurement Procurement Planning Make or Buy Decision Contract Planning Issue RFP Request Seller Response Receive Proposal Selecting Seller Award Contract Contract Administration Product/ Service Acquired Contract Close-Out Pushpa Thapa Formal Closer of Contract

Plan Purchases and Acquisitions Process • 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 • Plan Purchases and Acquisitions process is a part of “Project Planning Phases”. Pushpa Thapa

Plan Purchases and Acquisitions Overview Pushpa Thapa

Make or Buy Checklist • Reasons to Make • Cheaper to make • Experience making it • Idle production facility available • Compatible and fits in production line • Part is proprietary • Not dependent on supplier • Fragile part-> $ packing • High transportation costs • Reasons to Buy • Cheaper to buy • No production facilities • Avoid fluctuating / Seasonal demand • Inexperience with making process • Available suppliers • Maintain existing supplier • Higher reliability and quality Pushpa Thapa

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 • Expert Judgment: Expert purchasing judgment can be used to develop or modify the criteria that will be used to evaluate offers or proposals made by sellers. Pushpa Thapa

Contract Types • 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 Pushpa Thapa

Cost Reimbursable Contracts • Cost plus incentive fee (CPIF): the buyer pays the supplier for allowable performance costs plus a predetermined fee and an incentive bonus • 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 percentage of costs (CPPC): the buyer pays the supplier for allowable performance costs plus a predetermined percentage based on total costs Pushpa Thapa

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

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 Pushpa Thapa

Plan Contracting Process • Involves preparing several documents needed for potential sellers to prepare their responses and determining the evaluation criteria for the contract award. • Plan Contracting Process is a part of “Project Planning Phases”. • Request for Proposals: used to solicit proposals from prospective sellers • A proposal is a document prepared by a seller when there are different approaches for meeting buyer needs • Requests for Quotes: used to solicit quotes or bids from prospective suppliers • A 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 Pushpa Thapa

Plan Contracting Overview Pushpa Thapa

Tool & Techniques for Plan Contracting Process • Standard forms include standard contracts, standard descriptions of procurement items, non-disclosure agreements, proposal evaluation criteria checklists or standardized versions of all parts of the needed bid documents. • Evaluation Criteria are developed and used to rate or score proposals. Evaluation criteria are often included as part of the procurement documents. Pushpa Thapa

Requesting Seller Responses Process • The Request Seller Response process obtains responses, such as bids and proposals from prospective sellers on how project requirements can be met. • Organizations can advertise to procure goods and services in several ways • Approaching the preferred vendor • Approaching several potential vendors • Advertising to anyone interested • A bidders’ conference can help clarify the buyer’s expectations • Request Seller Responses process is a part of “Project Planning Phase” Pushpa Thapa

Requesting Seller Responses Overview Pushpa Thapa

Bidder Conference are meetings with prospective sellers prior to preparation of a bid or proposal. They are used to ensure that all prospective sellers have a clear, common understanding of the procurement. • Objective: to ensure equal opportunity for all prospective sellers • Treat people with consideration and respect • Understand what motivates them • Communicate carefully with them • Advertising: Existing lists of potential sellers can often be expanded by placing advertisements in general circulation publications such as newspapers or in specialty publications such as professional journals. • While designing and producing as advertisement, advertisement writing style can be defined in order to achieve the following objectives: • Get attention • Gain Interest • Create Desire • Get Action Pushpa Thapa

Select Sellers Process • 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 short list often prepare a best and final offer (BAFO) • Final output is a contract signed by the buyer and the selected seller • Select Sellers Process is a part of “Project Execution Phase” Pushpa Thapa

Select Seller Process Overview Pushpa Thapa

Contract Negotiation clarifies the structure and requirements of the contract so that mutual agreement can be reached prior to singing the contract. • Five Stages of Contract Negotiation: • Protocol- Get to know each other • Probing- Each party identifies issues of concern • Scratch bargaining- Bargaining occurs, concessions are made • Closure- Two positions summed up and final concessions made • Agreement- Both parties have identical understanding of agreements • Contract is awarded to each selected seller. It is the key output of the select seller process. • Project contracts should be treated as “two-way” contracts. • The content of the seller's proposal typically become the basis for the project work contract. • The contract can be in the form of a complex document or a simple purchase order. Pushpa Thapa

Contract Administration Process • Ensures that the seller’s performance meets contractual requirements • Contracts are legal relationships, so it is important that legal and contracting professionals be involved in writing and administering contracts • It is critical that project managers and team members watch for constructive change orders, which are oral or written acts or omissionsby someone with actual or apparent authority that can be construed to have the same effect as a written change order • Contract Administration process is a part of “Project Controlling Phase”. Pushpa Thapa

Contract Administration Process Overview Pushpa Thapa

Contract Change Control System • Changes to any part of the project need to be reviewed, approved, and documented by the same people in the same way that the original part of the plan was approved • Evaluation of any change should include an impact analysis; how will the change affect the scope, time, cost, and quality of the goods or services being provided? • Changes must be documented in writing; project team members should also document all important meetings and telephone phone calls • Project managers and teams should stay closely involved to make sure the new system will meet business needs and work in an operational environment • Have backup plans • Use tools and techniques, such as a contract change control system, buyer-conducted performance reviews, inspections and audits, and so on Pushpa Thapa

Contract Closure Process • Involves completing and settling contracts and resolving any open items • The project team should: • Determine if all work was completed correctly and satisfactorily • Update records to reflect final results • Archive information for future use • The contract itself should include requirements for formal acceptance and closure • Contract Closure process is a part of “ Project Closing Phase”. Pushpa Thapa

Contract Closure Process Overview Pushpa Thapa

Procurement Audit is to identify successes and failures that warrant recognition in the preparation or administration of other procurement contracts on the project. • Closed Contracts: The buyer, usually through its authorized contract administrator, provides the seller with formal written notice that the contract has been completed. Requirements for formal contract closure are usually defined in the terms of the contract, and would be included in the contract management plan. Pushpa Thapa

Thank You Pushpa Thapa

Project Procurement Management