Chap 12.2 Conduct Procurement

PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com)
Chapter 12 –
Project Procurement Management
PMP
Trainer: Anand BobadePMBOK 6th Edition, 2019, All rights reserved.
Conduct
Procurement
SIXTH EDITION

12.2 Conduct Procurement
Introduction
Conduct Procurement Definition?
Conduct Procurement -> ITTO
What is seller proposals?
Bidder Conference
Proposal Evaluation Techniques
Procurement negotiations
Review

Procurement Management Processes
Plan Procurement
Management
Conduct Procurement Control Procurement

The process of obtaining seller responses, selecting a seller, and
awarding a contract.
It selects a qualified seller and implements the legal agreement
for delivery.
Seller1 Response Seller2 Response
Seller3 Response Seller4 Response
Conduct Procurement
Selected Seller Award Contract
Selection
process
Review
prop.
Evaluate
Seller

Conduct Procurement -> ITTO
Expert Judgment
Data analysis
Advertisement
Bidder Conference
Interpersonal and team skills
Project Management
Plan
Project documents
Procurement
documentation
Sellers Proposals
Enterprise
environmental factors
Organizational process
assets
Selected sellers
Agreements
Change Requests
PMP updates
Project document updates
OPA updates
Inputs Tools & Techniques Outputs

Conduct Procurement -> Input
Project Management
Plan
Project documents Sellers Proposals
Procurement
documentation
Enterprise
Organizational
process assets

Project
Management Plan
Following subsidiary plans & cost baseline will provide key inputs.
Procurement
management Plan
Scope Management
Plan
Requirements
Management Plan
Communication
Management Plan
Risk Management Plan
Configuration
Management plan
Cost Baseline
Conduct Procurement -> Input -> Project Management Plan

Project
Management Plan
Scope Management Plan
• How the overall scope of work will be managed, including
scope performed by sellers.
Requirements Management Plan
• How seller will manage the requirements agreed in the
agreement.
Communication Management Plan
• How communication between buyer & seller will be
conducted.
Procurement management Plan
• Activities to be undertaken during conduct procurement.

Project
Management Plan
• How risk management activities will be structured &
performed for the project.
Configuration Management plan
• Defines the configurable items & list items that
requires formal change control.
• Format & processes for how seller will provide
configuration management consistent with buyers
approach.
Cost Baseline
• Procurement budget .
• Cost associated with managing procurement
processes & sellers.

Procurement
Management Plan
Plans describes how goods and services will be acquired from outside.
Procurement processes from developing procurement documents through contract closure.
Make‐or‐buy
decisions
Type of
contract
Team
responsibilities
Evaluation
criteria
Procurement
metrics
Plan Procurement Management-> Output-> Procurement MP
Managing multiple suppliers & coordination
Risk management (Performance bonds/insurance)
Form/format of procurement document
Procurement SOW
Constraints and assumptions

Project documents
Following Project documents will provide key inputs.
Lessons learned register
•Lessons learned with regards to conducting procurement can be applied
to latter phases to improve efficiency.
Project schedule
•Start & end date of procurement activities.
•Contract deliverables due dates.
Requirements documentation
•Technical requirement that seller is required to satisfy.
•Requirements with contractual & legal implications–Health, safety,
security etc.
Risk Register
•Each approved seller comes with its own set of risks.
•e.g., Sellers organization, Contract duration, project delivery method,
contract type, final agreed price etc.
Stakeholder Register
•Details about identified stakeholders.
Conduct Procurement -> Input -> Project documents

Procurement
Documents
Used to solicit proposals, quotes, and bids from sellers.
Conduct Procurement->Input->Procurement Documents
Bid documents
(RFI, RFP, RFQ)
Procurement
Statement of Work
Independent cost
estimates
Source selection
criteria

Procurement
Documents
Procurement Statement of Work
•Clearly stated goals, requirements & outcomes for which seller
can provide quantifiable response.
Independent cost estimates
•Developed internally or externally.
•Provide reasonableness check against bidders proposals.
Source selection criteria
•How bidders proposals will be evaluated, including evaluation
criteria & weights.
Conduct Procurement->Input->Procurement Documents

Seller Proposals
Prepared in response to procurement documents.
Contains the information that will be used by an evaluation team to select one or more successful bidders (sellers).
Its good practice to submit separate technical & financial proposals.
Conduct Procurement->Input->Seller Proposals
Proposal1
Proposal2
Proposal3
Criteria1
Criteria2
Criteria3
Vendor Evaluation
(Source selection criteria)

OPA
Listing of preferred sellers that have been prequalified.
Organization policies that influence selection of a seller
Templates, guidelines that determine how agreements are drafted.
Invoicing & payment processes.
Conduct Procurement->Input->OPA

Enterprise
Local laws & Regulations, e.g., involvement of local sellers
External economic environment; Marketplace conditions
Past experiences with sellers (good & bad)
Prior agreements
Contract management system
Conduct Procurement -> Input -> EEF

Conduct Procurement-> T&T
Expert Judgment Data analysis Advertisement
Bidder Conference
Interpersonal and
team skills

Expert Judgment
Expert with specialised knowledge:
Conduct Procurement-> T&T->Expert Judgement
Proposal evaluation
Technical or SME
Functional expert
(finance, engineering
etc.)
Industry regulation
environment
Laws, regulation,
compliance
Negotiation

Advertising
Advertising is communicating with users or potential users of the product or service.
Existing lists of potential sellers can often be expanded by placing advertisements.
Government may require public advertising or online posting of government contracts.
Trade publications Internet Newspapers
Conduct Procurement-> T&T->Advertising

Bidder Conference
Contractor
conferences
Vendor
conferences
Pre-bid
conferences
Meetings between buyer & sellers
Ensure a clear and complete understanding of requirements
No bidders receive PREFERENTIAL treatment.
Listen to EVERY question and every answer.
Collecting questions from bidders
Arranging field visits
Conduct Procurement-> T&T->Bidder Conference

Bidder Conference
Contractor
conferences
Vendor
conferences
Pre-bid
conferences
Conduct Procurement-> T&T->Bidder Conference
Important considerations:
Send details technical documents to Vendor, prior to the meeting
Send outline to the vendor & share actual documents during the meeting
Bring all Vendors together in a single room/single meeting
Meet Vendor individually when they are reluctant to share information.

Conduct Procurement->T&T->Data analysis->Proposal Evaluation Tech.
Proposal
1
Proposal
2
Proposal
3
Criteria1
Criteria2
Criteria3
Evaluation Team
Screening system
Independent estimate
Past performance history
Weighting system
Proposal
Evaluation
Data analysis
Proposal Evaluation :
•The process of reviewing proposals provided by suppliers.
•Ensure proposals are complete & respond in full to bid documents.
•Selection will be done based on seller responses to selection criteria and
as per buyers procurement policies .

Seller1 Seller2
Criteria Weight rating Score rating score
1 Company 6 85 510 99 594
2 Technical 9 90 810 90 810
3 Expertise 8 82 656 80 640
4 Cost 7 88 616 75 525
Total 2592 2569
Conduct Procurement->T&T->Data analysis->Proposal Evaluation Tech.
85
99
80
90 90 90
82 80 80
88
75
90
0
20
40
60
80
100
120
Seller1 Seller2 Seller3
Technical Company Expertice Cost
•Eliminate sellers who do no meet minimum requirementScreening system
•Estimation created in‐house or with outside assistanceIndependent estimate
•Use of historical information for selection.Past performance history
•Evaluate by weighting the source selection criteriaWeighting system
Data analysis

Interpersonal and
team skills
Negotiations:
•Clarify the structure, rights, obligations of parties and other terms of the
purchases to be reflected in Final contract.
•PM & other project management team may present during negotiation to
provide assistance.
•Obtain fair and reasonable price
•Develop good relationship with the seller
Objective of
negotiation:
Conduct Procurement-> T&T->Interpersonal & team skills-> Negotiations
What is
negotiated?
Scope Technical solutions
Technical & business
approaches
Authority to make
changes
Responsibilities
Overall schedule
/Milestones
Price Payment terms
Governing law Proprietary rights Contract financing

Interpersonal and
team skills
Who should negotiate?
Conduct Procurement-> T&T->Interpersonal & team skills-> Negotiations
Attacks
Personal
insults
Good
guy/bad
guy
Deadline Lying
Limited
authority
Missing
man
Fair
reasonable
Delay
Extreme
demands
Withdrawa
l
PM should not be involved in negotiation.
PM team should not negotiate.
PM & PM team work as supporters & provides clarifications.
Negotiation
tactics
Lead Negotiator
will negotiate

Conduct Procurement->Output
Selected sellers Agreements Change Requests PMP updates
Project document
updates
OPA updates

Selected sellers
• Based on the proposal or bid evaluation
Judged:
• A draft contract will become actual contract
when an award is made.
Negotiated:
• For all complex, high‐value, high‐risk
procurements prior to award.
Final senior management approval:
Conduct Procurement->Output->Selected Sellers

Agreements
Contract is a mutually binding agreement that obligates:
Seller:
• To provide specified product, service or a result.
Buyer:
• To compensate the seller.
Procurement
Statement of work
or deliverables
Schedule,
milestones, date
Performance
reporting
Pricing and
payment terms
Inspection, quality
and acceptance
criteria
Warranty and
future product
support
Incentives and
penalties
Insurance and
performance bonds
Subordinate,
subcontractor
approvals
General terms and
conditions
Change request
handling
Termination clause,
alternative dispute
resolution (ADR)
mechanisms
Conduct Procurement->Output->Agreements

Change Request due to:
More clarity on the work -> New scope addition.
Project duration/schedule may change based on proposal.
Cost may change based on Vendor proposal.
Conduct Procurement -> Output-> Change Request
Change Requests
Once seller is selected, typically project requires a change request to
adjust schedule, cost, payment milestones etc.

PMP updates
Following subsidiary plans & baselines may get updated.
Requirements
Management Plan
Quality Management
plan
Communication
Management Plan
Procurement
management Plan
Scope baseline
Schedule baseline Cost Baseline
Conduct Procurement->Output->PMP updates

PMP updates
Requirements Management Plan
• Requirements may change due to changes identified
by seller.
Quality Management plan
• Seller may offer alternative quality standard or solution
that may impact quality approach.
Communication Management Plan
• Updated to incorporate sellers communication needs
& approaches.
• Each agreement & seller has its own set of risks which
may lead to updates.
Procurement management Plan
• Update may require depending on the result of the
contracting & negotiation process.

PMP updates
Scope baseline
• WBS & deliverables document may change during the
procurement process.
Schedule baseline
• Delivery changes created by seller may impact overall
schedule performance.
• baseline need to be updated to reflect current
expectations.
Cost Baseline
• Contractor & material prices can change frequently
due to fluctuating material & labour prices.
• Baseline need to be updated to reflect agreed
contract value.

Project Documents
Updates
Following Project Documents may get updated.
Lessons learned
register
Requirements
documentation
Requirements
Traceability Matrix
Risk Register Stakeholder Register Resource calendars
Conduct Procurement->Output->Project document updates

OPA
Listing of prospective & prequalified sellers
Experience with sellers (Good & bad)
Conduct Procurement->Output ->OPA

Conduct Procurement -> Review
Conduct Procurement process
Seller proposals
Bidder Conference
Proposal Evaluation Techniques
Independent estimates
Procurement negotiations
Agreements

Chap 12.2 Conduct Procurement

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