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Chap 12.2 Conduct Procurement

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Chap 12.2 Conduct Procurement

  1. 1. 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
  2. 2. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 12.2 Conduct Procurement Introduction Conduct Procurement Definition? Conduct Procurement -> ITTO What is seller proposals? Bidder Conference Proposal Evaluation Techniques Procurement negotiations Review
  3. 3. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) Procurement Management Processes Plan Procurement Management Conduct Procurement Control Procurement
  4. 4. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  5. 5. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  6. 6. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) Conduct Procurement -> Input Project Management Plan Project documents Sellers Proposals Procurement documentation Enterprise environmental factors Organizational process assets
  7. 7. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  8. 8. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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. Conduct Procurement -> Input -> Project Management Plan
  9. 9. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) Project Management Plan Risk 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. Conduct Procurement -> Input -> Project Management Plan
  10. 10. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  11. 11. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  12. 12. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  13. 13. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  14. 14. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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)
  15. 15. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  16. 16. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) Enterprise environmental factors 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
  17. 17. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) Conduct Procurement-> T&T Expert Judgment Data analysis Advertisement Bidder Conference Interpersonal and team skills
  18. 18. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  19. 19. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  20. 20. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  21. 21. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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.
  22. 22. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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 .
  23. 23. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  24. 24. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  25. 25. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  26. 26. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) Conduct Procurement->Output Selected sellers Agreements Change Requests PMP updates Project document updates OPA updates
  27. 27. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  28. 28. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  29. 29. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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.
  30. 30. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) PMP updates Following subsidiary plans & baselines may get updated. Requirements Management Plan Quality Management plan Communication Management Plan Risk Management Plan Procurement management Plan Scope baseline Schedule baseline Cost Baseline Conduct Procurement->Output->PMP updates
  31. 31. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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. Risk Management Plan • 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. Conduct Procurement->Output->PMP updates
  32. 32. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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. Conduct Procurement->Output->PMP updates
  33. 33. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) 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
  34. 34. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) OPA Listing of prospective & prequalified sellers Experience with sellers (Good & bad) Conduct Procurement->Output ->OPA
  35. 35. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com) Conduct Procurement -> Review Conduct Procurement process Seller proposals Bidder Conference Proposal Evaluation Techniques Independent estimates Procurement negotiations Agreements
  36. 36. PMBOK 6 - All rights reserved; By: Anand Bobade (nmbobade@gmail.com)

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