Procurement Management

1. Project ProcurementProject Procurement
ManagementManagement
Sections of this presentation were adaptedSections of this presentation were adapted
fromfrom A Guide to the Project ManagementA Guide to the Project Management
Body of KnowledgeBody of Knowledge 44thth
Edition, ProjectEdition, Project
Management Institute Inc., © 2008Management Institute Inc., © 2008

2. Project Quality ManagementProject Quality Management
““The processes to purchase or acquire theThe processes to purchase or acquire the
products, services, or results needed fromproducts, services, or results needed from
outside the project team to perform theoutside the project team to perform the
work”work”

3. Why Procurement Management?Why Procurement Management?
Most all projects will need to acquire someMost all projects will need to acquire some
resources from outsideresources from outside
Not understanding the different ways toNot understanding the different ways to
contract could result in unnecessary risk forcontract could result in unnecessary risk for
the projectthe project
Note for Test Takers: PMI Procurement questions are from the
BUYERS perspective unless noted otherwise

4. How Do We Manage Procurement?How Do We Manage Procurement?
Four processesFour processes

Plan ProcurementsPlan Procurements

Conduct ProcurementsConduct Procurements

Administer ProcurementsAdminister Procurements

Close ProcurementsClose Procurements
Conduct
Procurements
Administer
Procurements
Plan
Procurements
Close
Procurements

5. Plan ProcurementsPlan Procurements
Scope Baseline
Requirements
Documentation
Teaming Agreements
Risk Register
Risk-Related Contract
Decisions
Activity Resource
Requirements
Project Schedule
Activity Cost Estimates
Cost Performance Baseline
Enterprise Environmental
Factors
Organizational Process
Assets
Make or Buy Analysis
Expert Judgment
Contract TypesInputs
Outputs
Tools & Techniques
Procurement
Management Plan
Procurement
Statements of Work
Procurement
Documents
Source Selection
Criteria
Change Requests
Make or Buy
Decisions
Conduct
Procurements
Administer
Procurements
Plan
Procurements
Close
Procurements

6. Contract TypesContract Types
Fixed Price (Lump Sum) ContractsFixed Price (Lump Sum) Contracts
Cost-Reimbursable ContractsCost-Reimbursable Contracts

Cost Plus Fee (CPF)Cost Plus Fee (CPF)
Cost Plus Percentage of Cost (CPPC)Cost Plus Percentage of Cost (CPPC)

Cost Plus Fixed Fee (CPFF)Cost Plus Fixed Fee (CPFF)

Cost Plus Incentive Fee (CPIF)Cost Plus Incentive Fee (CPIF)
Time and Material (T&M) ContractsTime and Material (T&M) Contracts
Which type of contract is the highest risk for the Buyer? Seller?

7. Conduct ProcurementsConduct Procurements
Project
Management Plan
Procurement
Documents
Source Selection
Criteria
Qualified Sellers List
Seller Proposals
Project Documents
Make-or-Buy Decisions
Teaming Agreements
Organizational Process
Assets
Bidder Conference
Proposal Evaluation
Techniques
Independent Estimates
Expert Judgment
Advertising
Internet Search
Procurement Negotiations
Inputs
Outputs
Tools & Techniques
Selected Seller
Procurement
Contract Award
Resource Calendars
Change Requests
Project Management
Plan Updates
Project Document
Updates
Conduct
Procurements
Administer
Procurements
Plan
Procurements
Close
Procurements

8. Types of Scopes of WorkTypes of Scopes of Work
PerformancePerformance

What the project wants, how accomplishedWhat the project wants, how accomplished
and project needs defined by sellerand project needs defined by seller
Functional or DetailedFunctional or Detailed

Defines what end product should be as wellDefines what end product should be as well
as minimum requirementsas minimum requirements
DesignDesign

Defines exactly what is required and how toDefines exactly what is required and how to
accomplish itaccomplish it

9. Procurement DocumentsProcurement Documents
Request for Proposal (RFP)Request for Proposal (RFP)

Asks for the price and how/who will do theAsks for the price and how/who will do the
workwork
Invitation for Bid (IFB)Invitation for Bid (IFB)

One simple price to do the workOne simple price to do the work
Request for Quotation (RFQ)Request for Quotation (RFQ)

Price per unit quotePrice per unit quote

10. Negotiating TacticsNegotiating Tactics
Attacks – Argue a pointAttacks – Argue a point
Personal Insults – AttackPersonal Insults – Attack
other sides negotiatorother sides negotiator
Good Guy/Bad GuyGood Guy/Bad Guy
Deadline – The offerDeadline – The offer
stands until…stands until…
LyingLying
Limited Authority – I needLimited Authority – I need
to check with ____to check with ____
Missing Man – She is outMissing Man – She is out
today, I will have to gettoday, I will have to get
back tomorrowback tomorrow
Fair and ReasonableFair and Reasonable
Delay – Tabling issuesDelay – Tabling issues
important to the otherimportant to the other
sideside
Extreme DemandsExtreme Demands
Withdrawal – FeigningWithdrawal – Feigning
interestinterest
Fait Accompli – DoneFait Accompli – Done
Deal, this is how we haveDeal, this is how we have
to do it….to do it….
These are all tactics, but not necessarily good tactics!

11. Administer ProcurementsAdminister Procurements
Procurement
Documents
Project
Management Plan
Contract
Performance
Reports
Approved Change
Requests
Work Performance
Information
Contract change control
system
Procurement performance
review
Inspections and audits
Performance reporting
Payment systems
Claims administration
Records management
system
Inputs Outputs
Tools & Techniques
Procurement
Documentation
Organizational
Process Assets
Updates
Change Requests
Project Management
Plan Updates
Conduct
Procurements
Administer
Procurements
Plan
Procurements
Close
Procurements

12. Contract ClosureContract Closure
Project
Management Plan
Procurement
Documentation
Procurement audits
Negotiated Settlements
Records management
system
Inputs OutputsTools & Techniques
Closed Procurments
Organizational
Process Assets
Updates
Conduct
Procurements
Administer
Procurements
Plan
Procurements
Close
Procurements

13. Procurement TermsProcurement Terms
Arbitration – Third party dispute resolutionArbitration – Third party dispute resolution
Breach/Default – When a contract provision is notBreach/Default – When a contract provision is not
metmet
Force Majeure – Riots, wars, weather, or other “ActsForce Majeure – Riots, wars, weather, or other “Acts
of God”of God”
Indemnification – Who is liableIndemnification – Who is liable
Liquidated Damages – Estimated damages forLiquidated Damages – Estimated damages for
specific types of defaults as defined in the contractspecific types of defaults as defined in the contract
Material Breach – A violation of the contract ofMaterial Breach – A violation of the contract of
sufficient magnitude that the contract cannot besufficient magnitude that the contract cannot be
completedcompleted

14. Procurement Terms ContinuedProcurement Terms Continued
Retainage – Monies withheld to ensure performance atRetainage – Monies withheld to ensure performance at
the end of the contractthe end of the contract
Termination – Stopping the work before it is completedTermination – Stopping the work before it is completed
Waiver – Statements in the contract that indicate thatWaiver – Statements in the contract that indicate that
rights cannot be ignored or modified without writtenrights cannot be ignored or modified without written
agreement between the two partiesagreement between the two parties
Time is of the essence – Seller is placed on notice thatTime is of the essence – Seller is placed on notice that
delivery agreements are strictly bindingdelivery agreements are strictly binding
Work for Hire – At the end of the contract the workWork for Hire – At the end of the contract the work
product generated will be owned by the buyerproduct generated will be owned by the buyer