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- 2. Project Procurement Management •Project Procurement Management includes the processes necessary to purchase or acquire products, services • Results needed from outside the project team
- 3. What is supplychain • A supply chain is defined as the entire process of making and selling commercial goods, including every stage from the supply of materials and the manufacture of the goods through to their distribution and sale. • Successfully managing supply chains is essential to any company hoping to compete
- 4. 4 Example of anExtended Supply Chain Product Designer Market Research Raw Material Producer Retail Customer Retailer Distributor Manufacture Logistic Provider Finance Provider Business Customer
- 5. Contracts • Contracts arelegal documents between a buyer and a seller(External entity) • A contract is a legal relationship subject to remedy in the courts • Exchange of good and services(monitory value) • Disputes are communicated in formal communiction 5
- 6. • Agreement – Anagreement is simply an understanding or arrangement between two or more parties(trust basis) – usually an informal arrangement, often unwritten, between two or more parties – The parties simply consent to do or refrain from doing something. – An agreement can’t be enforced in court through litigation – Eg; internal service level agreements, memos, letter of intent, charter – Disputes are resolved by conversation and email
- 7. Procurement Organization • Centralizeprocurement • Decentralize procurement 7
- 8. Centralized Proc Advantageous • Goodexpertise available • Standardized proc practices and procedures • Continuous development opportunities for proc people • Clear career paths Disadvantageous • PM may not get the services in a timely manner • Proc manager will find it difficult to concentrate on many projects 8
- 9. Decentralized Proc Advantageous • Procumbentrep has good understanding of the needs • PM gets flexible service • Proc reps level of loyalty is high Disadvantageous • Lack of standardization of proc practices and procedures • Lack of expertise • Proc rep does not have a career path • No permanent home 9
- 10. Plan Procurement Management •Process of documenting project procurement decisions, specifying the approach and identifying potential sellers.
- 11. Project Procurement ManagementOverview Plan Procurement Management 1. Inputs a. Project charter b. Business documents c. Project management plan d. Project documents e. Enterprise environmental factors f. Organizational process assets 2. Tools & Techniques a. Expert judgment b. Data gathering c. Data analysis d. Source selection analysis e. Meetings 3. Outputs a. Procurement management plan b. Procurement strategy c. Bid documents d. Procurement statement of work e. Source selection criteria f. Make-or-buy decisions g. Independent cost estimates h. Change requests i. Project documents updates j. Organizational process assets updates
- 12. Project Procurement ManagementOverview Plan Procurement Management 1. Inputs a.Project Charter - Objectives, project description, summary milestones, and the preapproved financial resources b. Business Documents • Business case. The procurement strategy and business case need to be aligned •Benefits management plan. The benefits management plan describes when specific project benefits are expected to be available c. Project Management Plan • Scope management plan – How to manage scope of work by vendor • Quality management plan - Standards • Resource management plan – What resource to purchase • Scope baseline – Scope and WBS
- 13. Project Procurement ManagementOverview Plan Procurement Management d. Project Documents • Milestone list – Delivery dates • Project team assignments- Team ability to support procurement • Requirements documentation- Technical, health,safety,security • Requirements traceability matrix – To be included in deliverables • Resource requirements- What and what quantities • Risk register – To transfer through agreements • Stakeholder register – Regulator, legal, personnel etc to accommodate their interests
- 14. e. Enterprise EnvironmentalFactors • Marketplace conditions • Products, services, and results that are available in the marketplace • Sellers, including their past performance or reputation • Typical terms and conditions for products, services, and results or for the specific industry f. Organizational Process Assets • Preapproved seller lists • Formal procurement policies, procedures, and guidelines • Contract types
- 15. Types of Contracts FixedPrice Contracts Firm fixed price Fixed Price incentive fee Fixed price with economic price adjustm ent Cost reimbursable Contracts Cost plus fixed fee Cost plus incentiv e fee Cost plus Award fee Time and material Contracts 15
- 16. Fixed-Price or Lump-Sum,Firm Fixed Price • A type of fixed price contract where the buyer pays the seller a set amount (as defined by the contractor) regardless of the seller’s cost • Example ; Contract = $1,100,000 Source : PMBOK ® Guide 6th Edition, Glossary 16
- 17. • Fixed PriceIncentive Fee (FPIF) – A type of contract where the buyer pays the seller a set amount (as defined by the contract) and the seller can earn an additional amount if the seller meets defined performance criteria. – Contract = $1,100,000. For every month early the project is finished, and additional $ 10,000 is paid to the sellers. Source : PMBOK ® Guide 6th Edition, Glossary 17
- 18. Fixed Price EconomicPrice Adjustment (FPEPA) • Sometimes a fixed price contract allows for price increases if the contract is for multiple years • Price adjustment can be linked to inflation changes, etc. with the help of a reliable index 18
- 19. Advantages Disadvantages The costof the contract is known to the buyer from the beginning Buyer has to invest a lot of effort to write a comprehensive statement of work Seller has a strong incentive to control costs. Omissions in SOW will lead to cost increase. Buyer need not deploy much resource to administer the contract. eg; audits etc Sellers may under price to win bids and try to make profits through change requests Seller will add contingency to deal with risk Fixed Price 19
- 20. Cost-Reimbursable Contracts – Atype of contract involved in payment to the seller, for the seller’s actual costs, plus a fee typically representing seller’s profit. Cost-reimbursable contracts often includes incentive clauses where if the seller meets or exceeds selected project objectives, such as scheduled targets or total costs, then the seller receives from the buyer an incentive or bonus payment. Source : PMBOK ® Guide 6th Edition, Glossary 20
- 21. Cost-Plus-Fixed-Fee (CPFF) –A typeof cost reimbursable contract where the buyer reimburses the seller for the seller’s allowable cost (allowable costs are defined by the contract) plus a fixed amount of profit (fee). Contract = Cost plus a fee of $100,000 Source : PMBOK ® Guide 5th Edition, Glossary 21
- 22. • Cost PlusPercentage of Cost – Cost plus 10% as fee. 22
- 23. CPFF vs. CPPC CPFF Actual Cost $80$100 $120 Fee $10 $10 $10 Actual Price $ 90 $110 $130 CPPC Actual Cost $80 $100 $120 Fee $8 $10 $12 Actual Price $ 88 $110 $132 Cost Plus Fixed Fee Estimate Cost= $100 Fixed Fee=$10 Cost Plus % Cost Estimate Cost= $100 Fixed %=10%
- 24. Cost-Plus-Incentive-Fee (CPIF) • Atype of cost-reimbursable contract where the buyer reimburses the seller for the seller’s allowable costs (allowable costs are defined by the contract) and the seller earns its profits if it meets defined performance criteria • The incentive fee is usually based on objective criteria (often cost-based) that are included in the contract. When cost based, every $ over budget means a greater loss of incentive fee and every $ under budget means a greater portion of the incentive fee is earned. The incentive fee can be based on any criteria such as cost schedule, technical goals (e.g. ship speed), or delivery/schedule. Source : PMBOK ® Guide 6th Edition, Glossary 24
- 25. Cost Plus AwardFee (CPAF) • A type of cost reimbursable contract that pays all costs and apportion a bonus based on performance • Very similar to the CPIF contract except the award amount is determined in advance and apportioned out depending on performance • The award fee is usually based on a subject evaluation of some component of the work. It is also not usually subject to dispute. 25
- 26. Cost Plus AwardFee (CPAF) • For example, the buyer might say that there is a $75,000 award fee available. It will be apportioned out at the rate of $7,000 for every month production on the project is over a certain amount 26
- 27. Advantages Disadvantages The SOWcan be prepared with minimum effort Buyer need to invest a lot of effort to administer Price can be less, as seller does not add contingency No motives for seller to control cost Price is known at the end only Cost Reimbursable 27
- 28. Time and Material(T&M) Contracts – Possess characteristics of cost reimbursable and fixed price type contracts – The price of the items to be purchased are agreed but the quantity is not defined – Generally used in urgencies and for small requirements 28
- 29. Advantages Disadvantages Easy wayto supplement a big contract Can be used for only small purchase activities Contracting can be done quickly Work has to be supervised thoroughly Doest not motivate seller to control cost Simple contract Profit is in build to the rates agreed Time and Material 29
- 30. Firm Fixed Pricevs Cost Plus Award Fee Grass Mowing (Simplified) FFP CPAF Labor $ 30.00 Labor $ 30.00 Fuel $ 3.00 Fuel $ 3.00 Oil $ 2.00 Oil $ 2.00 TOTAL REIMBURSABLE EXPENSES $35.00 EXPENSES $35.00 Profit/10% $ 3.50 Base Fee/3% $ 1.05 Award Fee/7% $ 2.45 Bid Price $ 38.50 Bid Price $ 38.50 Contract Cost Contract Cost $38.50 Minimum - $36.05 Maximum - $38.5 30
- 31. Situation Type ofContract to Use You need start work immediately and has no time for detailed documentation You want to hire a designer to design a product You have a detailed SOW indicating functions, features, size etc You do not have enough staff to supervise the sellers work You need to build the hospital as soon as possible after a Tsunami You have completed the detailed SOW, but the project takes more than 3 years and economy is unstable 31
- 32. Situation Type of Contract Youare going to hire a plumber to do some repairs that take 2-3 days The contractor is billing the project $120 per hour, plus materials. You are negotiating considerations for inflation and utility prices. You will pay allowable cost and 8% fee over and above the allowable cost. The buyer will pay for the cost of phone service, rent on the facilities, and employees, plus an additional $2,500 per month. The buyer will pay the seller a total of $ 400,000 for installation of the machines 32
- 33. Situation Type of Contract Thebuyer will pay for the cost of computers, cables and servers plus $8,500 per month for employees’ time. Costs will not exceed $24,500 per month The buyer will pay for the cost of computers, cables and servers, employees wages. An additional $ 5000 will be awarded each month that the seller achieves monthly performance targets without any defects. The buyer will pay for the cost of computers, cables and servers, employees wages and agreed fee of 5000. An additional $ 2000 will be if the seller completes the work one week earlier than the agreed period. 33
- 34. Situation Type of Contract Thebuyer will pay the seller a total of $50000 for completing the project in one year. An additional $3000 will be awarded if the work is competed one month before the agreed deadline 34
- 35. Situation Type ofContract to Use You need start work immediately and has no time for detailed documentation You want to hire a designer to design a product You have a detailed SOW indicating functions, features, size etc You do not have enough staff to supervise the sellers work You need to build the hospital as soon as possible after a Tsunami You have completed the detailed SOW, but the project takes more than 3 years and economy is unstable 35
- 36. Situation Type ofContract You are going to hire a plumber to do some repairs that take 2-3 days T and M The contractor is billing the project $120 per hour, plus materials. T and M You are negotiating considerations for inflation and utility prices. FPEPA You will pay allowable cost and 8% fee over and above the allowable cost. Cost % of cost The buyer will pay for the cost of phone service, rent on the facilities, and employees, plus an additional $2,500 per month. Cos t + fixed fee The buyer will pay the seller a total of $ 400,000 for installation of the machines Fixed price 36
- 37. Situation Type of Contract Thebuyer will pay for the cost of computers, cables and servers plus $8,500 per month for employees’ time. Costs will not exceed $24,500 per month Time and material The buyer will pay for the cost of computers, cables and servers, employees wages. An additional $ 5000 will be awarded each month that the seller achieves monthly performance targets without any defects. Cost plus award fee The buyer will pay for the cost of computers, cables and servers, employees wages and agreed fee of 5000. An additional $ 2000 will be if the seller completes the work one week earlier than the agreed period. Cost plus incentive fee 37
- 38. Situation Type of Contract Thebuyer will pay the seller a total of $50000 for completing the project in one year. An additional $3000 will be awarded if the work is competed one month before the agreed deadline Fixed price incentive 38
- 39. Two ways inwhich a contract can originate: unilaterally or bilaterally – Unilaterally: • Common form for contract is a relatively simple type of document called a purchase order. • A purchase order is used when routine, standard cost items are needed. • A purchase order is legally binding and should be specific. – Bilaterally: 39
- 40. Factors that influencethe type of contract selected ; • How completely a comprehensive and detailed statement of work can be prepared • The amount of changes will have to be done to the project • The amount of resources the buyer can assign to manage the seller’s work • Industry practices • Amount of risks to be shared • Competitiveness in the market 40
- 41. Exercise • In acost reimbursable contract, the cost of the contract is estimated at $300,000 and the fee at $50,000. If the sellers save money they will share the savings; 80% to the buyer and 20% to the seller. If the actual costs come in at $250,000, what is the final fee and final price ? Answer • Fee = $ 60,000 • Project cost = $ 250,000 • Total price = $ 310,000 41
- 42. Project Procurement ManagementOverview Plan Procurement Management 2. Tools & Techniques a. Expert Judgment • Procurement and purchasing, • Contract types and contract documents • Regulations and compliance topics b. Data Gathering • Market research - Eexamination of industry and specific seller capabilities, seller risk c. Data Analysis • Make-or-buy analysis .
- 43. Project Procurement ManagementOverview Plan Procurement Management Make-or-Buy Analysis – Particular product or service can be produced by the project team or can be purchased – Alternatively product or service can be purchased or rented 43
- 44. Make or BuyAnalysis - Example • Company A decides to create its own software package which will cost $30,000. The maintenance cost of the software would be $ 2,500 • A software outsourcing company also sells the same software @ $22,000 and the cost of maintenance would be $3,500 per month 44
- 45. The difference ofinitial investment • $30,000 (make) - $22,000 (buy) = $8,000 The difference of maintenance cost • $2500 (make) -$3500 (buy) = $1000 • Number of months the company should need the support of software to go for in-house solutions = $8,000/$1,000= 8 months 45
- 46. Factor Reasons toMake In-House Reasons to Buy Cost Cheaper Cheaper Skills Availability Can use people in the organization Team members are not capable of doing Skills Acquisition Can learn new sills Organization is not interested in new skills Risks Can manage risk associated Transfer the risk Work Core project work Not very important Human Resource availability Staff available Vendor available Reasons for Make or Buy 46
- 47. Project Procurement ManagementOverview Plan Procurement Management d. Source Selection Analysis - Determine the source selection method and inform the bidder. • Least cost-used in standard or routine procurement • Qualification only- credibility, qualifications, experience, expertise, areas of specialization, and references • Quality-based/highest technical proposal score later negotiate financial proposal • Quality and cost-based(quality is priority) • Sole source(no competition/single source( preferred seller) • Fixed budget- fixed budget indicated to the seller and select the one with highest quality
- 48. Project Procurement ManagementOverview Plan Procurement Management e. Meetings • Meetings with prospective sellers can be used to determine the strategy for managing and monitoring the procurement
- 49. Project Procurement ManagementOverview Plan Procurement Management 3. Outputs a. Procurement Management Plan • Contains the activities to be undertaken during the procurement process • Indicate type of bidding done(international competitive bidding, national competitive bidding, local bidding, etc., )
- 50. b. Procurement Strategy •Delivery methods –For professional services, delivery methods include: buyer/services provider with no subcontracting, buyer/services provider with subcontracting allowed –For industrial or commercial construction, turnkey, design build (DB), design bid build (DBB), design build operate (DBO), build own operate transfer (BOOT) • Contract payment types: fixed price, cost reimbursable, time and material • Procurement phases- description of phases, objectives of phases, exit criteria, tracking plan,
- 51. Delivery Methods • Turnkey-It is a contract under which a firm agrees to fully design, construct and equip a manufacturing/ business/ service facility and turn the project over to the purchaser when it is ready for operation for a remuneration • Design build - method to deliver a project in which the design and construction services are contracted by a single entity known as the design–builder or design– build contractor
- 52. Delivery Methods • DesignBid Build- Design-Bid-Build is the most traditional — and most common — project delivery method. On design-bid-build jobs, the owner contracts separately with a designer/architect and a contractor. Once the designer completes the design documents, the owner then looks for bids from contractors to perform the work
- 53. Delivery Methods DBO • Thecommon form of such a contract is a public private partnership(PPP), in which a public client(e.g. government or public agency ) enters into a contract with a private contractor to design, build and then operate the project, while the client finances the project and retains ownership.
- 54. Delivery Methods BOOT • Thepublic partner may provide limited funding or other benefits (such as tax exemptions) but the private organization accepts most of the risks • The private organisation is then granted the right to own, maintain and operate the project for a set period of time, during which they can draw fees from users of the asset • Once the time period has elapsed, the control of the project transfers to the public sector partner, either freely or for a fee that is stipulated in the original contract.
- 55. 55 Types Description Whento use IFB Invitation for bid Routine items where best price is the primary objective RFI Request for information To qualify potential suppliers RFQ Request for Quote Specifications are very clear Relatively low monetary purchases of commodity items RFP Request for Proposal Various approaches are possible Complex or non standard items of high monetary value c. Bid Documents
- 56. Document Purpose Bid Sellersends to buyer. The seller is making the product. Price is the determining factor in the decision making process Quotation Seller sends to buyer. Price is the determining factor in the decision making process. Variously called shopping. Proposal Seller sends to buyer. Other factors – such as skill sets, reputation, ideas for the project solution – may be used in the decision making process 56
- 57. d. Procurement Statementof Work – Description of the work/services to be outsourced – Ex. Quantity, quality, performance data, work locations, etc. Source : PMBOK ® Guide 6th Edition, Glossary 57
- 58. Procurement Statement of Work Characteristicsneeded to accurately develop their bid or proposal, Expected deliverables Required materials Specifications, Project milestones Acceptance criteria, 58 Work locations Quality level Quantity desired
- 59. The phrase termsof reference (TOR) is sometimes used when contracting for services. Similar to the procurement. SOW, a TOR typically includes these elements: – Tasks the contractor is required to perform as well as specified coordination requirements – Standards the contractor will fulfill that are applicable to the project – Data that needs to be submitted for approval – Detailed list of all data and services that will be provided to the contractor by the buyer for use in performing the contract, if applicable – Definition of the schedule for initial submission and the review/approval time required
- 60. Types of SOW Performance:describes final product in terms of performance, not the design characteristics or how it should be built I want a car that will run 20 km per Hr Functional: describes characteristics I want a car with 6 seats Design: describes exactly what you want. Build the car as per my detailed design 60
- 61. e. Source SelectionCriteria • Capability and capacity • Product cost and life cycle cost • Delivery dates • Technical expertise and approach • Specific relevant experience • Adequacy of the proposed approach and work plan in responding to the SOW • Key staff’s qualifications, availability, and competence • Financial stability of the firm • Management experience • Suitability of the knowledge transfer program, including training
- 62. f. Make-or-Buy Decisions g.Independent Cost Estimates • An estimate prepared by the buyer about products/services to be outsourced • Can be used to compare seller’s estimates with own estimates and determine how reasonable seller’s prices are
- 63. h. Change Requests i.Project Documents Updates – Lessons learned register – Milestone list – Requirements documentation – Requirements traceability matrix. – Risk register – Stakeholder register
- 64. j. Organizational ProcessAssets Updates
- 65. Conduct Procurements • Processof obtaining seller responses, selecting a seller, and awarding a contract
- 66. Project Procurement ManagementOverview Conduct Procurements 1. Inputs a. Project management plan b. Project documents c. Procurement documentation d. Seller proposals e. Enterprise environmental factors f. Organizational process assets 2. Tools & Techniques a. Expert judgment b. Advertising c. Bidder conferences d. Data analysis e. Interpersonal and team skills 3. Outputs a. Selected sellers b. Agreements c. Change requests d. Project management plan updates e. Project documents updates f. Organizational process assets updates
- 67. Project Procurement ManagementOverview Conduct Procurements 1. Inputs a. Project Management Plan • Scope management plan • Requirements management plan • Communications management plan • Risk management plan • Procurement management plan • Configuration management plan • Cost baseline
- 68. Project Procurement ManagementOverview Conduct Procurements b. Project Documents • Lessons learned register • Project schedule • Requirements documentation • Risk register • Stakeholder register
- 69. Project Procurement ManagementOverview Conduct Procurements c. Procurement Documentation • Bid documents • Procurement statement of work • Independent cost estimates • Source selection criteria d. Seller Proposals
- 70. e. Enterprise EnvironmentalFactors • Local laws and regulations regarding procurements • Local laws and regulations ensuring that the major procurements involve local sellers • External economic environnent constraining procurement processes • Marketplace conditions • Information on relevant past experience with sellers, both good and bad • Prior agreements already in place • Contract management systems
- 71. f. Organizational ProcessAssets • List of preferred sellers that have been prequalified • Organizational policies that influence the selection of a seller • Specific organizational templates or guidelines that will determine the way agreements are drafted and built • Financial policies and procedures regarding invoicing and payment processes
- 72. Project Procurement ManagementOverview Conduct Procurements 2. Tools & Techniques a. Expert Judgment • Proposal evaluation • Technical or subject matter • Relevant functional areas such as finance, engineering, design, development, supply chain management, etc. • Industry regulatory environment • Laws, regulations, and compliance requirements • Negotiation b. Advertising
- 73. c. Bidder Conferences •Also called contractor conferences, vendor conferences, and pre-bid conferences • Create an opportunity for all the prospective sellers to clarify their doubts and gain a common understanding about the buyers requirement d. Data Analysis •Proposal evaluation .
- 74. 74 Possible Score 2020 15 10 10 5 20 100 Value Expe rienc e Certifica tions Level IV Engine ers Security Clearance Start Date Waste Removal Price Total Score ABC Constructions 15 20 7 10 10 5 12 79 Allen Builders 12 20 12 10 10 0 10 74 FRJ Construction 18 20 11 0 10 5 18 82 Howe and Who Construction 18 15 5 0 5 5 15 73 Martin and Martin 9 20 13 10 5 0 18 65 Ralph Engineers 15 8 18 0 10 5 17 73
- 75. Evaluation Criteria –Forced Ranking Consultant Vendor A B C D Rank Sum Forced Rank 1 2 3 2 4 11 3 2 4 1 1 2 8 1 3 6 2 5 5 18 5 4 1 5 3 1 10 2 5 3 4 4 3 14 4 6 5 6 6 6 23 6 75
- 76. e. Interpersonal andTeam Skills • Negotiation
- 77. Project Procurement ManagementOverview Conduct Procurements 3. Outputs a. Selected Sellers b. Agreements • Procurement statement of work or major deliverables • Schedule, milestones, or date by which a schedule is required • Performance reporting • Pricing and payment terms • Inspection, quality, and acceptance criteria • Warranty and future product support
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- 79. d. Project ManagementPlan Updates • Requirements management plan • Quality management plan • Communications management plan • Risk management plan • Procurement management plan • Scope baseline • Schedule baseline • Cost baseline
- 80. e. Project DocumentsUpdates • Lessons learned register • Requirements documentation • Requirements traceability matrix • Resource calendars • Risk register • Stakeholder register f. Organizational Process Assets Updates •Listings of prospective and prequalified sellers •Information on relevant experience with sellers, both good and bad
- 81. Control Procurements • Processof managing procurement relationships; monitoring contract performance, and making changes and corrections as appropriate; and closing out contracts.
- 82. Project Procurement ManagementOverview Control Procurements 1. Inputs a. Project management plan b. Project documents c. Agreements d. Procurement documentation e. Approved change requests f. Work performance data g. Enterprise environmental factors h. Organizational process assets 2. Tools & Techniques a. Expert judgment b. Claims administration c. Data analysis d. Inspection e. Audits 3. Outputs a. Closed procurements b. Work performance information c. Procurement documentation updates d. Change requests e. Project management plan updates f. Project documents updates g. Organizational process assets updates
- 83. Project Procurement ManagementOverview Control Procurements 1. Inputs a. Project Management Plan • Requirements management plan • Risk management plan • Procurement management plan • Change management plan • Schedule baseline
- 84. b. Project Documents •Assumption log • Lessons learned register • Milestone list • Quality reports • Requirements documentation • Requirements traceability matrix • Risk register • Stakeholder register
- 85. c. Agreements –to monitor if terms and conditions are met d. Procurement Documentation -statement of work, payment information, contractor work performance information, plans, drawings, and other correspondence e. Approved Change Requests -modifications to the terms and conditions of the contract, including the procurement statement of work (SOW), pricing, and descriptions of the products, services, or results to be provided. f. Work Performance Data -seller data on project status such as technical performance; activities that have started, are in progress, or have completed; and costs that have been incurred or committed.
- 86. g. Enterprise EnvironmentalFactors Contract change control system, Marketplace conditions, Financial management and accounts payable system, and Buying organization’s code of ethics. h. Organizational Process Assets -procurement policies.
- 87. Project Procurement ManagementOverview Control Procurements 2. Tools & Techniques a. Expert Judgment Relevant functional areas such as finance, engineering, design, development, supply chain management, etc Laws, regulations, and compliance requirements; and Claims administration. b. Claims Administration – Outstanding disputes are settled by negotiation – Can resort to Alternative Claim Resolution Procedures .
- 88. Tools and Techniques •Negotiated Settlements Disagreement s Whenever settlement cannot be achieved through direct negotiation, some form of alternative dispute resolution (ADR) including mediation or arbitration may be explored. mediation or arbitration Settlement of negotiation 88
- 89. Negotiate project agreements •Analyse the bounds of the negotiations for agreement • Assess priorities and determine ultimate objective(s) • Verify objective(s) of the project agreement is met • Participate in agreement negotiations • Determine a negotiation strategy
- 90.
- 91. Negotiation Sellers starting point Buyersstarting point Maximum buyer will pay Minimum Acceptable to the seller Bargaining Range
- 92.
- 93. Mediation • Mediation isa kind of facilitated negotiation • Uses an mediator to bring both sides together to a settlement. • The role of the mediator is to find a middle-ground which both sides will accept as reasonable 93
- 94. Arbitration • Arbitration isthe more formal of the two common ADR processes • A simplified form of a mini-trial. • Conducted by a professional arbitrator (or panel of arbitrators) who will preside as a type of judge and jury • The final rulings are not necessarily made public. • Findings in arbitration rulings can be by the terms of the agreement either binding, or consensual on the parties 94
- 95. c. Data Analysis •Performance reviews-measure, compare, and analyze quality, resource, schedule, and cost performance against the agreement. • Earned value analysis -Schedule and cost variances along with schedule and cost performance indexes are calculated • Trend analysis –to develop forecast d. Inspection -structured review of the work being performed by the contractor e. Audits-structured review of the procurement process
- 96. Project Procurement ManagementOverview Control Procurements 3. Outputs a. Closed Procurements -provides the seller with formal written notice that the contract has been completed b. Work Performance Information -information on how a seller is performing by comparing the deliverables received, the technical performance achieved, and the costs incurred and accepted against the SOW budget for the work performed c. Procurement Documentation Updates -contract with all supporting schedules, requested unapproved contract changes, and approved change requests, seller performance reports and warranties, financial documents including invoices and payment records.
- 97. d. Change Requests-Change requests to the project management plan, its subsidiary plans, and other components such as the cost baseline, schedule baseline, and procurement management plan, may result from the Control Procurements process.
- 98. Project Management PlanUpdates • Risk management plan – new risks arising • Procurement management plan –updated based on the performance of the seller • Schedule baseline- to adjust for schedule changes created by seller cost base line • Cost baseline- to adjust for changes in material and labour cost
- 99. f. Project DocumentsUpdates • Lessons learned register –variances, corrective action taken, their effectiveness. • Resource requirements – changes to resource requirement identified as work progresses • Requirements traceability matrix –to record requirement that were satisfied • Risk register – new risks identified • Stakeholder register –if contractors and suppliers change
- 100. g. Organizational ProcessAssets Updates – Payment schedules and requests – Seller performance evaluation documentation – Prequalified seller lists updates – Lessons learned repository-actual results of the procurement are compared with the projected results in the original procurement management plan – Procurement file-actual results of the procurement are compared with the projected results in the original procurement management plan
- 101. 101 A contract endsby: Successful performance Mutual agreement Last two are Termination Breach of contract