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Procurements Chapter 12
- 2. 12.1 PLAN PROCUREMENT MANAGEMENT
- 3. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS 1. Project Charter 2. Business Documents • Scope Management Plan, Quality Management Plan, Resource Management Plan, Scope baseline. 3. Project Management Plan
- 4. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS 4. Project Documents (Milestones, Project Team assignments, Requirements Documentation, RTM, Resource Requirements, Risk Register, Stakeholders)
- 5. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS 5. Enterprise Environmental Factors • Fixed-price contracts (FFP , FPIFC, FP-EPA) • Cost-reimbursable contracts (CPFF, CPIF, CPAF, CPF or CPPC) • Time and Material Contracts (T&M) 6. Organizational Process Assets
- 6. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS Contract Types (Fixed-Price): Firm Fixed Price Contracts (FFP). Most commonly used. Cost increase due performance is responsibility of the seller. Fixed Price Incentive Fee Contracts (FPIF). Gives the buyer and seller some flexibility in that it allows for deviation from performance Fixed Price with Economic Price Adjustment Contracts (FP-EPA), considered for big projects that last many years and factors like inflation or cost increases or decreases affect the project. The FP-EPA contract is intended to protect both buyer and seller from external conditions beyond their control
- 7. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS Contract Types (Cost-Reimbursable): Cost Plus Fixed Fee Contracts (CPFF). The seller is reimbursed for all allowable costs for performing the contract work and receives a fixed-fee payment calculated as a percentage of the initial estimated project costs. Cost Plus Incentive Fee Contracts (CPIF). The seller is reimbursed for all allowable costs for performing the contract work and receives a predetermined incentive fee based upon achieving certain performance objectives as set forth in the contract. Cost Plus Award Fee Contracts (CPAF). The seller is reimbursed for all legitimate costs, but the majority of the fee is earned only based on the satisfaction of certain broad subjective performance criteria defined and incorporated into the contract. Cost Plus Fee (CPF) or Cost-Plus Percentage of Costs (CPPC). It requires the buyer to pay for all costs plus a percentage of costs as a fee.
- 8. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS Contract Types (T&M): Time and material contracts (T&M). Time and material contracts (also called time and means) are a hybrid type of contractual arrangement with aspects of both cost-reimbursable and fixed-price contracts. They are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed.
- 9. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS Contract Types Examples: Firm Fixed Price Contracts (FFP). Contract = $US 1’000,000 Fixed Price Incentive Fee Contracts (FPIF). Contract = $US 1’000,000 For every month early the project is finished, an additional US$ 10,000 is paid to the seller. Fixed Price with Economic Price Adjustment Contracts Contract = $US 1’000,000, but a price increase will be allowed in year 2 based on the US Consumer Price Index report for year 1. Or Contract = $US 1’000,000, but a price increase will be allowed in year 2 to account for increases in specific material costs
- 10. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS Contract Types Examples: Cost Plus Fixed Fee Contracts (CPFF). Contract = Cost plus a fee of US$100,000 Cost Plus Incentive Fee Contracts (CPIF). Contract = US$ 500,000 target cost plus US$ 50,000 target fee. The buyer and seller share any cost savings or overruns at 80% to the buyer and 20% to the seller. Cost Plus Award Fee Contracts (CPAF). Contract = Cost plus a base fee plus award for meeting buyer-specified performance criteria. Maximum award available is US$ 50,000. Cost Plus Fee (CPF) or Cost-Plus Percentage of Costs (CPPC). Contract = Cost plus 10 percent of costs as fee.
- 11. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS Contract Types Examples: Time and Material Contract: Contract = $100 per hour plus expenses or materials at cost. Or Contract = $100 per hour plus materials at $5 per linear meter of wood.
- 12. 12.1.1 PLAN PROCUREMENT MANAGEMENT: INPUTS Risk and Contract Types
- 13. 12.1.2 PLAN PROCUREMENT MANAGEMENT: TOOLS AND TECHNIQUES Expert Judgment Data Gathering (Market Research) Data Analysis (Make-or-Buy Analysis) Source Selection Analysis(Least cost, Qualifications, Quality- based, Quality and cost based, Sole source, Fixed Budget) Meetings
- 14. 12.1.3 PLAN PROCUREMENT MANAGEMENT: OUTPUTS Procurement Management Plan Procurement Strategy BID Documents (RFI, RFQ, RFP , IFB) Procurement Statement of Work (SOW) Source Selection Criteria
- 15. 12.1.3 PLAN PROCUREMENT MANAGEMENT: OUTPUTS Request for information (RFI). An RFI is used when more information on the goods and services to be acquired is needed from the sellers. It will typically be followed by an RFQ or RFP . Request for quotation (RFQ). An RFQ is commonly used when more information is needed on how vendors would satisfy the requirements and/or how much it will cost. Request for proposal (RFP). An RFP requests a detailed proposal that includes information on price, how the work will be accomplished, who will do it (along with resumes, in some cases), and company experience. Statement of Work (SOW). Describes the goods or services you want to procure from outside the organization. Invitation for bid (IFB), Sometimes called a request for bid (RFB), usually requests a total price to do all the work. Think of an IFB as a form of RFP where the work described in the procurement statement of work is detailed enough for bidders to determine a total price.
- 16. 12.1.3 PLAN PROCUREMENT MANAGEMENT: OUTPUTS Source Selection Criteria: Understanding of need Overall or life-cycle cost Technical capability Risk Management approach Technical approach Warranty Financial capacity Production capacity and interest Business size and type Past performance of sellers References Intellectual property rights Proprietary rights
- 17. 12.1.3 PLAN PROCUREMENT MANAGEMENT: OUTPUTS 6. Make-or-Buy Decisions 7. Independent Cost Estimates 8. Change Requests 9. Project Documents Updates 10. OPAs Updates
- 18. 12.1.4 PLAN PROCUREMENT MANAGEMENT: QUESTIONS Name the three main types of contracts. The Procurement Statement of Work is included in which other output? What are the two types of incentive contracts? _________________ Criteria are used to rate or score bids, or proposals. Which technique will help you to decide whether to procure or not?
- 20. 12.2.1 CONDUCT PROCUREMENTS : INPUTS PMP(Scope, Requirements, Communications, Risk, Procurement, Configuration, Cost baseline) Project documents (Lessons, Project Schedule, Requirements docs, Risks, Stakeholders) Procurement Documentation Seller Proposals EEFs OPAs
- 21. 12.2.2 CONDUCT PROCUREMENTS : TOOLS AND TECHNIQUES Expert Judgment Advertising Bidder Conferences Data Analysis Proposal Evaluation Interpersonal and Team Skills Negotiation
- 22. 12.2.3 CONDUCT PROCUREMENTS: OUTPUTS Selected Sellers Agreements Change Requests Project Management Plan Updates Requirements, Quality, Communications, Risk, Procurement, Scope baseline, Schedule baseline, Cost baseline) Project Documents Updates Lessons, Requirements docs, RTM, Resource calendars, Risks, Stakeholders OPAs Updates
- 23. 12.2.4 CONDUCT PROCUREMENTS: QUESTIONS Which tool/technique can be used to clarify details about the work prior to proposals being submitted? Which tool/technique can be used to find more potential Sellers? _____________ are formal responses to an RFP . What are the two key outputs of Conduct Procurements? Which tool/technique is used to reach agreement prior to signing a contract.
- 25. 12.3.1 CONTROL PROCUREMENTS: INPUTS PMP (Requirements, Risk, Procurement, Change, Schedule baseline) Project Documents (Assumptions, Lessons, Milestones, Quality Reports, Requirement docs, RTM, Risks, Stakeholders) Agreements Procurement Documentation Approved Change Requests WPD = Work Performance Data EEFs OPAs
- 26. 12.3.2 CONTROL PROCUREMENTS : TOOLS AND TECHNIQUES Expert Judgment Claims Administration Data Analysis Performance Reviews Earned Value Analysis Trend Analysis Inspection Audits
- 27. 12.3.3 CONTROL PROCUREMENTS : OUTPUTS Closed Procurements WPI=Work Performance Information Procurements docs updates Change Requests PMP Updates (Risk, Procurement, Schedule baseline, Cost baseline) Project Documents Updates (Lessons, Resource Requirements, RTM, Risks, Stakeholders) Organizational Process Assets Updates
- 28. 12.3.4 CONTROL PROCUREMENTS : QUESTIONS Performances of both the buyer and seller are managed in which process? Which tool/technique is used to settle any contested changes or claims by the buyer or seller? What tool/technique is used to perform a structured review of the procurement process? What tool/technique is used to perform a structured review of the work performed by the seller?
- 29. SUMMARY 12.1 Plan Procurement Management 12.2 Conduct Procurements 12.3 Control Procurements
- 30. Procurements Mind Map 12.1 Plan Procurement Management PMP Project Documents - Exp. Judg. - Data Gathering(Mkt Res.) - Data Analysis (Make/Buy) - Source Selection Analysis - Meetings Procurement Mgmt. Plan Project Charter Business Docs Procurement strategy Bid docs Procurement SOW Source Selection Criteria Make or Buy Decisions Independent cost estimates Change Requests 12.2 Conduct Procurement OPA (Contract Types) Procurement Docs Seller Proposals - Exp. Judg. - Advertising - Bidder conference - Data Analysis (Proposal Eval) - ITS (Negotiation) Selected Sellers Agreements Change Requests 12.3 Control Procurement Procurement Docs Approved Change Requests WPD - Exp. Judg. - Claims administration - Data Analysis - Inspection - Audits Closed Procurements WPI Change Requests
Editor's Notes
- Understand what is the procurement? Is it a service, a good, a material, is it a finished product that is going to be integrated? What pieces, how many pieces, and when do you need that? We need to think about make or buy. (Good or Services) When we think in HOW, we need to think in contracts.
- Requirements Documentation: Requirements with contractual and legal implications that may include health, safety, security, performance, environmental, insurance, intellectual property rights, equal employment opportunity, licenses, and permits—all of which are considered when planning for procurements.
- Fixed-Price, Cost-Reimbursable, Time and Material. Bid Documents (RFQ/RFP). Fixed Price Incentive Fee (FPIF), Cost Plus Incentive Fee (CPIF). Source Selection. Make-or-Buy Analysis
- Plan Contracting Requesting Sellers Responses Selecting Sellers
- In this process you can use: RFI, RFQ, and RFP You need to focus on the scope of your procurements Bidder conferences (also called contractor conferences, vendor conferences, and pre-bid conferences)
- Bidder Conferences. Advertising. Seller Proposals. Selected Sellers, and Agreements. Negotiation.
- Claims Administration: Contested changes and potential constructive changes are those requested changes where the buyer and seller cannot reach an agreement on compensation for the change or cannot agree that a change has occurred. These contested changes are called claims. When they cannot be resolved, they become disputes and finally appeals. Claims are documented, processed, monitored, and managed throughout the contract life cycle, usually in accordance with the terms of the contract. If the parties themselves do not resolve a claim, it may have to be handled in accordance with alternative dispute resolution (ADR) typically following procedures established in the contract. Settlement of all claims and disputes through negotiation is the preferred method.
- Control Procurements. Claims Administration. Audits. Inspection.