Block 7 Project Procurement Management Project Procurement Management

Block 7 Project Procurement Management

Project Procurement Management ► The processes required to acquire goods and services from outside the organization ► Purchasing Procurement ► Common reasons for outsourcing: * Cost reduction * Focus on core business activities * Staffing flexibility * Increased accountability

Key processes and activities ► Procurement Planning ► Solicitation ► Source Selection ► Contract Administration ► Contract Close-out

Procurement Planning ► Do we outsource? ► How do we outsource? ► What to outsource? ► How much to outsource? ► When to procure?

Procurement Planning Tools & Techniques ► Make-or-buy analysis Types of Contracts ►Fixed price or lump sum contracts ►Cost reimbursable contracts ►Unit price contracts

Types of Contracts ► Fixed price or Lump sum: * Fixed total price for well defined product * Vendor assumes majority of risks * More common for procurements of products ► Unit price contracts: * Amount per unit of service * Total contract value = f (no. of units required) * More common with IT / SW development

Types of Contracts ► Cost reimbursable contracts: * Payment to vendor for direct & indirect actual costs * Indirect costs (e. g. over heads) as % of actual costs * Incentives for meeting deadlines or exceeding targets * Buyer assumes more risk * Types of reimbursable contracts: Cost plus incentive fee (CPIF) Cost plus fixed fee (CPFF) Cost plus percentage of costs (CPPC) (lowest risk to buyer) (highest risk to buyer)

Solicitation Planning ► Requests for Proposals (RFPs) Document used to solicit proposals from vendors ► Invitations to Quote (ITQs) Invitations to quote prices only for products or services already defined. Solicitation documents must be clearly written to facilitate accurate and complete responses from vendors

►Solicitation § Involves obtaining proposals or bids from prospective vendors ►Source Selection § Involves evaluating bidders’ proposals, negotiating and awarding contract ►Contract Administration § Entails managing the relationship with vendor to ensure meeting of the contract details ► Contract Close-out § Completion and settlement of contract and resolution of any open issues, verification that all work is complete, archiving information etc.