Procurement Management Flashcards
Process “Plan Procurement Management”
- Goal: document project procurement decisions, specify the approach and identify potential sellers
- Inputs: project charter, business documents, PMplan (scope, quality and resource mgmt plan; scope baseline), project docs (milestone list, project team assignments, reqs doc, reqs traceability matrix, resource requirements, risk and stakeholder reg), EEFs, OPAs
- Tools+Techniques: expert judgment, market research, make-or-buy analysis, source selection analysis, meetings
- Outputs: Procurement mgmt plan, procurement strategy, bid documents, procurement SOW, source selection criteria, make-or-buy decision, independent cost estimates, CRs, Project docs updates (milestone list; reqs doc; reqs traceability matrix; risk, lessons learned and stakeholder reg), OPA updates
Process “Conduct Procurements”
- Goal: obtain seller responses, select a seller, and award a contract.
- Inputs: PMplan (scope, reqs, comm, risk, procurement, config mgmt plan + cost baselne), project docs (lessons learned, risk and stakeholder reg, project schedule, reqs doc), procurement documenation, seller proposal, EEFs, OPAs
- Tools+Techniques: Expert judgement, advertising, bidder conferences, data analysis (proposal eval), negotiation
- Outputs: selected sellers, agreements, CRS, PMplan (reqs, quality, comm, risk and procurement mgmt plan; scope, schedule and cost baseline); project docs updates (lessons learned, risk and stakeholder reg; reqs doc; resource calendars, reqs traceability matrix), OPAs
Process “Control Procurements”
- Goal: manage procurement relationships, monitor contract performance, make changes and corrections as appropriate, and close out contracts
- Inputs: PMplan (reqs, risk, procurement and change mgmt plan + schedule baseline), project docs (assump log; milestone list; quality reports; reqs doc; req traceability matrix, lessons learned, risk and stakeholder reg), agreements, procurement doc, approved CRs, work perf data, EEFs, OPAs
- Tools+Techniques: Expert judgment, claims administration, Data analysis (performance reviews, EVA, trend analysis), inspection, audits
- Outputs: Closed procurements, work perf info, procurement doc updates, CRs, PMplan updates (risk and procurement mgmt plan; schedule and cost baseline), project docs updates (req traceability matrix; lessons learned, risk and stakeholder reg; resource reqs), OPAs
Activities during ‘Plan Procurement Mgmt”
- Performing make or buy analysis
- Creating a procurement mgmt plan
- Creating a strategy for each procurement
- Creating a procurement statement of work for each procurement
- Selecting the appropriate contract type for each procurement
- Creating the bid documents
- Determining the source selection criteria
contract types
- fixed price contracts: fixed total price for a defined product, service or result (should be used when reqs are well-defined and no significant changes are expected)
- cost-reimbursable contracts: payments to seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit (should be used if the scope of work is expected to change significantly)
- time and material contracts: hybrid type of contactual agreement with aspects of both cost-reimbursable and fixed-price contracts (often used for staff augmentation, acquisition of experts and any outside support when a precise SOW cannot be quickly prescribed)
Fixed price contracts
1) firm fixed price (FFP): favored by most buying orgs b/c the price for goods is set at the beginning and not subject to change unless the scope changes (least cost risk for PM)
2) fixed price incentive fee (FPIF): gives seller and buyer some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed-upon metrics/goals
3) fixed price award fee (FPAF): same as FPIF but with a maximum defined for the fee/profit
4) fixed price with economic price adjustments (FPEPA): for contracts with a considerable period of years or payments in different currency
5) Purchase-order (PO): simplest type of FP contract; usually unilateral; used for simple commodity procurements
Cost-reimbursable contracts
1) Cost plus fixed fee (CPFF): 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 projects costs
2) Cost plus incentive fee (CPIF): seller is reimbursed for all allowable costs for performing the contract work and receives a predetermined incentive fee based on achieving certain performance objectives
3) Cost plus award fee (CPAF): seller is reimbursed for all legitimate costs, but the majority of the fee is earned based on the statisfaction of certain broad subjective performance criteria (fee is based solely on the subjective determination of seller performance by the buyer and is generally not subject to appeals)
Source selection methods
- Least cost: appropriate for procurements of a standard or routine nature
- Qualfications only: applies when the time and cost of a full selection process would not make sense because of a small procurement value; buyer establishes short list and selects the bidder with the best credibility, experience, expertise, etc.
- Quality-based/highest technical prosposal score: proposal (with both technical and cost details) is first evaluated based on quality and then negotiation or acceptance of financial proposal
- Quality and cost based: allows cost to be included in seller selection process
- Sole source: buyer asks a specific seller to prepare proposal which is then negotiated (no competition, should be an exception)
- Fixed budget: budget is disclosed to invited sellers in the RFP, highest-ranking technichal proposal within budget wins (only appropriate upon well-defined SOW)
Procurement Management Plan
It contains the activities to be undertaken during the procurement process and can include:
- how procurement will be coordinated with other aspects such as schedule development and control processes
- timetable of key procurement activities
- procurement metrics to be used to manage contracts
- stakeholder roles and responsibilities
- constraints and assumptions that could affect procurements
- legal jurisdiction and the currency
- determination of whether independent estimates will be used and whether they are needed as eval criteria
- risk mgmt issues
- prequalified sellers
Procurements strategy
objective is to determine the project delivery method (subcontractng etc.), the type of legally binding agreements (fixed price, cost-reimbursable, T&M), and how the procurement will advance through the procurement phases
delivery methods
delivery methods are defined in procurement strategy and are different for
- professional services: methods include buyer/services provider with no subcontracting or with subcontracting allowed; joint verture between buyer and services provider; and buyer/services provider acts as the representative
- construction: methods include turnkey, design build, design bid build, design build operate, build own operate transfer, and others
contracts payment types
they are defined in procurement strategy, coordinated with the buyer’s internal financial system and include lump sum, firm fixed price, cost plus award fees, T&M, target cost and others
procurement phases
they are defined in procurement strategy and include:
- sequencing or phasing of the procurement (description and objective of each phase)
- procurements performance indicators and milestones for monitoring
- criteria for moving from phase to phase
- monitoring and evaluation plan for tracking progress
- process for knowledge transfer
bid documents
- are used to solicit proposals from prospective sellers
- can include a RFI, RFQ, RFP or other appropriate documents
- are structured to facilitate an accurate and complete response from sellers as well as an easy evaluation
- include description of desired form of response, relevant procurement SOW, and any required contractual provisions
RFI
is used when more information on the goods and service to be acquired is needed - typically followed by RFQ or RFP
