6. Project Procurement Management
• To acquire / purchase products, services, or
results needed from outside the project team
• Includes contract management
• Contracts: legal document between buyer and
seller, represents a legally binding agreement
which obligates the seller to provide the
specified products, services, or results and
obligates the buyer to provide monetary or
other valuable consideration
10. Project Procurement Management
• Plan Procurements
• Documenting project purchasing decisions
• Specify purchasing approach
• Identifying potential sellers
• Answers, “Should we acquire it externally?, What
to require, How to require, How much and When
to acquire”
12. Project Procurement Management
• Plan Procurements – I
• Scope baseline (…)
• Requirement documentation
• Teaming agreements
• Joint ventures, partnerships, or other
form of agreements between defined
parties
14. Project Procurement Management
• Plan Procurements – TT
• Make-or-buy analysis
• Expert judgment
• Contract types
Fixed-price contract
Cost-reimbursable contract
Time and material
15. Project Procurement Management
• Plan Procurements – TT (cont’d)
• Contract types (cont’d)
Fixed-price contract
– Firm fixed price (FFP) buyer preffered
– Fixed price incentive fee (FPIF)
Set price ceiling
Price is based on seller’s performance
related to cost, schedule, or technical
performance
16. Project Procurement Management
• Plan Procurements – TT (cont’d)
• Contract types (cont’d)
Fixed-price contract (cont’d)
– Fixed price with economic price adjustment
(FP-EPA) usually a very long project
Takes inflation and commodities cost,
into account
Relies on financial index
17. Project Procurement Management
• Plan Procurements – TT (cont’d)
• Contract types (cont’d)
Cost reimbursable contract
– Cost plus fixed fee (CPFF)
– Cost plus incentive fee (CPIF)
Seller can reimburse allowable costs
Based on seller’s performance
Utilizes sharing formula, e.g.: 80/20
18. Project Procurement Management
• Plan Procurements – TT (cont’d)
• Contract types (cont’d)
Cost reimbursable contract (cont’d)
– Cost plus award fee (CPAF)
Subjective determination of seller
performance by buyer
Not a subject for appeals
19. Project Procurement Management
• Plan Procurements – TT (cont’d)
• Contract types (cont’d)
Time and Material
– A hybrid type
– Used when a precise statement of work
cannot be quickly prescribed
– A form of cost reimbursable if it is left open
ended
– A form of fixed price if buyer limits
parameters and apply unit labor cost
20. Project Procurement Management
• Plan Procurements – O
• Procurement management plan
Contract type, risk management issue
Evaluation criteria, multiple contracts criteria
Constraints and assumptions, etc
21. Project Procurement Management
• Plan Procurements – O (cont’d)
• Procurement statement of work
Developed from project scope baseline and
defines only a portion of project scope to be
included in related contract
Must be in sufficient detail so that prospective
sellers can determine their capability to
provide such product, service, or results
22. Project Procurement Management
• Plan Procurements – O (cont’d)
• Procurement statement of work (cont’d)
Includes specifications, quantity, quality
levels, performance data, performance
period, work location, etc
Must be clear, complete, and concise
Multiple products / services can be grouped
into single SOW
Is subject to change until a contract is awarded
23. Project Procurement Management
• Plan Procurements – O (cont’d)
• Make-or-buy decisions
May include decision to require insurance
policies or performance bonds to address
some identified risks
• Procurement documents
Quotation, bidding
document, tender, RFP, RFQ, RFI, etc
30. Project Procurement Management
• Conduct Procurements – TT
• Bidder conferences
To ensure buyer and seller have a clear and
common understanding of the procurement
No sellers received preferential treatment
Every prospective sellers hear individual
questions and the answers from buyers
• Proposal evaluation techniques
34. Project Procurement Management
• Administer Procurements
• Process of managing procurement
relationships, monitoring contract
performance, making changes / corrections
• To ensure both parties meet their contractual
agreements and their own legal rights are
protected
• Might be carried out by separate function of the
organization
35. Project Procurement Management
• Administer Procurements
• Applied project management processes (but not
limited to):
Direct and manage project execution
Report performance
Perform quality control
Perform integrated change control
Monitor and control risk
36. Project Procurement Management
• Administer Procurements
• Also includes monitoring payments to sellers
• Document seller’s performance / evaluation
• Contracts can be amended at any time prior to
contract closure by mutual consent
39. Project Procurement Management
• Administer Procurements – TT
• Contract change control system
• Procurement performance review
• Inspection and audit
• Performance reporting
• Payment system
• Claims administration
• Records management system
41. Project Procurement Management
• Close Procurements
• Completion of project procurement
• Includes administrative activities
• Finalizing open claims, update
information to project records
• In multi phase project, close procurement
only applicable to given phase of the
project
47. Sample Questions
1. Which of the following is a false statement about
project risks?
A. A risk arises out of uncertainty.
B. A risk can only have a negative effect on a project.
C. Identified risks are usually listed in a document
called the risk register.
D. Risks can be categorized by developing a risk
breakdown structure (RBS).