DUBLIN BUSINESS SCHOOL

PROJECT PLANNING AND CONTROLLING B7BU100

The Chunnel Project Case Study

ANA CAROLINA ASSIS E SOUZA 10130650

DUBLIN 2015

CONTENTS
1 INTRODUCTION ............................................................................................. 3
2 QUESTION 1................................................................................................... 3
Plan Procurements.......................................................................................... 3
Conduct Procurements ................................................................................... 5
Administer Procurement .................................................................................. 7
Close Procurements........................................................................................ 9
3 QUESTION 2................................................................................................. 11
4 REFERENCES .............................................................................................. 12

1 INTRODUCTION
It is necessary a procurement management plan to planning, executing and
controlling the procurements in the project. Procurement problems: In Eurotunnel
project there were many vendors bidding for the contract. This background led
the winners curse of the successful bidders having the lowest and most
optimistic price estimates, against the most realistic estimates. Finally, the bidder
winner could not accomplish the forecast of time and cost.
2 QUESTION 1
If I were in the condition of a manager, I would propose a simple method to
manage the procurement/contract process. The main steps to follow for a
successful process procurement manage are Plan, Conduct, Administer and
Close procurements. Now, I will describe the main points and information for
those steps to support the method that I suggested.
Plan Procurements
The process of documenting project-purchasing decisions, specifying the
approach and identifying potential sellers. The inputs, tools and techniques, and
outputs of this process are summarized in the table below.

Figure 1 Plan Procurements: Inputs, Tools and Techniques, and Outputs

According to the PMBOK, the plan procurement management focuses on

documenting project procurement decisions, specifying the approach, and
identifying potential sellers. This analyses the organization project by identifying
products and services that can be developed internally and those that require
external contributions. Upon the identification of what products and services,

require external parties, the plan procurement further details how to acquire it,
when to acquire it, and the required quantity.
The most important inputs into the procurement management processes are the
project management plan, the requirement documentation, and the activity cost
estimates. The project management plan, as discussed in earlier articles, defines
the requirement, need, justification, and boundary for the project. The
requirement documentation, on the other hand, shows how individual
requirements dovetail into the overall project need. For a project manager, a clear
understanding of the requirements vis--vis the organizations strength and
resources will help in deciding what items or services require procurement.
Finally, prospective sellers use the activity cost estimates in evaluating the
reasonableness of bids and proposals. Other inputs into the plan procurement
management process include the risk register, activity resource requirement,
project schedule, stakeholders register, enterprise environmental factors, and
organizational process assets.
As project manager, we deal with a lot of contractual relationships when planning
procurement. The most popular contract types are the fixed-price contract, which
defines a fixed total price for a project; the cost reimbursable contract, which
reimburses the seller with legitimate cost incurred during the cost of the project
(this is largely used when the scope of a project cannot be determined at the start
of the project);. and the time and material contract (T&M), which is a combination
of the fixed-price contract and the cost reimbursable contract. It is often used for
special arrangements in a fixed-cost project such as hiring expatriates, staff
augmentation, or part of the contract for which the quantity cannot be defined as
of the time of award.
The main tools and techniques for the plan procurement management are as
follows:
1. Make or buy analysisAs far as procurement management is concerned, this
is the most important tool for the project manager. It analyzes whether a
product or service should be produced in-house or sourced from a supplier by
analysing the various costs and risks involved.
2. MeetingsAs a project manager, arranging meetings with potential sellers or
bidders allows the organization to make better choices and strike better deals.
It also gives room for the sellers to clarify details of the procurement with the
procurement team.
Other important tools and techniques used for the plan procurement process are
expert judgment and market research for industry and seller analysis.
The outputs of the plan procurement management process are:
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1. Procurement management planThis is the major output of the plan

procurement management process; it describes how procurement will be
managed throughout the whole project and it contains information such as the
type of contract to be used, how to manage suppliers, handling risk, etc.
2. Procurement statement of work this describes the product or service in detail
to allow contractors to determine if they are able to deliver.
3. Source selection criteriathese are criteria developed to be used in evaluating
and selecting buyers.
4. Make or buy decisionthis is the result of the make or buy analysis, detailing
which activity would be accomplished by the project team or sourced from
outside source.
The change request, procurement documents, and the project documents update
are other key outputs of the plan procurement management process.
Conduct Procurements

After planning procurement, the next process a project manager has to undertake
is to conduct procurement. This is defined as the process of obtaining seller bids
and proposals, selecting the seller and awarding the contract to the chosen seller.

Figure 2: Conduct Procurements: Inputs, Tools and Techniques, and Outputs.

The most important inputs in the conduct procurement processes are the
procurement management plan, source selection criteria, and the seller proposal.
The procurement management plan, as discussed earlier, is the key output of the
plan procurement management process and details how the whole procurement
management process would be managed. The source selection criteria detail
information required for selection of sellers, while the seller proposals are bids
submitted by sellers that will be used in selecting the successful bidders. Other
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inputs for the conduct procurement processes include the procurement

document, project documents, make or buy decisions, procurement statement of
work, and organizational processes assets.
As a project manager, it is important to note that, depending on the nature of the
project, the seller might be involved in the preparation of the procurement
statement of work, as this would provide a broader perspective from which ideas
can be drawn to satisfy the project requirement. A detailed contract would then
be negotiated with the seller afterwards.
The tools and techniques for the conduct procurement processes are:
1. Bidder conferenceAs the name suggests, this is a meeting at which the
prospective bidders or sellers meet with the buyer before submitting a proposal.
This is to ensure that all prospective sellers have a clear idea of the
procurement requirements. This also eliminates or reduces preferential
treatment among bidders.
2. Proposal evaluation techniquesAfter proposals have been made, these are
the criteria used in selecting the successful bidders.
3. Independent estimatesWhen carrying out procurement, it is important for the
buyer to carry out independent estimates of product or services. This is used
as a benchmark for comparison of the prospective sellers bids. Large
variations among independent estimates should be noted and possible reasons
for the variations identified.
4. Expert judgmentThe use of expert opinion in evaluating proposals.
5. AdvertisingAlthough this might sound very general, advertisement is the only
way to increase the list of potential suppliers. This is sometimes neglected
during procurement. thus limiting the number of prospective sellers. Niche
advertisement, such as advertising in specific trade publications, is more
effective.
6. Analytical techniquesWhile sellers generally try to add value to product and
services rendered to increase chances of winning the bid, analytical techniques
are used to identify areas of risk in a project such that they might be monitored
closely to ensure a successful project and avoid cost overruns.
7. Procurement negotiationsThis is used for final clarification of the
requirements and structure of the contract before signing the contract. It covers
areas such as authority to make changes, technical and management
approaches, propriety rights, payment, project schedule, price, and contract
financing.
The major outputs of the conduct procurement process are the selected sellers
and the agreements. The selected sellers are those whose bids have been
judged competitive after the proposal evaluation. The agreement describes the
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terms and condition of the contract. It can be called a contract, an understanding,

a subcontract, or a purchase order. The main components of the agreement
include the deliverables, schedule baseline, performance reporting, period of
performance, roles and responsibilities, pricing, payment terms, place of delivery,
acceptance criteria, product support, limitation of liability, fees and retention,
penalties, incentives, insurance and performance bonds, change request, and
termination clause.
Other outputs of the conduct procurement process are resource calendars,
change requests, and updates to the project management plan.
Administer Procurement

Figure 3: Administer Procurement: Inputs, Tools and Techniques, and Outputs

According to the PMBOK, this is the process of managing procurement

relationships, monitoring contract performance, and making changes and
corrections to contracts as appropriate. While the control procurement process
is important for all project types, it is more complicated for large projects with
multiple suppliers, as it involves managing the interfaces among various
providers to ensure the overall success of the project. Since procurement
management involves a legal agreement (contract) between the buyer and the
seller, it is important for the project management team to be aware of the legal
implications when controlling procurement.
The control procurement process reviews the performance of the seller with
respect to the agreed contract and points the sellers attention to variations,
especially where corrective actions are required. It also ensures that agreed
payment conditions are met as specified in the contract. It is important to note
that the contract condition can be amended at any time before the end of the
project, as long as there is a mutual consent between the buyer and the seller.
The most important inputs for the control procurement process are the
procurement documents and agreements. The procurement documents hold
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details of records required for effective control of the procurement process; the
agreement, as discussed in the previous post, is an understanding between the
buyer and the seller that also provides detailed information on the duties of both
parties. Other inputs include the procurement documents, approved change
requests, work performance reports, and work performance data.
The tools and techniques for the plan procurement management are:
- Contract change control systemThis defines the processes by which
changes can be made to procurement. Important elements of this are conflict
resolution and levels of approval necessary for change authorizations
- Procurement performance reviewThis is a structured review to ensure that
the seller meets the contract requirement (scope) within the triple constrain
(time, cost, and quality). This allows the project management team to quantify
the work done by the seller, identify performance success and failure, and
make further decisions based on the information gathered.
- Inspection and auditsThese are conducted during the execution of the project
to ensure that the contract deliverables are fulfilled
- Performance reporting
- Payment systemsThese systems ensure that payment is made to the seller
once work has been confirmed as satisfactory by authorized personnel.
- Claims administrationClaims are contested changes where the buyer and the
seller cannot reach an agreement that the change occurred or on the cost of
the change. Claims administration deals with resolving claims as agreed in the
contract document.
- Record management systemThis is used by the project manager in
managing contract and procurement.
-

The outputs of the control procurement process are:

Work performance informationThis helps in the identification of potential
problems for new procurements. Documenting the performance of a vendor
increases organizational knowledge about the seller, which can help in making
better decisions and managing risk.
Change requestFor changes requested to the project management plan.
Project management plan updateElements of the project management plan
that might be updated include the procurement management plan, schedule
baseline, and cost baseline.
Project documents updatesThe procurement document is the key document
that might be updated.
Organizational process assets updates

Close Procurements

Figure 4 Close Procurements: Inputs, Tools and Techniques, and Outputs.

Every beginning must have an end (hopefully). Close procurement is the process
of completing all procurements. At this stage, agreements and related documents
are documented for future references, all open claims are finalized, and relevant
records are updated. In the case of a large project with multiple procurement
agreements, different procurements are closed at different phases of the project
lifecycle. A termination clause is usually included in the contract in case of an
early termination. Early termination could be a result of the mutual agreement of
both parties or a breach of contract from one of the parties. Contract termination
should always be based upon the procurement terms and conditions.
There are two inputs for the close procurement process. These are the project
management plan, which contains the procurement plan that details the
necessary procedures for closing out procurements, and the procurement
documents. The procurement documents contain all of the information gathered
during the contract period, such as contract time, scope, quality, cost
performance, payment records, etc.
There are three main tools and techniques used when closing procurements.
First, the procurement audits constitute a structured review of the whole
procurement process. This identifies the successes and weaknesses of the
contract and helps in planning other procurement during the project or future
procurements. Second is the procurement negotiation, which is used in resolving
all outstanding negotiations and disputes. Only when settlements cannot be
resolved through negotiation is the court involved. Finally, the record
management system is used by the project manager in keeping records of all
procurement.
There are two main outputs for the close procurement process:
1. Close procurementsThis is a formal way of closing the agreement with the
seller. This involves a formal written notice given by the procurement team to
the seller confirming the end of the contract. Details of formal procurement
closure are always included in the procurement plan.

2. Organizational process assets and updatesThe procurement file, deliverable

acceptance, and lessons learned are some of the organizational process that
might be updated.
While exploring the knowledge area of procurement, we should realize that the
words contract and agreement were used interchangeably and in the context
of this article mean the same thing. We should also agree that procurement
management can also be referred to as contract or agreement management.
In the light of the above, I think we should explore the word contract from a more
detailed perspective. This would involve the definition of various types of
contracts and who bears the risk in the contractual agreement.
A contract, as earlier defined, is a legal binding between two or more voluntary
parties. There must be an offer and an acceptance before a contract can be
defined as a legal entity. In procurement scenarios, the seller typically treats the
contract as a project, especially when the acquisitions are not for shelf materials,
goods, or common products.
When negotiating a contract, both the seller and the buyer often attempt to
minimize their exposure to risk by shifting most of the risk onto the other party.
The two extreme forms of contracts are the cost reimbursable and firm fixed price
contract. The cost reimbursable contract involves the seller paying for all the
legitimate costs incurred for the completion of the contract. In this type of contract
the buyer bears most or all of the risk involved. On the other hand, for the fixed
price contract the seller bears all risk incurred during the contract as the prices

are not negotiable after an agreement has been reached.

Some variations of cost reimbursable and fixed price contracts are shown below:
Cost plus fixed fee contractHere the seller is reimbursed for all allowable costs
and a fixed fee, which is a percentage of the initial estimated cost is paid to the
seller. Under no conditions does the percentage or the estimated cost change
unless there is a change in the procurement scope.

Cost plus incentive fee contractThe seller is reimbursed for all allowable costs
and also receives pre-determined incentive fees upon achieving milestones as
described in the contract.

Fixed price incentive fee contractHere a fixed priced is given for the contract,
but financial incentives are tied to achieving good matrices as a form of
performance motivation for the seller.

Fixed price with economic price adjustment contractThis contract type is used
when a contract spans a considerable period of years (long-term contracts). A
predefined fixed price can then be adjusted, based on certain economic
conditions that occurred over the years such as inflation or a change in the foreign
exchange rate.

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Figure 5 - The two extremes on a spectrum of risk

Understanding the various types of contracts and when to use them is very
important for any project manager. While you might not have to make huge
financial decisions like a CFO, you will have to make buying decisions as a project
manager and you should be familiar with the various contract types and their
implications on the project budget.
3 QUESTION 2
Trends in modern Management
In recent years, major developments in management reflect the acceptance to
various degrees of the following elements: (1) the management process
approach, (2) the management science and decision support approach, (3) the
behavioural science approach for human resource development, and (4)
sustainable competitive advantage. These four approaches complement each
other in current practice, and provide a useful groundwork for project
management. Project managers should be aware of the strategic position of their
own organization and the other organizations involved in the project. The project
manager faces the difficult task of trying to align the goals and strategies of these
various organizations to accomplish the project goals.
Major Opportunities for Improvement
FINANCING: The Channel Tunnel project had to be financed from private
sources with no public finding to aid or guarantee the loans. This put major
pressure on the project and increased the risk involved.
CONTRACT AGREEMENT: A major contractual downfall that influenced the
success of the Chunnel construction was the contractual errors that were made
in the estimates and risk allocation method. These errors added to an additional
cost of US$ 2.25 billion. Instead of establishing specific criteria for the Chunnel
Tunnels contractors in their initial contract, later adjustments had to be made to
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the contract to ensure the quality and reliability of their work. This merging of
contract criteria led to the contract being very complex.
MANAGEMENT TEAM: The Chunnel project management team did not utilise
their resources and technology properly due to lack of scope definition. Very slow
decision-making processes during the Chunnel Project construction lead to
situations where significant budget over-expenditures occurred. Not only was this
a result of poorly managed finances, but it was also partially due to an out-ofcontrol amount of changes made to the management team.
Software like AUTOCAD, SOLIDWORKS and RS could have helped the
Chunnel Tunnel Project throughout each stage of the project life cycle, which are
Conception, Definition and Execution. The first two software uses a mouse-driven
graphical user interface to enable engineers and designers to visualize and
communicate 3D models of manufactured objects. SolidWorks works extremely
well for mechanical design and similar industries requiring precise definition of
3D shapes and their design intent.
RS could have contributed more because, is a program for 3D analysis of
geotechnical structures for civil and mining applications. Applicable for both rock
and soil (RS3 = Rock and Soil 3-dimensional analysis program), RS is a general
purpose finite element analysis program for underground excavations, tunnel and
support design, surface excavation, foundation design, embankments,
consolidation, groundwater seepage and more.
Those software mentioned above are only a small part of the contribution of the
technologies we have today could have helped in the project. Today the field of
computer science and graphic design is extremely supported by technological
resources that can provide an entire project to reduce costs, time and faults.

4 REFERENCES
Barnett, T. (2015) Management Functions. 2nd edn. Advameg, Inc. [Online].
Available
at:
http://www.referenceforbusiness.com/management/LogMar/Management-Functions.html (Accessed: 12 Apr 2015).
PMI (2012), A Guide to the Project Management Body of Knowledge, 5th Ed.
A Guide to the Project Management Body of Knowledge (PMBOK Guide). Forth
Edition ed. [S.l.]: Project Management Institute.

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