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NED University of
Engineering & Technology,
Karachi
Sunday March 12, 2017
Procurement Management?
• Do you procure for your projects?
• Do you have practical experience managing and
controlling procurements?
• Processes necessary to purchase or acquire
products, services, or results needed from outside
the organization or project team
• Seller may be identified as contractor,
subcontractor, vendor, designer, service provider, or
supplier, consultant, or sub‐consultant.
• Buyer may be identified as client, customer,
employer, prime contractor, general contractor,
contractor, service requestor, or purchaser.
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Procurement Management and PMP ‐ Terminology
• Contract vs Agreement
• Buyers vs Sellers
• Centralized vs Decentralized Contracting
• Interpretation
• Make‐or‐Buy Decisions
• Single Source vs Sole Source
• Request for Proposal vs Request for Quotation
• Invitation to Bid
• Confidentiality vs Nondisclosure Agreement
• Selection Criteria
• Incentive
• Authority vs Assignment
• Conflict vs Termination
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Procurement Management and PMP ‐ Terminology
• Cost
• Profit
• Price
• Target Price
• Final Price
• Ceiling Price
• Sharing Ratio
• Standard Contract
• Special Conditions or Provisions
• Breach/Default
• Force Majeure
• Notice
• Termination
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Project Quality Management in PMP
• Chapter 12
• 9th Knowledge Area
• Total of four processes
12.1 Plan Procurement Management
12.2 Conduct Procurements
12.3 Control Procurements
12.4 Close Procurements
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Inputs from other Knowledge Areas
• 2: Organizational Influences and Project Life Cycle
2.1.4 Organizational Process Assets
2.1.5 Enterprise Environmental Factors
• 4: Integration Management
4.2 Develop Project Management Plan – Project Management Plan
4.3 Direct and Manage Project Work – Deliverables and Work Performance Data
4.4 Monitor and Control Project Work – Work Performance Reports
4.5 Perform Integrated Change Control – Approved Change requests
• 5: Scope Management
5.2 Collect Requirements – Requirements Documentation
• 6: Time Management
6.4 Estimate Activity Resources – Activity Resource Requirement
6.6 Develop Schedule – Project Schedule
• 7: Cost Management
7.2 Estimate Costs – Activity Cost Estimates
• 11: Risk Management
11.2 Identify Risks ‐ Risk Register
• 13: Stakeholder Management
13.1 Identify Stakeholders – Stakeholder Register
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12.1 Plan Procurement Management
• Process of documenting project procurement decisions, specifying the approach,
and identify potential sellers.
• Key benefit – determines if to acquire outside support, and if yes what, how, how
much, and when.
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Types of Contracts
• Fixed Price or Lump Sum Contracts
‐ Fixed Price (FP) or Firm Fixed Price (FFP)
‐ Fixed Price Incentive Fee (FPIF)
‐ Fixed Price Award Fee (FPAF)
‐ Fixed Price with Economic Price Adjustment Contracts (FP‐EPA)
‐ Purchase Order
• Cost Reimbursable (CR) Contracts
‐ Cost Plus Fee (CPF)
‐ Cost Plus Fixed Fee (CPFF)
‐ Cost Plus Percent of Costs (CPPC)
‐ Cost Plus Incentive Fee (CPIF)
‐ Cost Plus Award Fee (CPAF)
• Time and Material (T&M) or Unit Price Contracts
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Types of Contracts and Risks
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Procurement Management Plan
• Procurement Statement of Work
‐ Performance ‐ Functional ‐ Design
• Procurement Documents
• Source Selection Criteria
‐ Understanding of Need ‐ Technical Capability ‐ Risk
‐ Overall or life‐cycle cost ‐ References ‐ Make‐or‐Buy Decisions
‐ Management Approach ‐ Technical Approach ‐ Production Capacity
‐ Warranty, Bonds, ‐ Financial Capacity ‐ Business Size and Type
‐ Past Performance of Seller
• Change Requests
• Project Documents updates
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12.2 Conduct Procurements
• Process of obtaining seller responses, selecting a seller, and awarding a contract.
• Key benefit – provides alignment of internal and external stakeholder expectations
through established agreements.
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12.2 Conduct Procurements – Tools & Techniques
• Bidder Conferences
• Proposal Evaluation Techniques
• Independent Estimates
• Expert Judgment
• Advertising
• Analytical Techniques
• Procurement Negotiations
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12.2 Conduct Procurements – Outputs
• Selected Sellers
Sellers identified as eligible and competitive range
• Agreements
Complete contractual documents including all information related to delivery of project, product,
or service
• Resource Calendars
The quantity and availability of contracted resources and dates on which these resources will be
available
• Change Requirements
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12.3 Control Procurements
• Process of managing procurement relationships, monitoring contract
performance, and making changes and corrections to contracts as appropriate.
• Key benefit – ensures both seller and buyer performance meet requirements
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12.3 Control Procurements – Tools & Techniques
• Contract Change Control System
Process by which procurement can be modified. Includes paperwork, tracking
systems, dispute resolution, and approval levels
• Procurement Performance Reviews
• Inspections and Audits
• Performance Reporting
Provides management with information on how effectively seller is meeting
contractual requirements
• Payment Systems
• Claims Administration
Contested changes when project teams cannot agree.
• Records Management System
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12.4 Close Procurements
• Process of completing each procurement.
• Key benefit – closes procurements so parties depart on a good note and
documents agreements and related information for company’s future references.
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12.4 Close Procurements – Tools & Techniques
• Procurement Audits
A structured review of the procurement process to identify successes and failures
• Procurement Negotiations
Closing the final payments; if negotiations fails then Alternate Dispute Resolution methods (like
Arbitration) is used.
• Records Management System
All procurement documents are archived through this system.
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