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NED University of
Engineering & Technology,
Karachi
Sunday March 24, 2019
Agenda
• Chapter 6 Schedule Management (3rd Knowledge Area)
• Chapter 7 Cost Management (4th Knowledge Area)
• Chapter 8 Quality Management (5th Knowledge Area)
• Chapter 12 Procurement Management (9th Knowledge Area)
Date Topic
March 17, 2019 Schedule Management
March 17, 2019 Quality Management
March 24, 2019 Quality Management
March 24, 2019 Procurement Management
March 24, 2019 Cost Management
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Procurement Management?
• Processes necessary to purchase or acquire products,
services, or results needed from outside the project
team or organization
• 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,
consultant, prime contractor, general contractor,
contractor, service requestor, or purchaser.
• There can be significant legal obligations and penalties.
• Can be as simple as buying office supplies or as complex as multi‐year international
construction contract or service contract
• Most organizations document policies and procedures specifically defining
procurement rules and specifying who has authority to sign and administer such
agreements on behalf of the organization.
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Procurement Management Terminology
• Make‐or‐Buy Decisions
• Invitation to Bid
• Qualification Criteria
• Centralized vs Decentralized Contracting
• Standard Contract
• Incentive
• Authority vs Assignment
• Conflict vs Termination
• Single Source vs Sole Source
• Cost
• Profit
• Price
• Target Price
• Final Price
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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
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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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12.1 Plan Procurement Management ‐ Outputs
• Procurement Management Plan includes
How procurement will be coordinated with other project aspects, such as project schedule
development and control processes;
Timetable of key procurement activities;
Procurement metrics to be used to manage contracts;
Stakeholder roles and responsibilities related to procurement, including authority and constraints of
the project team when the performing organization has a procurement department;
Constraints and assumptions that could affect planned procurements;
The legal jurisdiction and the currency in which payments will be made;
Determination of whether independent estimates will be used and whether they are needed as
evaluation criteria;
Risk management issues including identifying requirements for performance bonds or insurance
contracts to mitigate some forms of project risk; and
Prequalified sellers, if any, to be used
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12.1 Plan Procurement Management ‐ Outputs
• Procurement Strategy
‐ Delivery Methods ‐ Contract Payment Types ‐ Phases
• Bid Documents
• Procurement Statement of Work
‐ Performance ‐ Functional ‐ Design
• Source Selection Criteria
‐ Understanding of Need ‐ Technical Capability ‐ Risk
‐ Life‐cycle cost ‐ References ‐ Past Performance of Seller
‐ Management Approach ‐ Technical Approach ‐ Production Capacity
‐ Warranty, Bonds, ‐ Financial Capacity ‐ Business Size and Type
‐ Delivery Dates
• Make‐or‐Buy Decisions
• Independent Cost Estimates
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Types of Contracts
• Fixed Price or Lump Sum Contracts
‐ Firm Fixed Price (FP or FFP)
‐ Fixed Price Incentive Fee (FPIF)
‐ Fixed Price with Economic Price Adjustment Contracts (FP‐EPA) or Fixed Price with Escalation
‐ Purchase Order
• Cost Reimbursable (CR) Contracts
‐ 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) Contracts
• Purchase Orders (POs)
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Types of Contracts and Risks
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Source Selection Analysis
• Least cost: For procurements of a standard or routine nature where well‐established
practices and standards exist.
• Qualifications only: Applies when the time and cost of a full selection process would
not make sense because the value of the procurement is relatively small.
• Quality‐based/highest technical proposal score: The selected firm is asked to submit
a proposal with both technical and cost details and is then invited to negotiate the
contract if the technical proposal proves acceptable.
• Quality and cost‐based: allows cost to be included as a factor in the seller selection
process.
• Single/Sole source: The buyer asks a specific seller to prepare technical and financial
proposals, which are then negotiated.
• Fixed budget: Requires disclosing the available budget to invited sellers in the RFP
and selecting the highest‐ranking technical proposal within the budget.
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Comparison of Procurement Documentation
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12.2 Conduct Procurements
• Process of obtaining seller responses, selecting a seller, and awarding a contract.
End results of the process are established agreements including formal contracts.
• Key benefit – selects a qualified seller and implements legal agreement for delivery.
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12.2 Conduct Procurements – Tools & Techniques
• Expert Judgment
Proposal evaluation;
Technical or subject matter;
Relevant functional areas such as finance, engineering, design, development, supply chain
management, etc.;
Industry regulatory environment;
Laws, regulations, and compliance requirements; and
Negotiation.
• Advertising
• Bidder Conferences
• Data Analysis
Proposal Evaluation
• Interpersonal and Team Skills
Negotiations
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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
• Expert Judgment
• Claims Administration
Changes where the buyer and seller cannot reach an agreement on compensation for the
change OR cannot agree that a change has occurred ‐ are called claims.
When claims cannot be resolved, they become disputes and finally appeals.
Claims are documented, processed, monitored, and managed throughout the contract life
cycle, usually in accordance with the terms of the contract.
If the parties themselves do not resolve a claim, it may have to be handled in accordance with
alternative dispute resolution (ADR) or legal process.
Settlement of all claims and disputes through negotiation is the preferred method.
• Data Analysis
Performance Reviews
Earned Value Analysis
Trend Analysis
• Inspections
• Audits
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