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Procurement Management-PMBOK 4TH Edition

  1. Processes:
  • Plan Procurements
  • Conduct Procurements
  • Administer Procurements
  • Select Sellers
  • Close Procurements
  1.  All requirements must be stated in the contract. Contracts are formal documents which are legally binding.
  2. If it's in the contract, it must be done. If it's not in the contract, it can only be done if a change order is signed by both parties.
  3. Most organizations have contract managers who are primarily responsible for contracts. They may also be called procurement officers or contract officers.
  4. Project managers must help contract managers by ensuring that the contract contains all product requirements and all project management requirements (status reports, meeting attendance, etc.).
  5. In some companies, contract management staff are centralized; in others, they are distributed. The advantages and disadvantages of these approaches are analagous to functional vs. projectized organizations.
  6. Inputs to procurement management include enterprise environmental factors, organizational process assets, baselines for project scope, schedule and cost, and risk register.
  7. Make or buy analysis: buying may reduce triple constraint risk, but consider whole costs of buying, including costs of managing procurement. Building may be appropriate if you have extra capacity or want to maintain control.
  8. A "buy or lease" problem is similar to a "make or buy" problem - consider all costs and see where it becomes more expensive to lease.
  9. Contract types: Fixed price, time and materials, cost reimburseable.
  10. Fixed price: the cost of the contract is set when the contract is signed; the risk of higher costs is borne by the seller. A purchase order is an example of a fixed price contract. Sometimes fixed price contracts include incentive fees for early completion or price adjustments over time.
  11. Time and materials: has elements of fixed price (fixed hourly rate) and cost reimbursable (total costs are unknown).
  12. Cost reimbursable: seller's costs are reimbursed plus an additional amount, usually a percentage of cost. Research projects where there are many unknowns are well suited to cost reimbursable contracts.
  13. Other examples of cost reimbursable contracts:
  14. o cost plus fixed fee (fee fixed so seller not rewarded for cost overrun; fee only changes with approved change order).
  15. o cost plus percentage of costs/cost plus fee - buyer pays all costs plus a percentage of costs or a fee
  16. o cost plus incentive fee (bonus for beating performance objectives)
  17. o cost plus award fee (bonus determined in advance and disbursed over time).
  18. Contract type selection determines how the risk will be distributed between the buyer and the seller. Fixed price is most risky to the seller; cost reimbursable is most risky to the buyer.
  19.  Contract Statement of Work is critical. Having a complete statement of work prevents problems down the road.
  20. Contract SOW goes with contract type; SOW for FP will be very complete and focus on design of solution; SOW for CR will leave room for interpretation and will focus on the functional and performance attributes of the desired product - the design will be left up to the seller.
  21. Procurement Management Plan describes how procurement will be planned, managed and executed.
  22. Plan Contracting: Creating procurement documents (RFP, RFQ, IFB, etc.)
  23. Procurement documents and contract types (generally) go together: RFPs are well suited for CR contracts, RFQs are well suited for FP contracts.
  24. IFBs are generally used in government contracts.
  25. Request Seller Responses: Get the procurement documents to the sellers, let them respond. Note that sometimes the sellers are pre-qualified in this process.
  26. Select Sellers: try to make evaluation criteria measurable to minimize halo effect, personal bias, etc.
  27. Contract SOW is the main part of the contract, but not the only part. All important terms and conditions must be specified in the contract.
  28. Legal contract = offer, acceptance, consideration, legal capacity, legal purpose.
  29. Contract Management Plan: specific to one contract, talks about contract administration, contains a list of major todo items. This is an output of Select Sellers for significant purchases or acquisitions.
  30. Contract Administration: Making sure both parties adhere to the contract. Extra work is required in T & M and CR contracts to be sure invoices are reasonable.
  31. The number of people who may speak to the seller may be limited. The number of people who can change the contract is almost certainly limited to the contract administrator; the project manager probably doesn't have the authority.
  32. Contract Change Control System is the process for modifying the contract. If there are too many changes, it may be wise to cancel the original contract and make a new one (both parties must agree).
  33. Claims: a claim in a seller's change request - the seller says the buyer did something that was harmful, and requesting compensation.
  34. Records management is important in contract administration - correspondance and logs must be kept in a way that makes them accessible if they are need in the future.
  35. Contract Closure: may be when the contract ends or it may be when the contract is terminated prior to the completion of work.
  36. Contract closure is prior to administrative closure and only occurs once at the end of the contract. (Administrative closure may be done at the end of every phase.)

Edited Fri, Feb 5, 2010 2:27 AM

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