Chapter Project Procurement Management

Project Procurement Management includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team to perform the work. This chapter presents two perspectives of procurement. The organization can be either the buyer or seller of the product, service, or results under a project.

Project Procurement Management includes the contract management and change control processes required to develop and administer contracts or purchase orders issued by authorized project team members.

Project Procurement Management also includes administering any contract issued by an outside organization (the buyer) that is acquiring the project from the performing organization (the seller), and administering contractual obligations placed on the project team by the contract.

Table 12-1 provides an overview of the Project Procurement Management processes which include the following:

12.1 Plan Procurements—The process of documenting project purchasing decisions, the approach, and identifying potential sellers.

12.2 Conduct Procurements—The process of obtaining seller responses, selecting a seller, and awarding a contract.

12.3 Administer Procurements—The process of managing procurement relationships, monitoring contract performance, and making changes and corrections as needed.

12.4 Close Procurements—The process of completing each project procurement.

These processes interact with each other and with the processes in the other Knowledge Areas. Each process can involve effort from one or more persons or groups of persons, based on the requirements of the project. Each process occurs in one or more project phases, if the project is divided into phases. Although the processes are presented here as discrete components with well-defined interfaces, in practice they overlap and interact in ways not detailed here. Process interactions are discussed in detail in Chapter 3, Project Management Processes.

The Project Procurement Management processes involve contracts that are legal documents between a buyer and a seller. A contract represents a mutually binding agreement that obligates the seller to provide the specified products, services, or results, and obligates the buyer to provide monetary or other valuable consideration. A contract is a legal relationship subject to remedy in the courts. The agreement can be simple or complex, and can reflect the simplicity or complexity of the deliverables and procured effort.

A procurement contract will include terms and conditions, and may incorporate other items that the buyer relies upon to establish what the seller is to perform or provide. It is the project management team's responsibility to make certain that all procurements meet the specific needs of the project while adhering to organizational procurement policies. Depending upon the application area, a contract can also be called for example, an agreement, an understanding, a subcontract, or a purchase order. Most organizations will have documented policies and procedures specifically defining the procurement rules and specifically prescribing who has delegated authority to sign and administer such agreements on behalf of the organization.

Although all project documents are subject to some form of review and approval, the legally binding nature of a contract usually means that it will be subjected to a more extensive approval process. In all cases, the primary focus of the review and approval process ensures that the contract language describes the products, services, or results that will satisfy the identified project need.

The project management team may seek support early from specialists in the disciplines of contracting, purchasing, law, and technical. Such involvement can be mandated by an organization's policies.

The various activities involved in the Project Procurement Management processes form the life cycle of a contract. By actively managing the contract life cycle and carefully wording the terms and conditions of the procurements, some identifiable project risks can be avoided or mitigated or transferred to a seller. Entering into a contract for products or services is one method of allocating the responsibility for managing or sharing potential risks.

A complex project can involve managing multiple contracts or subcontracts simultaneously or in sequence. In such cases, each contract life cycle can end during any phase of the project life cycle. Project Procurement Management is discussed within the perspective of the buyer-seller relationship. The buyer-seller relationship can exist at many levels on any one project, and between organizations internal to and external to the acquiring organization.

Depending on the application area, the seller can be called a contractor, subcontractor, vendor, service provider, or supplier. Depending on the buyer's position in the project acquisition cycle, the buyer can be called a client, customer, prime contractor, contractor, acquiring organization, governmental agency, service requestor, or purchaser. The seller can be viewed during the contract life cycle first as a bidder, then as the selected source, and then as the contracted supplier or vendor.

The seller will typically manage the work as a project if the acquisition is not just for shelf material, goods, or common products. In such cases:

• The buyer becomes the customer, and is thus a key project stakeholder for the seller.

• The seller's project management team is concerned with all the processes of project management, not just with those of this Knowledge Area.

• Terms and conditions of the contract become key inputs to many of the seller's management processes. The contract can actually contain the inputs (e.g., major deliverables, key milestones, cost objectives), or it can limit the project team's options (e.g., buyer approval of staffing decisions is often required on design projects).

This chapter assumes that the buyer of items for the project is within or assigned to the project team and that the sellers are organizationally external to the project team.

It also assumes that a formal contractual relationship will be developed and exist between the buyer and the seller. However, most of the discussion in this chapter is equally applicable to noncontractual inter-divisional work, entered into with other units of the project team's organization.

Table 12-1. Project Procurement Management Overview

Project Procurement Management Overview

Inputs

1. Procurement documents

2. Procurement management plan

3. Selected sellers

4. Performance reports

5. Approved change requests 6vWork performance data

Tools & Techniques

1. Contract change control system

2. Procurement performance reviews

3. Inspections and audits

4. Performance reporting

5. Payment systems

6. Claims administration

1. Records management system

Outputs

1. Procurement documentation

2. Organizational process asset updates

3. Change requests

4. Project management plan updates

1.

Inputs

). Scope baseline

2. Stakeholder requirements

documentation

3. Teaming agreements

4. Risk register

5. Risk-related contract

decisions

6. Activity resource

requirements

7. Project schedule

8. Activity cost estimates

9 Cost performance baseline

lO.Enterprise environmental

factors

11 Organizational process assets

2.

Tools & Techniques

1. Make or buy analysis

2. Expert judgment

3. Contract types

3,

Outputs

1. Procurement management

plan

2. Procurement statements of

work

3. Make-or-buydecisions

4. Change requests

5. Procurement document

packages

G. Source selection criteria

1. Inputs

1. Procurement management plan

2. Procurement document package

3. Source selection criteria

4. Qualified seller list

5. Seller proposals

6. Project documents

7 Make or buy decisions 8. Teaming agreements 3. Organizational process assets

2. Tools & Techniques

1. Bidder conferences

2. Proposal evaluation techniques

3. Independent estimates

4. Procurement negotiations

5. Expert judgment

6. Advertising

7. Internet search

3. Outputs

1. Selected sellers

2. Procurement award

3. Resource calendars

4. Change requests

5. Project management plan updates

6. Project document updates

13.4 Close Procurements

1.

Inputs

1. Procurement management

plan

2. Procurement documentation

2,

Tools & Techniques

1. Procurement audits

2. Negotiated settlements

3. Records management system

3,

Outputs

1, Closed procurements

2. Organizational process asset

updates

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Project Management Made Easy

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