Planning for Contracting Pmbok Section

Now that the project manager has made a decision on what needs to be procured, it's time to plan for the actual contracting. Plan contracting, as the PMBOK puts it, is the process of soliciting the vendors to respond to the requests to purchase goods or services. Yes, I said, "solicit." Gasp! You won't find the word solicit in the third edition of the PMBOK because that word could have a naughty meaning. Come on, we're all adults. We're just talking about buying goods and services—just not that service. In order to plan for contracting, the project management team needs four things:

• Procurement management plan This subsidiary plan sets out the methodologies and expectations of procurement within the performing organization.

• Contract statement of work This document provides detailed information on what the seller will be providing for the performing organization. Recall that this document allows the seller to determine if he or she can provide the product and meet the requirements of the project team.

• Make-or-buy decision The make-or-buy decision tells the project manager what the conditions have to be to make or buy from a vendor.

• Project management plan Throughout the project management plan, there are planning outputs that affect the plan-contracting process. Consider the schedule, resource requirements, quality issues, and one of the most important topics: risk. When it comes to risk, consider the risk register and its information about each identified project risk and any transference risk response that will result in a risk-related contract.

Completing the Plan-Contracting Process

The plan-contracting process relies on the outputs of procurement planning. The procurement management plan will guide the process as the project team has planned, as the performing organization requires, or under the guidance of a procurement office within the performing organization. There are two primary tools used for plan contracting:

• Standard forms Within the performing organization, there may be different standardized forms for contracts, descriptions of procurement items, bid documents, and other procurement-related documents. The project manager also considers nondisclosure agreements, proposal evaluation checklists, and any standardized documents to aid in the procurement process.

• Expert judgment Expert judgment may be needed to review and help the project manager select the best source for the procured product.

Creating the Procurement Documents

The primary outputs of the plan-contracting process are the procurement documents. These documents guide the relationship between the buyer and the seller. Communication between the buyer and the seller should always be specific as to the requirements and expectations of the seller. In initial communications, especially when requesting a price or proposal, the buyer should include the contract statement of work, relevant specifications, and, if necessary, any nondisclosure agreements (NDAs). Requests from buyers to sellers should be specific enough to give the seller a clear idea of what the buyer is requesting, but general enough to allow the seller to provide viable alternatives.

Here are some specific documents the project manager—and the PMP and CAPM candidate—should be familiar with:

• Invitation for bid (IFB) From buyer to seller. Requests the seller to provide a price for the procured product or service.

• Request for quote (RFQ) From buyer to seller. Requests the seller to provide a price for the procured product or service.

• Request for proposal (RFP) From buyer to seller. Requests the seller to provide a proposal to complete the procured work or to provide the procured product.

• Purchase order (PO) A purchase order is a form of a unilateral contract that the buyer provides to the vendor which shows the purchase has been approved by the buyer's organization.

• Bid From seller to buyer. Price is the determining factor in the decisionmaking process.

• Quotation From seller to buyer. Price is the determining factor in the decision-making process.

• Proposal From seller to buyer. Other factors, such as skill sets, reputation, or ideas for the project solution; may be used in the decision-making process.

Creating Evaluation Criteria

Another output of the plan-contracting process is the evaluation criteria. This is used to rate and score proposals from the sellers. In some instances, such as with a bid or quote, the evaluation criteria are focused just on the price the seller offers. In other instances, such as a proposal, the evaluation criteria can be multiple values: experience, references, certifications, and more. The project management team can use any combination of the following questions to help determine which vendor should be selected to supply the project's procurement needs:

• Does the vendor understand the project needs?

• What's the overall cost of the project?

• What's the life cycle cost of the deliverable?

• Does the seller have the technical capability to complete the deliverable?

• What's the vendor's technical approach to the project's needs?

• What's the vendor's management approach to creating the deliverable?

• Does the seller have the financial backing to deliver as promised?

• Will the vendor have sustained capacity and interest in the project's deliverable for future assignments?

• What is the vendor's business model? Is it a small business, woman-owned, or disadvantaged business that may qualify for the contract as defined in some governmental agencies?

• Can the vendor provide references?

• Who retains the intellectual and proprietary property rights?

These questions—and others—can help the project management team make the best decision when it comes to choosing which vendor should support the project. For your PMP or CAPM exam, always choose the vendor that offers the best solution for the project.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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