Elements of a Procurement Contract Award

You might recall that a contract is a legally binding agreement between two or more parties, typically used to acquire goods or services. Contracts have several names, including agreements, memorandums of understanding (MOUs), subcontracts, and purchase orders.

The type of contract you'll award will depend on the product or services you're procuring and your organizational policies. I talked about the types of contracts—fixed price, cost reimbursable, and so on—in Chapter 6 if you need a refresher. If your project has multiple sellers, you'll award contracts for each of them.

The contract should clearly address the elements of the SOW, time period of performance, pricing and payment plan, acceptance criteria, warranty periods, dispute resolution procedures, and so on.

Since contracts are legally binding and obligate your organization to fulfill the terms, they'll likely be subject to some intensive review, often by several different people. Be certain you understand your organization's policies on contract review and approval before proceeding.

Contracts, like projects, have a life cycle of their own. You might encounter questions on the exam regarding the stages of the contract life cycles, so we'll look at this topic next.

Contract Life Cycles

The contract life cycle consists of four stages:

■ Requirement

■ Requisition

■ Solicitation

These stages are closely related to the following Project Procurement Knowledge Area processes from the PMBOK® Guide:

■ Plan Procurements

■ Conduct Procurements

A description of each of the contract life cycles follows.

Requirement The requirement stage is the equivalent of the Plan Procurements process I discussed in Chapter 7. You establish the project and contract needs in this cycle, and you define the requirements of the project. The SOW defines the work of the project, the objectives, and a high-level overview of the deliverables. You develop a work breakdown structure (WBS), a make-or-buy analysis takes place, and you determine cost estimates.

The buyer provides the SOW to describe the requirements of the project when it's performed under contract. The product description can serve as the SOW.

Requisition In the requisition stage, the project objectives are refined and confirmed. Solicitation materials such as the request for proposals (RFP), request for information (RFI), and request for quotations (RFQ) are prepared during this phase. Generally, the project manager is the one responsible for preparing the RFP, RFI, and RFQ. A review of the potential qualified vendors takes place, including checking references and reviewing other projects the vendor has worked on that are similar to your proposed project. Requisition occurs during the Plan Procurements process.

Solicitation The solicitation stage is where vendors are asked to compete for the contract and respond to the RFP. You can use the tools and techniques of the Conduct Procurements process during this contract stage. The resulting output is the proposals. Solicitation occurs during the Conduct Procurements process.

Award Vendors are chosen and contracts are awarded and signed during the award stage. The Conduct Procurements process is the equivalent of the award phase.

The project manager—or the selection committee, depending on the organizational policy— receives the bids and proposals during the award phase and applies evaluation criteria to each in order to score or rank the responses. After ranking each of the proposals, an award is made to the winning vendor, and the contract is written.

Once you have a contract, someone has to administer it. In large organizations, this responsibility will fall to the procurement department. The project manager should still have a solid understanding of administering contracts because that person will work with the procurement department to determine the satisfactory fulfillment of the contract.

Now we're going to switch courses and discuss the quality assurance aspects of the project. We discussed the Plan Quality process back in Chapter 7, which prepared us for the Perform Quality Assurance process that's conducted during the Executing process group. We'll look at it next.

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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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