Requirement Cycle

The first step in the procurement process is the definition of project, specifically the requirement. This is referred to as the requirement cycle and includes the following:

• Defining the need for the project

• Development of the statement of work, specifications, and work breakdown structure

• Performing a make or buy analysis

• Laying out the major milestones and the timing/schedule

• Cost estimating, including life-cycle costing

• Obtaining authorization and approval to proceed

Previously, in Chapter 11, we discussed the statement of work. The SOW is a narrative description of the work to be accomplished and/or the resources to be supplied. The identification of resources to be supplied has taken on paramount importance during the last ten years or so. During the 1970s and 1980s, small companies were bidding on mega jobs only to subcontract out more than 99% of all of the work. Lawsuits were abundant and the solution was to put clauses in the SOW requiring that the contractor identify the names and resumes of the talented internal resources that would be committed to the project, including the percentage of their time on the project.

Specifications are written, pictorial, or graphic information that describe, define, or specify the services or items to be procured. There are three types of specifications:

• Design specifications: These detail what is to be done in terms of physical characteristics. The risk of performance is on the buyer.

• Performance specifications: These specify measurable capabilities the end product must achieve in terms of operational characteristics. The risk of performance is on the contractor.

• Functional specifications: This is when the seller describes the end use of the item to stimulate competition among commercial items, at a lower overall cost. This is a subset of the performance specification, and the risk of performance is on the contractor.

There are always options in the way the end item can be obtained. Feasible procurement alternatives include make or buy, lease or buy, buy or rent, and lease or rent. Buying domestic or international is also of critical importance, especially to the United Auto Workers Union. Factors involving the make or buy analysis are shown below:

• The make decision

• Easy integration of operations

• Utilize existing capacity that is idle

• Maintain direct control

• Maintain design/production secrecy

• Avoid unreliable supplier base

• Stabilize existing workforce

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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