(4) – PROCUREMENT
PLANNING
S# Inputs Tools & Techniques Outputs 39 Plan Procurements: The process of documenting project purchasing (make-or-buy) decisions, specifying the approach, and identifying potential sellers. (How, What, How Much and When). * Buyers Risk (from Highest to Lowest): CPPC – CPFF – CPAF – CPIF – T&M – FPEPA – FPIF – FFP. See Notes for various Contract Types . # Procurement SOW should include all of the scope of the work to be done by the seller. It provides the potential sellers the deliverables, materials, specifications, milestones, requirements, acceptance criteria, and any other characteristics. # Procurement Documents: RFI (Request for Information), RFP (Request for Tender/Proposal), IFB (Invitation for Bid), RFQ (Request for Quotation). * RFP or IFB used for 1. Single Price, 2.High $ Value, 3. Standardized * RFQ used for 1. Per Item/Hour Price, 2. Lower $ Value, 3. May be used to develop info in RFP 1. Make-or-Buy Analysis 1. Procurement Management Plan 1. Requirements Documentation 2. Scope Baseline 2. Procurement Statement of Work 2. Contract Types (FP, T&M, Cost Reimbursible/CR) 3. Activity Resource Requirements 3. Expert Judgement (Performance/Functional/Design) 4. Project Schedule 3. Procurement Documents (RFI, RFP, IFB, RFQ) 5. Activity Cost Estimates • RFP - Detailed proposal on how work will be accomplished, resumes, etc 6. Cost Performance Baseline (Budget) • IFB - just request a total price to do all the work 7. Risk Register • RFQ - request a price quote per item, hour, meter, etc 8. Risk-Related Contract Decisions (Plan Risk Resp)
EXECUTING
9.Teaming Agreements (MSA / Partnership / Joint Venture) 4. Make-or-Buy Decisions 5. Source Selection Criteria 10. EEF 11. OPA 6. Change Requests 40 Conduct Procurements: The process of distributing procurement docs, obtaining seller responses, evaluating bids & selecting seller/s, and awarding a contract to the selected seller/s. * It carries out the Procurement Management Plan, select one or more sellers and award the procurement, usually in the form of a Contract. Solicitation is another name for the stage where vendors are asked to compete for contract and respond to RFP. # Proposal Evaluation Techniques: Weighing System, Screening System, Past Performance History, Presentations. Fiat Accompli is a negotiation tactic ("This was already decided, and cannot be changed now"). 1. Selected Sellers 1. Project Management Plan (Procurement Mgmt Plan) 1. Advertising 2. Procurement Documents 2. Procurement Contract Award 2. Internet Search 3. Make-or-Buy Decisions 3. Bidder (Vendor/Pre-bid/Contractor) Conference 3. Resource Calendars (Also o/p of Acquire Proj Team)
M&C
4. Source Selection Criteria 4. Proposal Evaluation Techniques (4) 4. Change Requests 5. Qualified Sellers' List 5. Independent Estimates ('Should-Cost' Estimate) 5. Project Management Plan Updates 6. Seller Proposal 6. Procurement Negotiations 6. Project Document Updates 9.Teaming Agreements (MSA / Partnership / Joint Venture) 7. Expert Judgement 8. Project Documents 9. OPA 41 Administer Procurements: The process of managing procurement relationships, monitoring contract performance, and making changes and corrections as needed. * The buyer & seller review the contract & the work results to ensure that the results match the contract. * Manages any early terminations of the contract work (for Cause, Convenience or Default) in accordance with the Termination Clause in contract. # TT6: Claims can also be called as disputes or appeals; and are usually addressed thru Contract Change Control system. The best way to settle a claim is thru negotiation; if not, use of dispute resolution process (arbitration / litigation) specified in contract. # TT7: Records Management System is part of PMIS and assists in archiving, indexing and retrieval of contract documentation and correspondance. 1. Inspections and Audits 1. Project Management Plan 1. Procurement Documentation (•) 2. Procurement Documents (includes contract, schedules, change reqs, work 2. Procurement Performance Reviews performance info (eg., deliverables, performance reports, 3. Contract 3. Performance Reporting payment records), inspection results) 4. Contract Change Control System 4. Approved Change Requests 5. Payment System 2. Change Requests 6. Claims Administration 3. Project Management Plan Updates 7. Records Management System 4. OPA Updates 42 Close Procurements: The process of completing each project procurement. * Verify procurement result, Finalize and Close each purchasing contract. * When the contract is Completed or Terminated for any reason (cause/convenience/default), this process is performed. * All Procurements MUST to be closed before Project Closure. 1. Project Management Plan 1. Procurement Audits (Review of Procurement Processes - 1. Closed Procurements (after product verification) for capturing Lessons Learned) 2. Negotiated Settlements 2. Procurement Documentation (•) 2. OPA Updates 3. Records Management System
CLOSING
5. Work Performance Information (D & M Proj Exec) 6. Performance Reports (Report Performance)
# Fixed Price (FP) - used when there are well-defined specifications/requirements & with enough competitition to determine a fair and reasonable FP before the work begins. # FFP (Firm Fixed Price) / Lump Sum - Risk is entirely shifted to the SELLER. It is very popular 'When the Scope of work is throughly defined & completely known'. # FPIF (Fixed Price Incentive Fee) - Point of Total Assumption (PTA) is a point in the contract where a subcontractor assumes responsibility for all additional costs. PTA = Target Cost + ((Ceiling Price - Target Price + Fixed Fee (if it is there)) / Buyer's % share of cost overrun) # FPAF (Fixed Price Award Fee) # FP-EPA (Fixed Price Economic Price Adjustment) - It is popular when there is influence of economoc conditions that exists for a multi-year period. Economic Stipulation may be based on the Interest Rates, Currency Exchange Rates, the Consumer Price Index, Cost of Living Adjustments or other Indices. # Purchase Order (PO) - Normally unilateral (signed by one party) instead of bilateral. Usually used for simple commodity procurements. # T&M (Time & Material) / Unit Price - Here, buyer pays on a per-hour or per-item basis. Buyer bears the most risk of Cost overruns. It is used when the SCOPE of work is not completely defined (or) when the Scope is constantly changing. Used when the cost of an item is known but the number of needed items is unknown. # Cost Reimbursible (CR) - used when the exact scope of the work is uncertain & hence costs cannot be estimated accurately enough to use FP. Requires administrative overhead. # Cost Contract - Seller receives no fee/profit. Appropriate for work performed by non-profit organizations. # CPPC (Cost Plus Percentage of Costs) / CPF (Cost Plus Fee) - requires buyers to pay for all costs plus a percentage of costs as a fee. # CPFF (Cost Plus Fixed Fee) - provides for the payment to the seller of actual costs plus a negotiated fee that is fixed before the work begins. # CPIF (Cost Plus Incentive Fee) - provides for the the seller to be paid for actual costs plus a fee that will be adjusted based on meeting specific performance objectives. - Target Cost (TC) & Target Fee (TF) is determined in advance. Also seller gets % of savings (if AC < TC); or shares the cost overrun (if AC > TC) # CPAF (Cost Plus Award Fee) - buyer pays for all costs & a base fee + award amt (bonus) based on performance. //lar to CPIF but incentive is an award (& not award / penalty) Tip: FP is usually used when there is complete information available about the project scope. CPIF would be used when we have partial information about scope. T&M is suitable if the time frame and work involved, both are uncertain. # Privity is a confidential agreement / contractual relationship between the buyer and seller. # Force Majeure is a situation of natural disaster (eg., fire, storm, etc) and is neither party's fault for not meeting contractual obligations. Usually resolved by seller receiving extension of time on the project. # Seller can be called - contractor, sub-contractor, vendor, service provider or supplier. # buyer can be called - client, customer, prime contractor, contractor, acquiring organization, governmental agency, service requestor or purchaser.
