PMBOK 12 1 Plan Procurement Management PDF

Project Management
<12.1 Plan
Procurement Management>
Project Management
Michael A. Smith
Georgia Tech Scheller College of Business
What is procurement management?

Procurement is a formal process to obtain goods
and services.
Most companies have a department to handle
and control procurements. It might be called
procurement or contracting or purchasing or the
legal department.
When the work on a particular contract is
complete, that procurement is closed. There can
be many closures during a project.
Michael A. Smith
Michael A. Smith
Project Management
Project Management
Plan Procurement Management where it fits

Inputs
Outputs
Responses
http://www.professionaltreasure.com/wp-content/uploads/2013/04/Project-Management-Process_FifthEdition1.png
Michael A. Smith
Project Management
Inputs, Processes, and Outputs
Michael A. Smith
Michael A. Smith
Project Management
Project Management
Plan Procurement Management inputs, tools &

techniques, and outputs
Inputs
Process
Project Mgmt Plan
Procurement Management Plan
Requirements Documentation
Risk Register
Activity Resource Reqts
Project Schedule
Activity Cost Estimates
Stakeholder Register
Enterprise Env. Factors
Outputs
Procurement Stmt of Work
Plan
Procurement
Management
Procurement Documents
Source Selection Criteria
Tools & Techniques

Make or Buy Analysis
Expert Judgment
Market Research
Meetings
Make-or-buy Decisions
Change Requests
Project Document Updates
Org. Process Assets

Michael A. Smith
Project Management
Plan Procurement Management Inputs

Elements of the Project Management Plan used to
develop the procurement management plan include, at
least the scope baseline contents:
Project Scope Statement, including the scope description,
service description and result description, list of deliverables,
acceptance criteria, and important information regarding
technical issues or concerns that might affect cost estimating.
It might also include some constraints such as required
delivery dates, available skilled resources, and organizational
policies.
WBS contains the components of work that might be sourced
externally
WBS dictionary, identifies deliverables and describes the work
in each WBS component to produce each deliverable
Michael A. Smith
Michael A. Smith
Project Management
Project Management

Requirements documentation may include:
Important information about project requirements (we
hope)
Requirements with contractual and legal implications that
might include health, safety, security, performance,
environmental, insurance, intellectual property rights,
EEO information, licenses, and permits.
Risk register provides a list of risks along with the

results of risk analysis and response planning.
Updates to the risk register are included with project
document updates.
Michael A. Smith
Project Management

Activity resource requirements such as people,
equipment, or location
Project schedule which includes information on
required timelines and delivery dates
Activity cost estimates are used to evaluate the
reasonable of the bids or proposal received from
potential sellers.
Stakeholder register provides information on project
participants and their interests in the project.
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Michael A. Smith
Project Management
Project Management

Enterprise Environmental Factors that can
influence Plan Procurement Management
include but arent limited to:
Marketplace conditions
Produces, services, and results that are available in
the marketplace
Suppliers, including path performance or reputation
Typical terms and conditions for products, services,
and results or for the specific industry
Unique local requirements
Michael A. Smith
Project Management

Organizational Process Assets that can influence
Plan Procurement Management include but
arent limited to the organizations:
Formal procurement policies, procedures, and
guidelines. Most organizations have them.
Management systems that are considered in
developing the procurement management plan and
selecting the contractual relationships to be used.
An established multi-tier supplier system of
prequalified sellers based on experience.
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Plan Procurement Management Tools and

techniques
Make or Buy Analysis is a general management
technique. Should the project team do the work or
should it be outsourced.
The capability might exist in house but the resources may
not be available.
Should consider all related costsboth direct and
indirect. (It costs money to find and work with sellers.)
Available contract types should be considered depending
on need to share risks. Sometimes contract type is
dictated by law.
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techniques
Expert Judgment may be used to develop or modify
the criteria used to evaluate seller proposals.
Expert legal judgment may assist with unique
procurement issues, terms, and conditions.
Business and technical expertise, can be applied to

both the technical details of the acquired products,
service, or results, and to various aspects of the
procurement management processes.
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Michael A. Smith
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techniques
Market Research includes looking at industry and
specific vendor/seller capabilities.
Procurement teams may leverage information gained
at conferences, online reviews, and a variety of
sources to identify market capabilities.
Teams may also refine particular procurement
objectives to leverage maturing technologies while
balancing risks associated with the breadth of
vendors who can provide the materials or services
desired.
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Techniques
During meetings, information gained through
research may be supplemented with information
from potential bidders.
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Plan Procurement Management Outputs

Procurement Management Plan, a component
of the Project Management Plan, covers how the
project team will acquire goods and services
from outside the organization. It describe how
the procurement processes will be managed
from developing procurement documents
through contract closure.
The plan can be formal/informal, broad or
detailed, depending on the needs of the project.
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Procurement Management Plan may include
guidance for:
Types of contracts to be used
Risk management issues
Whether independent estimates will be used and
whether they are needed as evaluation criteria
Those actions the project management team can take
unilaterally, if the performing organization has a
prescribed procurement, contracting, or purchasing
department.
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guidance for:
Standardized procurement documents, if needed
Managing multiple suppliers
Coordinating procurement with other project
aspects, such as scheduling and performance
reporting
Any constraints and assumptions that could affect
planned procurements
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guidance for:
Handling the long lead times to purchase certain
items from sellers and coordinating the extra time
needed to procure these items with the development
of the project schedule
Handling the make-or-buy decisions and linking them
into the Estimate Activity Resources and Develop
Schedule processes
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guidance for:
Setting the scheduled dates in each contract for the
contract deliverables and coordinating with the schedule
development and control processes
Identifying requirements for performance bonds or
insurance contracts to mitigate some forms of project risk
Establishing the direction to be provided to the sellers on
developing and maintaining a work breakdown structure
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guidance for:
Establishing the form and format to be used for the
procurement/contract statements of work
Identifying prequalified sellers, if any, to be used
Procurement metrics to be sued to mangage
contracts and evaluate sellers
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Project Management

Procurement Statement of Work (SOW) for each
procurement is developed from the project scope
baseline.
Defines only that portion of the project scope that is to be
included within the related contract.
Must include sufficient detail to allow prospective sellers
to decide whether they can provide the product, service,
or result, for example, specifications, quantity desired,
quality levels, performance data, period of performance,
work location, etc.
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Procurement Statement of Work (SOW) for each
procurement is developed from the project scope
baseline.
Must be clear, complete, and concise.
Describes any collateral services required such as
performance reporting or post-project operational
support.
In some application areas, there may be specific content
and format requirements for a procurement SOW.
The SOW can evolve until its incorporated into a signed
agreement.
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Procurement Documents are used to solicit
proposals from prospective sellers.
Terms such as bid, tender, or quot(atation) are
generally used when the selection decision will be
based on price. Terms such as proposal are generally
used when other criteria will be used.
RFI (request for information, IFB (invitation for bid),
RFP (request for proposal), RFQ (request for
quotation)
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Structured to facilitate an accurate and complete
response from each seller to make responses easy to
evaluate.
Description of the desired form of response, the relevant
SOW, and any required contractual provisions.
If the government is involved, any or all of the content and
structure may be legally required.
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Project Management

Complexity and level of detail should reflect the value of
and risks associated with the planned procurement.
Should be flexible enough to allow consideration of seller
suggestions for better ways to satisfy the same
requirements.
Issuing any invitation to sellers is normally done in
accordance with the polices of the buyers organization,
which might include publication in public newspapers,
trade journals, public registries, or the Internet.
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Source Selection Criteria are developed and used
to rate or score seller proposals. They can be
objective or subjective. May include on the
purchase price and ancillary expenses such as
delivery if the desired item is readily available
from several acceptable sellers.
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Source Selection Criteria are developed and used to
rate or score seller proposals. Typical criteria for
more complex requirements include:
Understanding of need: How well does the sellers
proposal address the procurement SOW?
Overall or life-cycle cost: Will the selected seller produce
the lowest TCO?
Technical capability: Does the seller have or is it able to
develop the technical skills and knowledge needed to
ensure a successful project?
Risk: How much risk is embedded in the SOW? How much
is assigned to seller? How does the seller mitigate it?
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Source Selection Criteria are developed and used to
rate or score seller proposals. Typical criteria for
more complex requirements include:
Management Approach: Does the seller have or is it able
to develop the management processes and procedures to
ensure a successful project?
Technical Approach: Do the sellers proposed technical
methods, techniques, solutions, and services meet the
requirements or are they likely to provide more or less
than expected?
Warranty: What does the seller propose to warrant and
for how long?
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Source Selection Criteria are developed and used to rate or
score seller proposals. Typical criteria for more complex
requirements include:
Financial capacity: Does the seller have or have access to financial
resources to fulfill the agreement?
Production capacity and interest to meet future requirements
Business size and type: Does the sellers business meet criteria such
as being a certain size or of a certain kind of ownership as defined
by the organization or established by a government agency as a
condition of receiving an agreement?
Past performance of sellers
References: Can the seller provide references from prior customers
verifying the sellers work experience and compliance with
contractual requirements?
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Source Selection Criteria are developed and used
to rate or score seller proposals. Typical criteria
for more complex requirements include:
Intellectual property rights: Does the seller assert
intellectual property rights in the work processes or
services they will use or in the products they will
produce for the project?
Proprietary rights: Does the seller assert proprietary
rights in the work processes or services they will use
or in the products they will produce for the project?
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Make-or-Buy Decisions based on make-or-buy analysis.
Change Requests in procurement documents can result
from changes to the project management plan, its
subsidiary plans, or other components. These are
processed for review and disposition through the Perform
Integrated Change Control process.
Project Document Updates including but not limited to
Requirements documentation
Requirements traceability matrix
Risk register
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Important Tips
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Project Management
Plan Procurement Management Important tips

The most common procurement documents are RFP
(request for proposal) and RFQ (request for
quote/quotation.)
In most cases, procurement is competitive.
Sometimes work is so specialized that there is only
one potential seller (a noncompetitive bid situation.)
Sellers might need a lot of time to respond to a
request; the project manager must take this time
into account.
Organizations might use different methods to select
a seller. Sometimes the method is dictated by law.
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An agreement generally encompasses documents or
communications that outline internal or external relationships
and their intentions.
A contract is typically created with an external entity. There is an
exchange of goods or services for some kind of compensation.
It can be written or verbal.
It forms the legal relationship between the entities.
It is mutually binding.
It provides a framework for how failure by one side will be
addressed and ultimately remedied in court.
A contract is an agreement but not necessarily vice versa.
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All aspects of a contract are negotiable.
Project managers should be assigned on both the
buyer and seller side before a contract is signed.
Every project manager should know how to create,
read, and manage contracts.
The three main contract types are
Fixed price (FP)
Time and Material (T&M)
Cost reimbursable (CR)
Incentives can be added to any contract type.

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Once the contract is signed, procurement must
be managed and controlled
Making sure all requirements of the contract are met
Making approved changes to the contract
Deciding whats in and whats not in the contract
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<End>
Project Management
Michael A. Smith
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Project Management

What is procurement management?

Plan Procurement Management where it fits

Inputs, Processes, and Outputs

Plan Procurement Management inputs, tools &

Project Mgmt Plan

Procurement Management Plan

Procurement Stmt of Work

Tools & Techniques

Org. Process Assets

Plan Procurement Management Inputs

Plan Procurement Management Inputs

Risk register provides a list of risks along with the

Plan Procurement Management Inputs

Plan Procurement Management Inputs

Plan Procurement Management Inputs

Plan Procurement Management Tools and

Plan Procurement Management Tools and

Business and technical expertise, can be applied to

Plan Procurement Management Tools and

Plan Procurement Management Tools and

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Outputs

Plan Procurement Management Important tips

Plan Procurement Management Important tips

Plan Procurement Management Important tips

Incentives can be added to any contract type.

Plan Procurement Management Important tips

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