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Project Procurement Management
Knowledge Areas Major Processes desc. Primary Inputs Tools & Techniques Primary Outputs
Plan Purchases & Acquisitions Determining what to procure and when (make or buy) 1. Enterprise Environmental Factors
2. Organizational Process Assets
3. Project scope statement
4. WBS
5. WBS Dictionary
6. Project Management Plan		 1. Make or buy analysis 2. Expert judgment
3. Contract types		 1. Procurement mgmt plan
2. Contract Statement(s) of Work
3. Make or Buy Decisions
4. Requested Changes
Plan Contracting Preparing the documents needed to support solicitation 1. Procurement management plan
2. Contract Statement(s) of work
3. Make or Buy Decisions
4. Project Management Plan		 1. Standard forms
2. Expert judgment		 1. Procurement documents
2. Evaluation criteria 3. Contract Statement of work (updates)
Request Seller Responses Obtaining quotations, bids, offers, or proposals (answer questions) 1. Organizational Process Assets
2. Procurement Management Plan
3. Procurement Documents		 1. Bidder conferences 2. Advertising
3. Develop qualified sellers list		 1. Qualified sellers list 2. Procurement Document Package
3. Proposals
Select Sellers Involves the receipt of bids or proposals and the application of evaluation criteria to select a provider 1. Organizational Process Assets
2. Procurement Management Plan
3. Evaluation Criteria
4. Procurement Document Package
5. Proposals
6. Qualified Sellers List
7. Project Management Plan 		1. Weighting system
2. Independent estimates
3. Screening system
4. Contract Negotiation 5. Seller Rating System 6. Expert Judgment
7. Proposal Evaluation Techniques 		1. Selected Sellers 2. Contract
3. Contract Management Plan
4. Resource Availability
5. Procurement Management Plan (Updates)
6. Requested changes
Contract Administration Ensuring that the seller’s performance meets contractual requirements 1. Contract
2. Contract Management Plan 3. Selected Sellers
4. Performance Reports
5. Approved change requests
6. Work Performance information		 1. Contract change control system
2. Buyer conducted performance review
3. Inspections and audits 4. Performance reporting 5.Payment system
6. Claims administration 7. Records management system
8. Information technology		 1. Contract Documentation
2. Requested Changes
3. Recommended Corrective actions 4. Organizational Process assets (Updates)
5. Project Management plan (updates) * Procurement Management Plan * Contract management plan
Contract Closeout Product verification and administration closeout (finish) 1. Procurement management Plan
2. Contract management plan
3. Contract documentation
4. Contract closure procedure		 1. Procurement audits
2. Records Management System		 1. Closed Contracts 2. Organizational process assets (Updates)
Project Management Team – Is responsible to help tailor the contract to the specific needs of the Project.
Procurement Processes Repetition - When the project obtains products and services (project scope) from outside the performing organization, the processes from solicitation planning (Section 12.2) through contract closeout (Section 12.6) would be performed once for each product or service item.
Costs - Direct costs are costs incurred for the exclusive benefit of the project (e.g., salaries of full-time project staff). Indirect costs, also called overhead costs, are costs allocated to the project by the performing organization as a cost of doing business (e.g., salaries of corporate executives).
Procurement Documents – Common names for different types of procurement documents include: Invitation for Bid (IFB), Request for Proposal (RFP), Request for Quotation (RFQ), tender notice, Invitation for Negotiation, and Contractor Initial Response. Procurement documents are rigorous enough to ensure consistent, comparable responses but flexible enough to allow seller suggestions for better ways to satisfy the requirements. Seller is allowed to propose alternative solution in a separate proposal. It has 1. Information for sellers 2. Contract SOW 3. Proposed terms and conditions of the contract (Legal & Business)
Proposal - technical approach, Bid, Tender and quotation – price
Procurement Management Plan – Describes how procurement will be managed till contract closure. It includes Type Of contract, who prepares independent estimates, standardized procurement documents, Constraints and assumptions, identifying seller list etc.
Contract SOW – Developed from Scope Statement, WBS and WBS Dictionary describes procurement item in sufficient detail to allow prospective sellers to determine if they are capable of providing it.
Contract SOW Types – 1. Performance 2. Functional 3. Design IT, High-tech, R & D or Projects never done before – Performance & Functional Construction, Equipment or Purchase - Design
Bidder Conferences – Also called, as Contactor Conferences, Vendor Conferences and Pre-Bid Conferences are meetings with prospective sellers prior to preparation of bid or proposal, ensures clear and common understanding of procurement needs.
Procurement Document Package – Buyer prepared formal request sent to each seller and is the basis upon which a seller prepares a bid for the requested products, service or result.
Procurement Documents
1. Request For Proposal/Tender (RFP, RFT ) – Requests for Price and Detailed Proposal
2. Invitation for Bid/Request for Bid (IFB, RFB) – One Price
3. Request for Quotation – Price Quote per item
Contract – Subjects covered include Responsibilities, authorities, law and terms, technical and management approaches, financing, schedule, payments and price. Contract negotiations conclude with a document that can be signed by both buyer and seller, that is contract. The final contract can be a revised offer by the seller or counter offer by the buyer.
Select Sellers – Tools & Techniques
 1. Weighting System – Numeric Weight to each criteria, rating sellers, selection based on total weight
 2. Independent Estimates – called “Should-Cost” , prepared by procuring organization.
 3. Screening System – Establish minimum performance requirement for one or more criteria and use 1 & 2 methods Contract
 4. Negotiation – Project Manager may not be the lead negotiator, PM team may be present during negotiations for providing any clarification of project’s technical and management requirements.
 5. Seller Rating Systems
 6. Expert Judgment
 7. Proposal Evaluations techniques – Use some Expert judgment and evaluation criteria to rate and score proposals.
Contract Management Plan – Lists documentation, delivery and performance requirements that the buyer and seller must meet. The plan covers the contract administration activities throughout the life of the contract. Part of PMP.
Contract Administration – Ensures the seller meets the performance requirements of the contract. Because of legal considerations many organizations treat contract administration as a separate administrative function from the project organization. Contract administration includes application of the appropriate project management processes to the contractual relationships(s) and integration of the outputs from these processes into overall management of the project.
Payment System – Usually handled by accounts payable system of the buyer. It includes reviews & approvals by PM team.

Claims Administration – Contested Charges (claims, Disputes or appeals) are those where buyer and seller cannot agree. If both parties do not resolve a claim it is handled according to the resolution procedures established in the contract. Contract clauses can involve arbitration or litigation and can be invoked prior or after contract closure.
Records Management System – Set of procedures and automation tools that are consolidated as part of PMIS to manage contract documentation and records.
Organization Process Assets (After Contract Administration) –
1. Correspondence – In addition to documentation, it is a record of all the written and oral communication.
2. Payment Schedules and Requests
3. Seller Performance evaluation documentation
PMP updates – Procurement Management Plan and Contract Management Plan.
Procurement Audit – Review of procurement processes from Plan purchases to Contract administration. Aims to identify successes and failures.
Contract administration also has a financial management component. Payment terms should be defined within the contract and must involve a specific linkage between seller progress made and seller compensation paid.
Contract closeout is similar to administrative closure  in that it involves both product verification (Was all work completed correctly and satisfactorily?)
Administrative closeout (updating of records to reflect final results and archiving of such information for future use).
Contract file. A complete set of indexed records should be prepared for inclusion with the final project records
Administrative Closure (Internal)—generating, gathering, and disseminating information to formalize a phase or project completion
Contract Closeout—completion and settlement of the contract, including resolution of any open items. (External )
Project Procurement Management - the processes required to acquire goods and services from outside the performing organization.
Make or Buy Decision – it is generally better to do the work yourself if using an outside company means you have to turn over highly confidential proprietary data to other company.
Contract Types and Risk 1. Fixed Price 2. Cost-Reimbursable 3.Time & Material
Cost Plus Percentage of Cost (CPPC) No valid for federal contracts
Cost Plus Fixed Fee (CPFF) Used for research and development contracts (which generally have low level of detail in the scope); fixed fee can change if there is a change to the contract (usually through change orders). The risk rests with the buyer. This is the most common cost reimbursable contract.
Cost Plus Incentive Fee CPIF) Buyer and seller share in savings based on predetermined %s; long performance periods and substantial development and test requirements (incentive to the vendor to perform on or ahead of time)
Fixed Price Plus Incentive Fee (FPI) High-value projects involving long performance periods
Firm Fixed Price (FFP) Reasonably definite specifications (e.g. SOW). Shift risk to seller. Good when deliverable is not a core competency. Fixed Price (FP) is the most common type of contract in the world.
Time & Material (T&M) Good if the buyer wants to be in full control and/or the scope is unclear/not detailed or work has to start quickly. Profit factor into the hourly rate.
Fixed Price Award Fee “bonus” to the seller based on performance (e.g. 100K + 10K for every designated incremental quality level reached.
Fixed Price Economic Price Adjustment (FPEPA) Allow Price increase if the contract is for multiple years
Purchase Order A form of contract that is normally unilateral and used for simple commodity purchases. It is simplest type of fixed price contract and is usually unilateral(Signed by one party instead of bilateral)
Contract type Vs Risk FP – FPIF – FPAF – FPEPA – T&M – CPIF – CPAF – CPFF - CPPC
Fixed Price – T&M - Cost Reimbursable
Buyer’s risk from low to high
Seller’s risk from high to low
Elements of a Contract
Offer Assent to certain terms by both parties
Acceptance Agreement, written or spoken
Consideration Something of value
Legal Capacity Able to contract
Legal Purpose No violation of public policy