1、1Chapter 11:Project Procurement Management2Importance of Project Procurement Management Procurement means acquiring goods and/or services from an outside source Other terms include purchasing and outsourcing Experts predict that by the year 2003 the worldwide information technology outsourcing marke
2、t will grow to over$110 billion3Why Outsource?To reduce both fixed and recurrent costs To allow the client organization to focus on its core business To access skills and technologies To provide flexibility To increase accountability4Project Procurement Management ProcessesProcurement planning:deter
3、mining what to procure and whenSolicitation planning:documenting product requirements and identifying potential sourcesSolicitation:obtaining quotations,bids,offers,or proposals as appropriateSource selection:choosing from among potential vendorsContract administration:managing the relationship with
4、 the vendorContract close-out:completion and settlement of the contract5Figure 11-1.Project Procurement Management Processes and Key Outputs6Procurement Planning Procurement planning involves identifying which project needs can be best met by using products or services outside the organization.It in
5、cludes deciding whether to procure how to procure what to procure how much to procure when to procure7Collaborative Procurement Several organizations,even competitors,have found that it makes sense to collaborate on procurement for some projects Kodak worked with several competitors to develop the A
6、dvantix Advanced Photo System(see What Went Right?)8Procurement Planning Tools and Techniques Make-or-buy analysis:determining whether a particular product or service should be made or performed inside the organization or purchased from someone else.Often involves financial analysis Experts,both int
7、ernal and external,can provide valuable inputs in procurement decisions9Make-or Buy Example Assume you can lease an item you need for a project for$150/day.To purchase the item,the investment cost is$1,000,and the daily cost would be another$50/day.How long will it take for the lease cost to be the
8、same as the purchase cost?If you need the item for 12 days,should you lease it or purchase it?10Make-or Buy Solution Set up an equation so the“make”is equal to the“buy”In this example,use the following equation.Let d be the number of days to use the item.$150d=$1,000+$50d Solve for d as follows:Subt
9、ract$50d from the right side of the equation to get$100d=$1,000 Divide both sides of the equation by$100d=10 days The lease cost is the same as the purchase cost at 10 days If you need the item for 12 days,it would be more economical to purchase it11Types of Contracts Fixed price or lump sum:involve
10、 a fixed total price for a well-defined product or service Cost reimbursable:involve payment to the seller for direct and indirect costs Time and material contracts:hybrid of both fixed price and cost reimbursable,often used by consultants Unit price contracts:require the buyer to pay the seller a p
11、redetermined amount per unit of service12Cost Reimbursable ContractsCost plus incentive fee(CPIF):the buyer pays the seller for allowable performance costs plus a predetermined fee and an incentive bonusCost plus fixed fee(CPFF):the buyer pays the seller for allowable performance costs plus a fixed
12、fee payment usually based on a percentage of estimated costsCost plus percentage of costs(CPPC):the buyer pays the seller for allowable performance costs plus a predetermined percentage based on total costs13Figure 11-2.Contract Types Versus Risk14Statement of Work(SOW)A statement of work is a descr
13、iption of the work required for the procurement Many contracts,mutually binding agreements,include SOWs A good SOW gives bidders a better understanding of the buyers expectations15Figure 11-3.Statement of Work(SOW)TemplateI.Scope of Work:Describe the work to be done to detail.Specify the hardware an
14、dsoftware involved and the exact nature of the work.II.Location of Work:Describe where the work must be performed.Specify thelocation of hardware and software and where the people must perform the workIII.Period of Performance:Specify when the work is expected to start and end,working hours,number o
15、f hours that can be billed per week,where the work mustbe performed,and related schedule information.IV.Deliverables Schedule:List specific deliverables,describe them in detail,andspecify when they are due.V.Applicable Standards:Specify any company or industry-specific standards thatare relevant to
16、performing the work.VI.Acceptance Criteria:Describe how the buyer organization will determine if thework is acceptable.VII.Special Requirements:Specify any special requirements such as hardware orsoftware certifications,minimum degree or experience level of personnel,travelrequirements,and so on.16S
17、olicitation PlanningSolicitation planning involves preparing several documents:Request for Proposals:used to solicit proposals from prospective sellers where there are several ways to meet the sellers needsRequests for Quotes:used to solicit quotes for well-defined procurementsInvitations for bid or
18、 negotiation and initial contractor responses are also part of solicitation planning17Figure 11-4.Outline for a Request for Proposal(RFP)I.Purpose of RFPII.Organizations BackgroundIII.Basic RequirementsIV.Hardware and Software EnvironmentV.Description of RFP ProcessVI.Statement of Work and Schedule
19、InformationVII.Possible AppendicesA.Current System OverviewB.System RequirementsC.Volume and Size DataD.Required Contents of Vendors Response to RFPE.Sample Contract18Solicitation Solicitation involves obtaining proposals or bids from prospective sellers Organizations can advertise to procure goods
20、and services in several ways approaching the preferred vendor approaching several potential vendors advertising to anyone interested A bidders conference can help clarify the buyers expectations19Source Selection Source selection involves evaluating bidders proposals choosing the best one negotiatin
21、g the contract awarding the contract It is helpful to prepare formal evaluation procedures for selecting vendors Buyers often create a“short list”20Figure 11-5.Sample Proposal Evaluation Sheet21Figure 11-6.Detailed Criteria for Selecting Suppliers22Be Careful in Selecting Suppliers and Writing Their
22、 Contracts Many dot-com companies were created to meet potential market needs,but many went out of business,mainly due to poor business planning,lack of senior management operations experience,lack of leadership,and lack of visions.Check the stability of suppliers Even well-known suppliers can imped
23、e project success.Be sure to write and manage contracts well with all suppliers(see What Went Wrong?)23Contract Administration Contract administration ensures that the sellers performance meets contractual requirements Contracts are legal relationships,so it is important that legal and contracting p
24、rofessionals be involved in writing and administering contracts Many project managers ignore contractual issues,which can result in serious problems24Suggestions on Change Control for ContractsChanges to any part of the project need to be reviewed,approved,and documented by the same people in the sa
25、me way that the original part of the plan was approvedEvaluation of any change should include an impact analysis.How will the change affect the scope,time,cost,and quality of the goods or services being provided?Changes must be documented in writing.Project team members should also document all impo
26、rtant meetings and telephone phone calls25Contract Close-out Contract close-out includes product verification to determine if all work was completed correctly and satisfactorily administrative activities to update records to reflect final results archiving information for future use Procurement audi
27、ts identify lessons learned in the procurement process26Using Software to Assist in Project Procurement ManagementWord processing software helps in writing proposals and contracts,spreadsheets help in evaluating suppliers,databases help track suppliers,and presentation software aids in presenting pr
28、ocurement-related informationIn the late 1990s and early 2000s,many companies started using e-procurement software to do many procurement functions electronicallyCompanies such as Commerce One,Ariba,Concur Technologies,SAS,and Baan provide corporate procurement services over the InternetOrganizations also use other Internet tools to help find information on suppliers or auction goods and services
