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Procurement Management
 Outline ❑ Control Procurements
❑ Procurement Management ❑ Inputs/Outputs
❑ Plan Procurement Management ❑ Tools & Techniques
Inputs ▪ ❑ Supplementary Learning
Tools & Techniques
▪
Outputs ▪
▪ Procurement Management Plan
▪ Procurement Strategy
▪ Contract Types
▪ Statement of Work
▪ Selection Criteria
▪ Summary of Procurement
Documents
❑ Conduct Procurements
▪ Inputs/Outputs
▪ Tools & Techniques 2
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Planning for Small to Medium Sized Projects
Knowledge Area PM Principles PM Performance Domain
Scope Management - Delivery

Resource Management Team, Leadership. Team, Leadership

Schedule Management - Planning

Risk Management Risk, Complexity Uncertainty

Stakeholder Management Stakeholder, Leadership Stakeholder. Leadership,

Delivery
Communication Management - Planning

Quality Management Quality, Value Delivery

Integration Management (Project Systems Thinking, Change, Project Work

Processes) Adaptability and Resiliency
Cost Management - Planning

Procurement Management - Project Work

 Procurement Management
● Procurement Management are the activities that'll help you get
Project the products or services you need from outside the project, like
Procurement
Management
human resources or equipment.
● Covers how to monitor and control the agreements once in place
● Includes the contract management and change control processes
required to develop and administer contracts or purchase orders
issued by authorized project team members.
● Key output is the Procurement Management Plan and
Procurement Strategy.
Project Procurement Management Entails
1. Plan Procurement Management 2. Conduct Procurements 3. Control Procurements 4
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Source: Project Management Body of Knowledge
Plan Procurement Management

Source: PMBOK 6th Ed.

Plan Procurement Management is the process of documenting project procurement decisions,

specifying the approach and identifying potential sellers. The key benefit of this process is that it
determines whether to acquire goods and services from outside the project and, if so, what to
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acquire as well as how and when to acquire it. Goods and services may be procured from other
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parts of the performing organization or from external sources.
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 Plan Procurement Management Inputs
Project Charter
• Charter contains the Business Project Documents
objectives, project
Project Documents • Considers milestone list,
Documents
description, summary project team assignments,
milestones, and the requirements
Project
preapproved financial Charter documentation, and
Project
resources. Management traceability matrix, resource
Plan requirements, risk and
Business Documents stakeholder register.
• Considers the business
case and benefits
Internal/ Internal & External Factors
External
management plan Factors • All relevant internal or
external factors that
Project Management Plan influence planning
• Considers the scope, procurements.
quality, and resource
management plans, along
with the scope baseline.
Tools and 6
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Techniques 6
 Plan Procurement Management Tools & Techniques

Expert Judgement TOOLS & TECHNIQUES Data Analysis

▪ Subject Matter ▪ Techniques such
Expertise with as make or buy
procurement, Expert Judgement analysis
purchasing, and Data Analysis
contract expertise Data Gathering
Source Selection
Data Gathering Analysis
▪ Considers market • Uses common
Source Selection Analysis
research and seller selection methods
capabilities for to evaluate
procurements. Meetings bidders

Meetings
▪ Can be held to determine the strategy 7
for managing and monitoring the
procurement. 7
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Procurement Management Plan
The procurement management plan can include guidance for:
▪ How procurement will be coordinated with other project aspects, such as project schedule
development and control processes;
▪ Timetable of key procurement activities;
▪ Procurement metrics to be used to manage contracts;
▪ Stakeholder roles and responsibilities related to procurement, including authority and
constraints of the project team when the performing organization has a procurement
department;
▪ Constraints and assumptions that could affect planned procurements;
▪ The legal jurisdiction and the currency in which payments will be made;
▪ Determination of whether independent estimates will be used and whether they are needed
as evaluation criteria;
▪ Risk management issues including identifying requirements for performance bonds or
insurance contracts to mitigate some forms of project risk; and 8
▪ Prequalified sellers, if any, to be used.
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 Procurement Strategy
The objective of the procurement strategy is to determine the project delivery
method, the type of legally binding agreement(s), and how the procurement will
advance through the procurement phases. A procurement strategy includes
(but not limited to):

Phase - Delivery methods - Delivery methods include:

• buyer/services provider with no subcontracting,
• buyer/ services provider with subcontracting allowed,
• joint venture between buyer and services provider, and
• buyer/ services provider acts as the representative.

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 Procurement Strategy
Phase - Contract payment types - Contract payment types are separate
from the project delivery methods and are coordinated with the buying
organization’s internal financial systems. Contract payment types include
(but not limited to):
• lump sum,
• firm fixed price,
• cost plus award fees,
• cost plus incentive fees,
• time and materials,
• target cost, and others.

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 Procurement Strategy
Types of Contracts
1. Fixed-price contracts are suitable when the type of work is
predictable and the requirements are well defined and not likely to
change.
2. Cost plus contracts are suitable when the work is evolving, likely to
change, or not well defined.
3. Incentives and awards may be used to align the objectives of buyer
and seller
4. Time and Materials suitable to augment staff or buy services

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Fixed Price Contract Types
Firm Fixed Price (FFP) Fixed Price Incentive Fee (FPIF) Fixed Price with Economic Price
Adjustments (FPEPA)
Price of goods is set from the Buyer/seller have flexibility to Fixed-price contract, but with a
outset and not subject to allow for deviation from special provision allowing for
change unless the scope of performance, with financial predefined final adjustments to
work changes. Most commonly incentives tied to agreed upon the contract price due to
used and favored by most metrics such as cost, schedule, changed conditions, such as
organizations or technical performance of the inflation changes or cost
seller. increases (or decreases) for
specific commodities. Typically
used whenever the seller’s
performance period spans a
considerable period of years, or
if the payments are made in a
different currency 12
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Cost Plus and Incentive & Reward
Contracts
Cost plus fixed fee (CPFF) Cost plus incentive fee (CPIF) Cost plus award fee (CPAF)

The seller is reimbursed for The seller is reimbursed for all allowable The seller is reimbursed for all
all allowable costs for costs for performing the contract work legitimate costs, but the
performing the contract and receives a predetermined incentive majority of the fee is earned
work and receives a fixed- fee based on achieving certain based on the satisfaction of
fee payment calculated as performance objectives as set forth in certain broad subjective
a percentage of the initial the contract. In CPIF contracts, if the performance criteria that are
estimated project costs. final costs are less or greater than the defined and incorporated into
Fee amounts do not original estimated costs, then both the the contract. The
change unless the project buyer and seller share costs from the determination of fee is based
scope changes. departures based upon a pre-negotiated solely on the subjective
cost-sharing formula, for example, an determination of seller
80/20 split over/under target costs performance by the buyer and
based on the actual performance of the is generally not subject to 13
seller. appeals. 13
 Time and Materials
❑ Time and material contracts (also called time and means) are a
hybrid type of contractual arrangement with aspects of both cost-
reimbursable and fixed-price contracts.
❑ These types of contracts are often used for
▪ staff augmentation, acquisition of experts,
▪ any outside support when a precise statement of work cannot
be quickly prescribed
▪ to align the objectives of buyer and seller

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 Procurement Strategy, cont.
Phase - Procurement Phases, considers:
• Sequencing or phasing of the procurement,
• A description of each phase and the specific objectives of each phase;
• Procurement performance indicators and milestones to be used in
monitoring;
• Criteria for moving from phase to phase;
• A Monitoring and evaluation plan for tracking progress; and
• Process for knowledge transfer for use in subsequent phases

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Bid Documents
• Bid documents are used to solicit proposals from prospective sellers
• Terms such as bid, tender, or quotation are generally used when the seller
selection decision is based on price (as when buying commercial or standard
items. Types of bid documents include:
Request for Information Request for Quotation (RFQ) Request for Proposal (RFP)
(RFI)
An RFI is used when more An RFQ is commonly used when more An RFP is used when there is
information on the goods information is needed on how vendors a problem in the project and
and services to be would satisfy the requirements and/or the solution is not easy to
acquired is needed from how much it will cost. determine. This is the most
the sellers. It will typically formal of the “request for”
be followed by an RFQ or documents and has strict
RFP procurement rules for content,
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timeline, and seller responses.
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 Statement of Work
▪ The statement of work (SOW) for each procurement is developed from the
project scope baseline and defines only that portion of the project scope
that is to be included within the related contract.
▪ The SOW describes the procurement item in sufficient detail to allow
prospective sellers to determine if they are capable of providing the
products, services, or results. Sufficient detail can vary based on the nature
of the item, the needs of the buyer, or the expected contract form.
▪ Information included in a SOW can include specifications, quantity desired,
quality levels, performance data, period of performance, work location, and
other requirements.

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Terms of Reference (TOR)
A Terms of Reference (TOR) typically includes (but not limited to):
● Tasks the contractor is required to perform as well as specified
coordination requirements.
● Standards the contractor will fulfill that are applicable to the project.
● Data that needs to be submitted for approval.
● Detailed list of all data and services that will be provided to the contractor
by the buyer for use in performing the contract, if applicable; and
● Definition of the schedule for initial submission and the review/approval
time required.

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Selection Criteria
The source selection criteria can include:
▪ Capability and capacity;
▪ Product cost and life cycle cost;
▪ Delivery dates;
▪ Technical expertise and approach;
▪ Specific relevant experience;
▪ Adequacy of the proposed approach and work plan in responding to the
SOW;
▪ Key staff’s qualifications, availability, and competence;
▪ Financial stability of the firm;
▪ Management experience; and
▪ Suitability of the knowledge transfer program, including training.

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 Summary of Procurement
Documents

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Source: PMBOK 6th Ed 20
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 Conduct Procurements

Source: PMBOK 6th, Ed.

Conduct Procurements is the process of obtaining seller responses, selecting a seller, and
awarding a contract. The key benefit of this process is that it selects a qualified seller and
implements the legal agreement for delivery. The end results of the process are the established 21
agreements including formal contracts. 21
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 Conduct Procurements Inputs
Project Management Plan
Project Procurement Documents
• Considers components Documents
• Considers bid documents,
such as scope,
procurement statement of
requirements,
Procurement work, independent cost
communications, risk, Documents
Project estimates, and source
procurement, and Management
selection criteria.
configuration management Plan
plans, along with the cost
Seller Proposals
baseline.
Internal/ ▪ Seller responses to bid
External
documents
Project Documents Factors, Seller
Proposals
• Includes all relevant
Internal/External Factors
project documents such
• Internal or external factors
lessons learned, project
that influence procurement
schedule, requirements
contracts.
documentation, risk
register, and stakeholder
register.
Tools and
Techniques 22
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 Conduct Procurements Tools & Techniques
Expert Judgement Bidder Conferences
• Subject Matter TOOLS & TECHNIQUES • Meetings between
Expertise with the buyers and
specialized Expert sellers prior to
knowledge in Judgement proposal submission.
proposal evaluation,
laws, regulations, Bidder Conferences Data Analysis
and negotiation. • Technique such as
Advertising proposal evaluation
Advertising Data Analysis
in response to bid
• Used to evaluation.
communicate with Interpersonal and Team
potential users, or Skills
for sellers to
expand.
Interpersonal and Team Skills
• Techniques such as negotiation to reach 23
agreement.
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 Control Procurement

Source: PMBOK, 6th Ed.

Control Procurement is the process of managing procurement relationships; monitoring contract

performance and making changes and corrections as appropriate; and closing out contracts. The
key benefit of this process is that it ensures that both the seller’s and buyer’s performance meet 24
the project’s requirements according to the terms of the legal agreement. 24
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 Control Procurement Inputs Project Documents
Project Management Plan • Includes all relevant project
• Considers the requirements, documents such as assumption
risk, procurement, and Procurement Work
log, lessons learned register,
Documents, Performance
change management plans, Agreements Data milestone list, quality reports,
along with the schedule and requirements
baseline. Approved
documentation.
Change
Project Requests
Procurement Documents Management
Approved Change Requests
Plan
• Relevant business • Outlines modifications to terms
documents are the business of conditions of contracts, SOW,
case and benefits Internal/
and deliverables
External
management plan. Factors,
Project
Documents Internal/External Factors
Agreements • Internal or external factors that
• Understanding between influence the controlling of
parties procurements.

Work Performance Data

• Contains seller data on
status of contract Tools and 25
deliverables
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 Control Procurements Tools & Techniques
Expert Judgement
• Subject Matter Inspection
Expertise with TOOLS & TECHNIQUES • Structured review of
specialized a contractor’s work.
knowledge in Expert Judgement
financial, laws, Data Analysis
regulations, claims • Techniques such as
Inspection
administrations. Audits performance
reviews, earned value
Claims Administration Data Analysis analysis, and trend
• When the buyer and analysis
seller don’t agree
Claims Administration
on the occurrence
of the change
Audits
• Structured review of the procurement
process. r 26
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Wrap Up
This completes Module 13 – Project Procurement Management
The content for this module is from the PMBOK 6th and 7th Editions

Reference:
1. Project Management Institute. (2021). A guide to the Project Management
Body of Knowledge: Pmbok guide (7th ed.).
2. Project Management Institute. (2017). A guide to the Project Management
Body of Knowledge: Pmbok guide (6th ed.).

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THANKS!
Any questions?
You can find me at:
▸ [email protected]

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