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1、1,Importance 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 market will grow to over $110 billion,2,Why Ou
2、tsource?,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 accountability,3,Project Procurement Management Processes,Procurement planning: determining what to procure and when S
3、olicitation planning: documenting product requirements and identifying potential sources Solicitation: obtaining quotations, bids, offers, or proposals as appropriate Source selection: choosing from among potential vendors Contract administration: managing the relationship with the vendor Contract c
4、lose-out: completion and settlement of the contract,4,Figure 11-1. Project Procurement Management Processes and Key Outputs,5,Procurement Planning,Procurement planning involves identifying which project needs can be best met by using products or services outside the organization. It includes decidin
5、g whether to procure how to procure what to procure how much to procure when to procure,6,Collaborative 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 Advantix Ad
6、vanced Photo System (see What Went Right?),7,Procurement 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 interna
7、l and external, can provide valuable inputs in procurement decisions,8,Make-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 b
8、e the same as the purchase cost? If you need the item for 12 days, should you lease it or purchase it?,9,Make-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 f
9、or d as follows: Subtract $50d from the right side of the equation to get $100d = $1,000 Divide both sides of the equation by $100 d = 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 it,10,Types of Contracts
10、,Fixed price or lump sum: involve 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: re
11、quire the buyer to pay the seller a predetermined amount per unit of service,11,Cost Reimbursable Contracts,Cost plus incentive fee (CPIF): the buyer pays the seller for allowable performance costs plus a predetermined fee and an incentive bonus Cost plus fixed fee (CPFF): the buyer pays the seller
12、for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs Cost plus percentage of costs (CPPC): the buyer pays the seller for allowable performance costs plus a predetermined percentage based on total costs,12,Figure 11-2. Contract Types Versus Risk,13
13、,Statement of Work (SOW),A statement of work is a description 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 expectations,14,Figure 11-3. Statement of Work (SOW) Template,15,Solicitation
14、 Planning,Solicitation planning involves preparing several documents: Request for Proposals: used to solicit proposals from prospective sellers where there are several ways to meet the sellers needs Requests for Quotes: used to solicit quotes for well-defined procurements Invitations for bid or nego
15、tiation and initial contractor responses are also part of solicitation planning,16,Figure 11-4. Outline for a Request for Proposal (RFP),17,Solicitation,Solicitation involves obtaining proposals or bids from prospective sellers Organizations can advertise to procure goods and services in several way
16、s approaching the preferred vendor approaching several potential vendors advertising to anyone interested A bidders conference can help clarify the buyers expectations,18,Source Selection,Source selection involves evaluating bidders proposals choosing the best one negotiating the contract awarding the contract It is helpful to prepare formal evaluation procedures for selecting vendors Buyers often create a “short list”,19,Figure 11-5. Sample Proposal Evaluation Sheet,20,Figure 11-6. Detailed Cri
