Chapter 12: Project Procurement ManagementChapter 12: Project Procurement ManagementImportance of Project Procurement Management Planning Procurements Conducting Procurements Administering Procurements Closing Procurements Using Software to Assist in Project Procurement Management3Importance of Project Procurement Management§Procurement means acquiring goods and/or services from an outside source. §Other terms include purchasing and outsourcing. §Experts predict that global spending on computer software and services will continue to grow. §People continue to debate whether offshore outsourcing helps their own country or not.4Debates on Outsourcing§Some companies, such as Wal-Mart, prefer to do no outsourcing at all, while others do a lot of outsourcing. GM recently announced plans to switch from outsourcing 90% of IT service to only 10%. §Most organizations do some form of outsourcing to meet their IT needs and spend most money within their own country.5IT Outsourcing Market Continues to Grow§U.S. companies are transferring more work abroad, especially in the areas of IT infrastructure, application development and maintenance, and innovation processes §India, China, and the Philippines are the preferred locations for outsourcing, and Latin America is growing in popularity §A shortage of qualified personnel, not cost savings, is the top reason for global outsourcing of IT services6Why 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 accountability.7Project Procurement Management Processes§Project procurement management: Acquiring goods and services for a project from outside the performing organization. §Processes include: §Planning procurement involves determining what to procure, when, and how. §Conducting procurement involves obtaining seller responses, selecting sellers, and awarding contracts. §Administering procurements involves managing relationships with sellers, monitoring contract performance, and making changes as needed. §Closing procurements involves completion and settlement of each contract, including resolution of any open items. Project procurement management summary8Chapter 12: Project Procurement ManagementImportance of Project Procurement Management Planning Procurements Conducting Procurements Administering Procurements Closing Procurements Using Software to Assist in Project Procurement Management10Planning Procurement Management§Identifying which project needs can best be met by using products or services outside the organization§If there is no need to buy any products or services from outside the organization, then there is no need to perform any of the other procurement management processes11Contracts§ A contract is a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them§ Contracts can clarify responsibilities and sharpen focus on key deliverables of a project§ Because contracts are legally binding, there is more accountability for delivering the work as stated in the contract§ A recent trend in outsourcing is the increasing size of contracts.12Types of Contracts§Different types of contracts can be used in different situations: §Fixed price or lump sum contracts: Involve a fixed total price for a well-defined product or service §Cost reimbursable contracts: Involve payment to the seller for direct and indirect costs §Time and material contracts: Hybrid of both fixed price and cost reimbursable contracts, often used by consultants §Unit price contracts: Require the buyer to pay the seller a predetermined amount per unit of service §A single contract can actually include all four of these categories, if it makes sense for that particular procurementTools and Techniques for Planning Purchases and Acquisitions§Make-or-buy analysis: General management technique used to determine whether an organization should make or perform a particular product or service inside the organization or buy from someone else §Expert judgment §Market research13Procurement Management Plan§ Describes how the procurement processes will be managed, from developing documentation for making outside purchases or acquisitions to contract closure§ Contents varies based on project needs14Procurement Management Plan§Guidelines on types of contracts to be used in different situations §Standard procurement documents or templates to be used, if applicable §Guidelines for creating contract work breakdown structures, statements of work, and other procurement documents §Roles and responsibilities of the project team and related departments, such as the purchasing or legal department §Guidelines on using independent estimates for evaluating sellers §Suggestions on managing multiple providers §Processes for coordinating procurement decisions, such as make-or-buy 。