Project Procurement Management Details - Part2 Regardless of the project, when procurement results in hiring vendors who will complete all or some of the work on a project, Project managers need to understand their role in the procurement process. This presentation summarizes important procurement concepts, vendor selection process and contracting process.

1. By: Anand Bobade (nmbobade@gmail.com)
PMBOK Chap 12 – Project Procurement Management
The processes necessary to purchase or acquire product, services,
or results needed from outside the project team.
Initiating Planning Executing Monitoring &
Controlling
Closing
Plan Procurement
Management
Conduct
Procurement
Control
Procurement
Close Procurement
We cannot solve our problems with the same thinking we used when we created
them.
- Albert Einstein
Detailed
Part-2

2. By: Anand Bobade (nmbobade@gmail.com)
Introduction – Procurement Management Processes
12.1 Plan Procurement Management
• The process of documenting project procurement decisions,
specifying the approach, and identifying potential sellers.
12.2 Conduct Procurement
• The process of obtaining seller responses, selecting a seller, and
awarding a contract.
12.3 Control Procurement
• The process of managing procurement relationships, monitoring
contract performance, and making changes and corrections to
contracts as appropriate
12.4 Close Procurement
• The process of completing each procurement.

3. By: Anand Bobade (nmbobade@gmail.com)
Controlling Procurement
PM is
responsible
for
Manage
relationship
Document
Performance
Monitor and
communicate
variance
Manage
Changes

4. By: Anand Bobade (nmbobade@gmail.com)
The process of managing procurement relationships,
monitoring contract performance, and making changes
and corrections to contracts as appropriate.
It ensures both seller’s & buyer’s performance meets
procurement requirements according to agreement.
Managing
procurement
relationships
Monitoring
contract
performance
Making
changes and corrections
to contracts
12.3 Control Procurement

5. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement
Buyer ensure that they follow through
on their own obligations.
Quality will suffer if obligations are
not met.
Schedule/cost will impact if obligation
are not meet.
Process will ensure adherence to
contract/agreements.
Buyers Obligation

6. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement
Major processes where Buyer to focus:
• Monitor technical
performance
Technical:
Scope
Management:
• Ensure seller meets
agreed milestones
Schedule:
time
Management:
• Ensure project cost is
within the Budget
Budget:
Cost
Management:
• Continually Verify Seller
delivers agreed quality
Verification:
Quality
Management
• Contract risk has to be
mitigated.
Risk Mitigation:
Risk Management:

7. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement
Multiple Sellers scenario
Buyer
Seller1
(Buyer for
Seller3)
Seller3
Seller2
Seller 1:
Setup IT infrastructure
Seller2 - Develops
application
Seller 3 –
Data Center setup

8. By: Anand Bobade (nmbobade@gmail.com)
Inputs (6)
• PMP
• Procurement
documents
• Agreements
• Approved change
requests
• Work performance
reports
• Work performance
data
Tools &
Techniques(7)
• Contract change
control system
• Procurement
performance reviews
• Inspections and audits
• Performance
reporting
• Payment systems
• Claims administration
• Records management
system
Outputs(5)
• Work performance
information
• Change requests
• Project management
plan updates
• Project documents
updates
• OPA updates
By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement -> ITTO

9. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Input
PMP
Procurement
documents
Agreements
Approved Change
Requests
Work
Performance
Reports
Work
Performance
Data

10. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Input->Procurement Doc’s
Procurement
documents
Contract
Contract
Amendments
Contract
Addendums
Technical
documentation
User Manual Invoices
Payment
records
Contract related documents:

11. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Input->WPD
Work
Performance
Data
The raw observations & measurements related to
contract & activities performed as per contract.
Deliverables
produced
Cost - committed Vs
incurred
Seller invoices
(submitted, paid)
Quality standards
Cost Invoices
Deliverables Quality
Direct and Manage Project work

12. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Input-> Work Performance Reports
Work
Performance
Reports
The physical or electronic representation of work performance
information compiled as reports, to generate decisions, actions,
or awareness.
Generated reports - IT system generated / Physical
Seller performance related documents
Technical documentation
Work Performance information
Monitor & Control Project work Control Procurement

13. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Input -> Approved Change Requests
Approved Change
Requests
A change request that has been processed through the
integrated change control process and approved.
Due to change in :
Business
requirement
Technical
specification
Schedule,
Milestone
Cost Contract

14. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T
Contract Change
Control System
Procurement
Performance
Reviews
Inspections and
audits
Performance
Reporting
Payment Systems Claims
Administration
Records
Management
System

15. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T
Inspections and
audits
Procurement
Performance Reviews
Performance
Reporting
Inspect
Control
Records
Management
System
Payment Systems
Contract Change
Control System
Claims
Administration
General Categorization (Not as per PMBOK):

16. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T->Record Management System
Records
Management
System
Processes & tools that are combined to record and
retain information about the project.
Maintain all Contract related
correspondence
Contract version control
(Amendments/Addendums)
Repository of all contract/dispute
resolution information
It acts as document archive

17. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T->Payment System
Payment Systems
Oracle financials Microsoft Dynamics
Payment is processed accordance with the terms of the contract.
Payment is done only after approval of satisfactory work by an
project team.
Ensure compliance with agreement
The system used to provide and track supplier's
invoices and payments for services and products.

18. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T->Inspection & Audits
Inspections and
audits
The system used to provide and track supplier's
invoices and payments for services and products.
Inspect seller deliverables.
Audit Seller processes.
Verify compliance with contract
Verify any weakness in process

19. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T-> Procurement Performance Reviews
Procurement
Performance
Reviews
Structured review of seller’s progress to deliver
project scope & quality, within cost & on schedule.
Performance review objective :
To identify seller’s
performance
• Successes or failures
• Progress with respect to
the Procurement SOW
• Contract noncompliance
Allow the buyer to quantify
• Seller’s demonstrated
ability
• Inability to perform work.
Review of:
Seller‐prepared
documentation
Buyer inspections
Quality audits
conducted

20. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T->Performance Reporting
Performance
Reporting
It’s WPI, compiled as reports, to generate decisions,
actions, or awareness.
Similar to work performance reports, however focus
is on contractual performance.
Evaluate sellers work
performance
Verify sellers processes
& deliverable
compliance

21. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T->CCCS
Contract Change
Control System
Defines process to modify procurement.
Component of Integrated change control system:
Changes will be Documented Tracked Approved Arbitrate Communicated
The system used to collect, track, arbitrate, and
communicate changes to a contract.
Oracle’s Primavera Contract
Management
Microsoft SharePoint based Contract
Management

22. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement-> T&T->Claim Administration
Claims
Administration
The process of processing, adjudicating, and
communicating contract claims.
Claim administrations helps PM to solves
disputes. Disputes in large projects with
multiple sellers can be very complex.
Manage according to the terms of contract.
Follow documented procedures.
If not resolved follow alternative dispute resolution
(ADR)
How to
resolve
disputes

23. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Output
Work Performance
Information
Change Requests PMP Updates
Project Documents
Updates
OPA Updates

24. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Output->WPI
Work
Performance
Information
Performance data collected from various controlling
processes and analyzed in contractual context.
Work
Performance
Data,
Work
Performance
Reports
Control Procurement T&T -
Inspections and audits,
Change Control system,
Performance Review
(Generates data)
Work
Performance
Information

25. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Output->change Request
Change Requests
Processed
through
Integrated
Change Control
Requested but
unresolved
changes which
are documented
leads to disputes.
Change requests
going through
disputes are not
implemented.
A formal proposal to modify any document,
deliverable, or baseline.

26. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Output-> PMP Updates
PMP Updates
Update Project
Management
plan related
documents.
Update
Procurement
Management
plan
Update
schedule
(Milestones &
Delivery dates )

27. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement ->Output->OPA Updates
OPA Updates
Sellers Performance record, Preferred seller list.
Correspondence with seller.
Lesson Learned

28. By: Anand Bobade (nmbobade@gmail.com)
12.3 Control Procurement -> Process Flow

29. By: Anand Bobade (nmbobade@gmail.com)
Introduction – Procurement Management Processes
12.1 Plan Procurement Management
• The process of documenting project procurement decisions,
specifying the approach, and identifying potential sellers.
12.2 Conduct Procurement
• The process of obtaining seller responses, selecting a seller, and
awarding a contract.
12.3 Control Procurement
• The process of managing procurement relationships, monitoring
contract performance, and making changes and corrections to
contracts as appropriate
12.4 Close Procurement
• The process of completing each procurement.

30. By: Anand Bobade (nmbobade@gmail.com)
Procurement 1
Procurement 2
Individual
procurement
Closure
12.4 Close Procurement
The process of completing each procurement.
It documents agreements and related documentation
for future reference.

31. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement
Early
Termination
Partial
Termination
Termination for
a Cause
Termination for
Convenience
When to end an Agreement:
Seller is delivering as planned/Agreed
Long Silence from both parties is not a termination
Notice is required to initiate termination
Awareness & abiding by terms and conditions is
required
Complete all administrative task before termination

32. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> ITTO
Inputs (2)
• Project
Management Plan
• Procurement
Documents
Tools &
Techniques(3)
• Procurement
Audits
• Procurement
Negotiations
• Records
Management
System
Outputs(2)
• Closed
Procurements
• OPA Updates

33. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement ->Inputs
PMP
Procurement
documents

34. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> Inputs -> PMP
Procurement Management plan
Closure details & Guidelines
PMP

35. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> Inputs -> Proc. Documents
Procurement
documents
Procurement documents, Lesson Learned
Contractual agreement documents

36. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> T&T
Procurement
Audits
Procurement
Negotiations
Records
Management
System

37. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> T&T->Procurement Audits
Procurement
Audits
Structured review of procurement process originating from
Plan Procurements through Administer Procurements.
Examine & evaluate
How was the execution
Procurement Audits
Was it a best contract?
List of success & failures
Is the changes implemented correctly?

38. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> T&T->Procurement Negotiations
Procurement
Negotiations
Primary Goal is to final equitable
settlement of all outstanding issues,
claims, and disputes by negotiation.
Alternative dispute resolution ( ADR) )
including mediation or arbitration may
be explored if it cant be settled by direct
negotiations.
When all else fails, litigation in the courts
is the least desirable option.

39. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> T&T->Records Management System
Records
Management
System
Processes & tools that are combined to record and
retain information about the project.
Maintain all Contract related
correspondence
Contract version control
(Amendments/Addendums)
Repository of all contract/dispute
resolution information
It acts as document archive

40. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement ->Output
Closed
Procurements
OPA Updates

41. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement ->Output->Close Procurement
Closed
Procurements
Closure has to be signed by person with appropriate
authority
Follows the process agreed in procurement
management plan
Formal notice is required

42. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement ->Output->OPA Updates
OPA Updates
Update procurement documents with final notice &
contract closure
Update with Acceptance or non-compliance details
Update Lessons learned

43. By: Anand Bobade (nmbobade@gmail.com)
12.4 Close Procurement -> Process Flow

44. By: Anand Bobade (nmbobade@gmail.com)

45. By: Anand Bobade (nmbobade@gmail.com)
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