5th Edition PMBOK® Guide—Step 5: Memorizing Tools & Techniques (Procurement Management Knowledge Area)


 

1. Introduction

This series of posts assumes that you have already memorized the names of the 47 project management processes, and you are ready to go on to the task of memorizing the tools & techniques.    This post covers chapter 12 of the 5th Edition PMBOK® Guide, the Procurement Knowledge Area.

 

2.  Procurement Management Processes

Here is a list of the 4 procurement management processes, together with a brief description and a list of the tools & techniques used in those processes.

Process 

Number & Name

Process Description Tools & Techniques
12.1 Plan Procurements Documents project purchasing decisions, specifies the approach to procurement, identifies potential sellers. 1. Make-or-buy analysis

2. Expert judgment

3. Market research

4. Meetings

12.2 Conduct Procurements Obtains seller responses, selects a seller, awards a contract. 1. Bidder conferences

2. Proposal evaluation techniques

3. Independent estimates

4. Expert judgment

5. Advertising

6. Analytical techniques

7. Procurement negotiations

12.3 Administer Procurements Manages procurement relationships, monitors contract performance, makes changes and corrections as appropriate 1. Contract change control system

2. Procurement performance reviews

3. Inspections and audits

4. Performance reporting

5. Payment systems

6. Claims administration

7. Records management system

12.4 Close Procurements Completes each project procurement. 1. Procurement audits

2. Negotiated settlements

3. Records management system

3.   Procurement Management Tools & Techniques

Here is a closer look at the tools & techniques used in the procurement management processes.

a.  Make-or-buy analysis (12.1 Plan Procurement Management)

This decides whether a particular part of the project can be accomplished by the project team or should be purchased from outside sources.   After all, if no procurements are needed and the entire project can be done by the project team, then there is no need for procurements management.    This knowledge area is then the only truly optional knowledge area in that there are some projects for which it is not needed.

b.  Expert judgment, meetings (12.1 Plan Procurement Management, 12.2 Conduct Procurements)

By now, you should be familiar with the fact that when you doing a planning process, you are doing knowledge gathering to develop the management plan.    That’s where expert judgment comes in, by asking the people who either are expert at a certain subject matter area, in this case procurement management, or who are expert regarding procurement management with similar projects in the past.

In this case “meetings” can refer to meetings of the project team to develop the management plan, but it can also include meetings with potential bidders to exchange information, a process which is continued in the 12.2 Conduct Procurements process.

c.  Market research (12.1 Plan Procurement Management)

This is an examination of the capabilities of vendors within the industry in general, and specific vendors that would be possible candidates for vendors on this specific project.

d.  Bidder conference (12.2 Conduct Procurements)

These are meetings between the buyer and all prospective sellers prior to the submittal of a bid or a proposal.   The purpose is to ensure that all prospective sellers have an understanding of the procurement requirements before they submit their bid.

e.  Proposal evaluation techniques (12.2 Conduct Procurements)

This is the formal evaluation review process when bids are received, based on criteria that developed during the 12.1 Plan Procurement process.

f.   Independent estimates (12.2 Conduct Procurements)

One tool for evaluating the bids when they are received from prospective sellers, is to have an independent estimate of the costs of doing the work involved with the procurement.    This will give a “ballpark” figure against which to evaluate the various bids.

h.  Advertising (12.2 Conduct Procurements)

Existing lists of potential sellers can be expanded through advertisements in appropriate newspapers or specialty trade publications.

i.   Analytical techniques (12.2 Conduct Procurements)

These are ways of analyzing the vendor’s capabilities to do the work, often on the basis of past performance of that vendor on previous procurements,

j.   Procurement negotiations (12.2 Conduct Procurements, 12. 4 Close Procurements)

These negotiations are for working out the terms of the procurement agreement with sellers selected in the bidding process, in order to finalize the procurement contract.

k.  Contract change control system (12.3 Control Procurements)

This is the process by which the procurement may be modified by mutual agreement of the buyer and seller.    This contract change control system is incorporated into the integrated change control system for the project at large.

l.  Procurement performance reviews (12.3 Control Procurements)

This is a structured review of the seller’s progress during the course of the procurement to make sure that the work is progressing as per the terms of the procurement contract.

m.  Inspections and audits (12.3 Control Procurements)

These may be required by the buyer to verify compliance of the seller’s work processes and the quality of the deliverables.    The difference between this and the “procurement performance reviews” described in paragraph l above is that the procurement performance reviews may be passed passively on information supplied by the seller; the inspections and audits are more active methods of monitoring progress that are conducted by the buyer, either by the buyer’s own procurement personnel or done by independent personnel agreed upon by both parties.

n.  Performance reporting (12.3 Control Procurements)

This is ongoing reporting of the work done by the seller as compared to the agreement requirements.   It is the most passive form of monitoring of compliance in that it is simply information that is supplied on a regular basis to the buyer.    This may form the basis of the buyer’s structured procurement performance review as described in paragraph l above.

o.  Payment systems (12.3 Control Procurements)

This is the accounts payable system of the buyer, which is coordinated with the certification of satisfactory work done in accordance with the procurement contract.

p.  Claims administration (12.3 Control Procurements)

If a change is suggested in the contract control change system referred to above in paragraph k, but the change cannot be mutually agreed upon by the buyer and seller, or compensation for the change cannot be agreed upon, then this contested change becomes a “claim, dispute, or appeal” that must be resolved through an agreed upon mechanism, either through negotiations between the parties themselves or through an alternative dispute resolution (ADR) process.

q.  Records administration system (12.3 Control Procurements, 12.4 Close Procurements)

This is the management of contract and procurement documentation and records, and the system contains an archive of contract documents and correspondence.

r.  Procurement audits (12.4 Close Procurements)

This is a structured review of the procurement process at the completion of the procurement.    It differs from the “inspections and audits” referred to in paragraph m above in that it is contingent upon the satisfactory completion of the procurement contract.   The purpose is for contribution to a “lessons learned” document for future procurements.

The procurement tools and techniques to be used should be relatively straightforward as to which process they belong to; there are only a few which belong to multiple processes (such as the records administration system, used for both monitoring & controlling, and for closing the procurement).

Some of these tools & techniques will be used with most types of procurements, such as the bidder conference, whereas some tools & techniques offer a range of options for the company to choose from (such as performance reporting, inspections and audits, and structured performance reviews).

The next post will be on the LAST chapter of the 5th Edition PMBOK® Guide, namely, the 13th chapter on Stakeholder Management.   This knowledge area has been added in the 5th Edition, as an outgrowth of the Communications Knowledge area that goes beyond simply communicating with stakeholders, and actively engages them during the course of the project.

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