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In this post, I continue going through the various outputs for the Plan Procurement Management process.   The most important output is the Procurement Management Plan, from which the process gets its name.   Here are some additional outputs.

12.1.3.1  Plan Procurement Management

12.1.3.2 Procurement Strategy

Once the make-or-buy decision is complete (output 12.1.3.6) and the decision is made to acquire products or services from outside the project, a procurement strategy should be identified which includes the following three major elements.

• Delivery methods
  • For professional services, delivery methods include:  no subcontracting, subcontracting, joint venture, and representative.
  • For industrial and commercial construction, delivery methods include:  turnkey, design build (DB), design bid build (DBB), design build operate (DBO), and build own operate transfer (BOOT).
• Contract payment types
  • Fixed-price contracts:   suitable for predictable work with well-defined requirements
  • Cost-plus contracts:   suitable when work is evolving with not well-defined requirements
  • Incentive fees and awards may be used to align the objectives of buyer and seller
• Procurement phases
  • Sequencing or phasing of the procurement, with criteria for moving from phase to phase
  • Performance indicators and milestones to be used in monitoring, including monitoring and evaluation plan for tracking progress
  • Process for knowledge transfer to use in subsequent phases

12.1.3.3 Bid Documents

Bid documents are used to solicit proposals from prospective sellers.  Terms such as “bid”, “tender”, or “quotation” are used when the seller selection is based on price, and is usually used when purchasing standard items.   On the other hand, a term such as “proposal” is used when the seller selection is based on other considerations such as technical capability or technical approach, and is usually used when purchasing custom items.   Here are the types of bid documents typically used in procurements:

• Request for Information (RFI)–used when collecting information about the capabilities of various suppliers.   This is followed by one of the two following documents:
• Request for Quotation (RFQ)–when the seller selection is based on price
• Request for Proposal (RFP)–when the seller selection is based on technical capability or technical approach in addition to price

The RFP is obviously the most formal of the “request for” documents, and it includes the following:

• Description of the desired form of the response
• Relevant procurement Statement of Work (SOW) (see paragraph 12.1.3.4 below)
• Required contractual provisions

12.1.3.4  Procurement Statement of Work

In the same way that a seed contains the genetic blueprint for a plant, the SOW contains a blueprint of the procurement in the form of the definition of the project scope to be included within that procurement.   The SOW can include the following:

• Technical specifications
• Quantity desired
• Quality levels
• Performance data
• Period of performance
• Work location

Enough detail is included so that prospective sellers can determine if they are capable of providing the products, services, or results to be included in the procurement.

When contracting for services, sometimes Terms of Reference (TOR) are used in place of a Statement of Work.    A TOR can include the following:

• Tasks the contractor is required to perform
• Specified coordination requirements (delivery dates, communication methods, etc.)
• 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
• Definition of the schedule for initial submission and the review/approval time required

12.1.3.5  Source Selection Criteria

The buyer seeks to ensure that the proposals selected in response to the RFP will offer the best quality for the services required.   The PMBOK® Guide lists these in somewhat random order on p. 478.   I’m listing them below organized by the knowledge area they are most relevant to.

Integration Management

• Suitability of the knowledge transfer program, including training

Scope Management

• Adequacy of the proposed approach and work plan in responding to the SOW

Schedule Management

• Delivery dates

Cost Management

• Product cost and life cycle cost
• Financial stability of the firm

Quality Management

• Technical expertise and approach

Resource Management

• Capability and capacity
• Specific relevant experience
• Key staff’s qualifications, availability, and competence
• Management experience

Communications Management

• Local content requirements (for international projects)

The specific criteria may be a numerical score, color-code, or a written description on how well the seller satisfies the buyer’s selection criteria listed above.  The criteria form part of a weighting system that can be used to rank all the proposals by the weighted evaluation scores assigned to each proposal, and finally to select a single seller with whom the buyer will sign a contract.

12.1.3.6  Make-or-Buy Decisions

This is the result of the make-or-buy analysis (described in the post on “tools and techniques” for this process).

12.1.3.7  Independent Cost Estimates

For large procurements, the procuring organization may either prepare its own independent estimate or have a cost estimate prepared by an outside professional estimator to serve as a benchmark on proposed responses.

12.1.3.8 Change Requests

If the decision is made to procure goods, services, or resources as a result of the make-or-buy decision (see paragraph 12.1.3.6 above), then this may require a change request to the project management plan, which are then evaluated through the Perform Integrated Change Control process 4.6.

12.1.3.9  Project Document Updates

• Lessons learned register–updated with any relevant lessons regarding:
  • regulations and compliance
  • data gathering (market research)
  • data analysis (make-or-buy analysis)
  • source selection analysis
• Milestone list–shows when the sellers are expected to deliver their results
• Requirements documentation
  • Technical requirements that the seller is required to satisfy
  • Contractual and legal requirements related to the agreements, including:
    • Health
    • Safety
    • Security
    • Performance
    • Environmental
    • Insurance
    • Intellectual Property Rights
    • Equal Employment Opportunity requirements
    • License, permits
• Requirements traceability matrix–links product requirements from their origin to the deliverables that satisfy them, and indicate the owners of the requirements (who is responsible and/or accountable for them, as well as who to consult and inform when making decisions regarding them)
• Risk register–each approved seller will comes with its own unique set of risks related to one of the following:
  • Seller’s organization
  • Duration of the contract
  • External environment
  • Project delivery method
  • Type of contracting agreement chosen
  • Final agreed-upon price
• Stakeholder register–updated with any additional information on stakeholders that may have an impact on procurements, including contracting and/or legal personnel within the organization.

12.1.3.10  Organization Process Assets Updates

Information on qualified sellers is updated to the organization based on the experience gained in this process.

The documentation within the company that relates to procurements includes the following (see previous output paragraphs for details)

• Procurement Management Plan (paragraph 12.1.3.1)
• Procurement Management Strategy (paragraph 12.1.3.2)
• Statement of Work (paragraph 12.1.3.4)
• Bid Documents (paragraph 12.1.3.3)

There is a summary table 12-1 of all the contents of these documents on p. 461 of the PMBOK® Guide.

And that covers the remaining outputs for the process 12.1 Plan Procurement Management.   The next process, 12.2 Conduct Procurements, is in the Executing process group, and the inputs to this process are covered in the next post.

 

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