Blog Project Management Procurement Management – Part 2

Procurement Management – Part 2

Control Procurement

Control Procurements is the process of managing procurement relationships, monitoring contract performance, and making changes and corrections as needed. Both the buyer and the seller will administer the procurement contract for similar purposes. Each must ensure that both parties meet their contractual obligations and that their own legal rights are protected. The Administer Procurements process ensures that the seller’s performance meets procurement requirements and that the buyer performs according to the terms of the legal agreement.

Control Procurements includes application of the appropriate project management processes to the contractual relationship(s) and integration of the outputs from these processes into the overall management of the project.

Control Procurements also has a financial management component that involves monitoring payments to the seller. This ensures that payment terms defined within the contract are met and that seller compensation is linked to seller progress, as defined in the contract. One of the principal concerns when making payments to suppliers is that there is a close relationship of payments made to the work accomplished

Inputs

Tools & Techniques

Outputs

  • Project Management plan
  • Procurement documents
  • Agreements
  • Approved change request
  • Work performance reports
  • Work performance data
  • Contract change control system
  • Procurement performance reviews
  • Inspection and audits
  • Performance reporting
  • Payment systems
  • Claim administration
  • Records management system
  • Work performance information
  • Change requests
  • Project management plan updates
  • Project documents updates
  • Organizational process assets updates

Inputs

Project Management plan
The Project management plan describes the need, justification, requirements and current boundaries for the project. It includes:

Project Scope Statement: It contains product scope description, service description and result description, the list of deliverables, and acceptance criteria, as well as important information regarding technical issues or concerns that could impact cost estimating, identified constraints may include required delivery dates, available skilled resources and organizational policies.

WBS: Components of work that may be resources internally.

WBS dictionary: The WBS dictionary and related detailed statement of work provide identification of the deliverables and a description of the work in each WBS component required to produce each deliverables.

Procurement documents

Procurement documents contain complete supporting records for administration of the procurement processes. This includes procurement contract awards and the statement of work.

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Agreements

A document that includes terms and condition and other items that buyer specifies regarding what seller is to perform or provide.

Approved change request

Approved change requests can include modifications to the terms and conditions of the contract including the procurement statement of work, pricing, and description of the products, services, or results to be provided.

Work performance reports

Work performance reports including the extent to which quality standards are being satisfied, what costs have been incurred or committed, and which seller invoices have been paid, are all collected as part of project execution.

A work performance report includes:

  • Technical Documentation: Seller-developed technical documentation and other deliverable information provided in accordance with the terms of the contract.
  • Work performance information: indicate which deliverables have been completed and which have not.

Work performance data

Work performance data includes

  • The extent to which quality standards are being satisfied
  • The cost that have been incurred or committed
  • Identification of seller invoices that have been paid

Tools & Techniques

Contract change control system

A contract change control system defines the process by which the procurement can be modified. It includes the paperwork, tracking systems, dispute resolution procedures, and approval levels necessary for authorizing changes. The contract change control system is integrated with the integrated change control system.

Procurement performance reviews

A procurement performance review is a structured review of the seller’s progress to deliver project scope and quality, within cost and on schedule, as compared to the contract. It can include a review of seller-prepared documentation and buyer inspections, as well as quality audits conducted during seller’s execution of the work.

Inspection and audits

Inspections and audits required by the buyer and supported by the seller as specified in the procurement contract can be conducted during execution of the project to verify compliance in the seller’s work processes or deliverables. If authorized by contract, some inspection and audit teams can include buyer procurement personnel.

Performance reporting

Performance reporting provides management with information about how effectively the seller is achieving the contractual objectives.

Payment systems

Payments to the seller are typically processed by the accounts payable system of the buyer after certification of satisfactory work by an authorized person on the project team. All payments should be made and documented in strict accordance with the terms of the contract.

Claim administration

Contested changes and potential constructive changes are those requested changes where the buyer and seller cannot reach an agreement on compensation for the change, or cannot agree that a change has occurred. These contested changes are variously called claims, disputes, or appeals. Claims are documented, processed, monitored, and managed throughout the contract life cycle, usually in accordance with the terms of the contract. If the parties themselves do not resolve a claim, it may have to be handled in accordance with alternative dispute resolution (ADR) typically following procedures established in the contract.

Records management system

A records management system is used by the project manager to manage contract and procurement documentation and records. It consists of a specific set of processes, related control functions, and automation tools that are consolidated and combined as part of the project management information system.

Outputs

Work performance information

It provides a basis for identification of current or potential problem to support later claims or new procurements. Performance information increase knowledge of the performance of the procurement, which support improved forecasting, risk management and decision making, reports also assist if there is dispute with the vendor.

Change requests

Change requests to the project management plan, its subsidiary plans and other components, such as the cost baseline, project schedule and procurement management plan, may result from the Administer Procurements process. Change requests are processed for review and approval through the Perform Integrated Change Control process.

Project management plan updates

Following element of the project management plan that may be updated includes:

  • Procurement management plan: The procurement management plan is updated to reflect any approved change requests that affect procurement management, including impacts to costs or schedules.
  • Baseline schedule: If there are slippages that impact overall project performance, the baseline schedule may need to be updated to reflect the current expectations.

Project documents updates

Organizational process assets updates

Elements of the organizational process assets that may be updated include, but are not limited to:

Correspondence: Contract terms and conditions often require written documentation of certain aspects of buyer/seller communications, such as the need for warnings of unsatisfactory performance and requests for contract changes or clarification.

Payment schedules and requests: All payments should be made in accordance with the procurement contract terms and conditions.

Seller performance evaluation documentation: Seller performance evaluation documentation is prepared by the buyer. Such performance evaluations document the seller’s ability to continue to perform work on the current contract, indicate if the seller can be allowed to perform work on future projects, or rate how well the seller is performing the project work.

Close Procurement

Close procurement is the process of completing each procurement.  This process documents agreements and related documentation for future reference. This process involves activities like Finalizing open claims, records updating and archiving information for future use. In case of termination of project procurement closure that can result from a mutual agreement by both parties.

Additionally, it is important that all documents regarding change orders and other related details are organized and delivered with any other reports regarding the final product. When closing out a project, it is important to make a good record of any changes in procedure that might be helpful in any of your future projects. Keeping good personal records on projects can

This process involves activities like Finalizing open claims, records updating and archiving information for future use. In case of termination of project procurement closure that can result from a mutual agreement by both parties.

Additionally, it is important that all documents regarding change orders and other related details are organized and delivered with any other reports regarding the final product. When closing out a project, it is important to make a good record of any changes in procedure that might be helpful in any of your future projects. Keeping good personal records on projects can help identify areas where advanced training, or professional mentoring might bolster already strong project management skills.

Inputs

Tools & Techniques

Outputs

  • Project Management Plan
  • Procurement documents
  • Procurement Audit
  • Procurement negotiation
  • Records management system
  • Closed procurements
  • Organizational process asset updates

Inputs

Project Management Plan

The Project management plan describes the need, justification, requirements and current boundaries for the project. It includes:

Project Scope Statement: It contains product scope description, service description and result description, the list of deliverables, and acceptance criteria, as well as important information regarding technical issues or concerns that could impact cost estimating, identified constraints may include required delivery dates, available skilled resources and organizational policies.

WBS: Components of work that may be resources internally.

WBS dictionary: The WBS dictionary and related detailed statement of work provide identification of the deliverables and a description of the work in each WBS component required to produce each deliverables.

Procurement documents

To close the contract, all procurement documentation is collected, indexed, and filed. Information on contract schedule, scope, quality, and cost performance along with all contract change documentation, payment records, and inspection results are cataloged. This information can be used for lessons learned information and as a basis for evaluating contractors for future contracts.

Tools & Techniques

Procurement Audit

A procurement audit is a structured review of the procurement process originating from the Plan Procurements process through Administer Procurements. The objective of a procurement audit is to identify successes and failures that warrant recognition in the preparation or administration of other procurement contracts on the project, or on other projects within the performing organization.

Procurement negotiation

In all procurement relationships the final equitable settlement of all outstanding issues, claims, and disputes by negotiation is a primary goal. Whenever settlement cannot be achieved through direct negotiation, some form of alternative dispute resolution (ADR) including mediation or arbitration may be explored. When all else fails, litigation in the courts is the least desirable option.

Records management system

A records management system is used by the project manager to manage contract and procurement documentation and records. It consists of a specific set of processes, related control functions, and automation tools that are consolidated and combined as part of the project management information system.

Outputs

Closed procurements

The buyer, usually through its authorized procurement administrator, provides the seller with formal written notice that the contract has been completed. Requirements for formal procurement closure are usually defined in the terms and conditions of the contract and are included in the procurement management plan.

Organizational process asset updates

Following Elements of the organizational process assets that may be updated includes:

Procurement file: A complete set of indexed contract documentation, including the closed contract, is prepared for inclusion with the final project files.

Deliverable acceptance: The buyer, usually through its authorized procurement administrator, provides the seller with formal written notice that the deliverables have been accepted or rejected. Requirements for formal deliverable acceptance, and how to address non-conforming deliverables, are usually defined in the contract.

Lessons learned documentation: Lessons learned, what has been experienced, and process improvement recommendations should be developed for the project file to improve future procurements.

Questions & Answers

  1. Once signed, a contract is legally binding unless:
    • A. One party is unable to perform.
    • B. One party is unable to finance its part of the work.
    • C. It is in violation of applicable law.
    • D. It is declared null and void by either party’s legal counsel.

    Correct Answer: C

  2. With a clear contract statement of work, a seller completes work as specified, but the buyer is not pleased with the results. The contract is considered to be:
    • A. Null and void.
    • B. Incomplete.
    • C. Complete.
    • D. Waived.

    Correct Answer: C

  3. All of the following statements concerning procurement documents are incorrect EXCEPT:
    • A. Well-designed procurement documents can simplify comparison of responses.
    • B. Procurement documents must be rigorous with no flexibility to allow consideration of seller suggestions.
    • C. In general, bid documents should not include evaluation criteria.
    • D. Well-designed procurement documents do not include a procurement statement of work.

    Correct Answer: A

  4. A project manager for the seller is told by her management that the project should do whatever possible to be awarded incentive money. The primary objective of incentive clauses in a contract is to:
    • A. Reduce costs for the buyer.
    • B. Help the seller control costs.
    • C. Synchronize objectives.
    • D. Reduce risk for the seller by shifting risk to the buyer.

    Correct Answer: C

  5. All the following statements about change control are incorrect EXCEPT:
    • A. A fixed price contract will minimize the need for change control.
    • B. Changes seldom provide real benefits to the project.
    • C. Contracts should include procedures to accommodate changes.
    • D. More detailed specifications eliminate the causes of changes.

    Correct Answer: C

  6. A routine audit of a cost reimbursable (CR) contract determines that overcharges are being made. If the contract does not specify corrective action, the buyer should:
    • A. Continue to make project payments.
    • B. Halt payments until the problem is corrected.
    • C. Void the contract and start legal action to recover overpayments.
    • D. Change the contract to require more frequent audits.

    Correct Answer: A

  7. The primary objective of contract negotiations is to:
    • A. Get the most from the other side.
    • B. Protect the relationship.
    • C. Get the highest monetary return.
    • D. Define objectives and stick to them.

    Correct Answer: B

  8. A seller is working on a cost reimbursable (CR) contract when the buyer decides he would like to expand the scope of services and change to a fixed price (FP) contract. All of the following are the seller’s options EXPECT:
    • A. Completing the original work on a cost reimbursable basis and then negotiating a fixed price for the additional work.
    • B. Completing the original work and rejecting the additional work.
    • C. Negotiating a fixed price contract that includes all the work.
    • D. Starting over with a new contract.

    Correct Answer: D

  9. All of the following MUST be present to have a contract EXCEPT:
    • A. Procurement statement of work.
    • B. Acceptance.
    • C. Address of the seller
    • D. Buyer’s signature.

    Correct Answer: C

  10. Bidder Conferences are part of:
    • A. Plan Procurements.
    • B. Administer Procurements.
    • C. Conduct Procurements.
    • D. Communications Management.

    Correct Answer: C

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About Mark Oswald

Mark is an experienced software engineer and technology blogger. He has over five years of experience in writing in different technological domains. Writing is his passion and he contributes regularly to the Whizlabs blog to share his knowledge.
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