Chapter 18
Executing Procurement Management
TOPICS COVERED
Conduct Procurements
Conduct Procurements
Conduct Procurements is the process of obtaining seller responses, selecting a seller, and awarding a contract. You may notice that some of the inputs and tools and techniques from the Conduct Procurements process should occur in sequence as opposed to simultaneously. For example, in the inputs you have procurement documents and seller proposals. In the tools and techniques you have a bidder conference and proposal evaluation techniques. You will need the input of the qualified seller list and the procurement documents before you have the bidder conference. After you receive the seller proposals (another input), you will apply proposal evaluation techniques. If the topic of procurements is new to you, this may be confusing. I have tried to make it as logical as possible to help you understand all the events that happen when conducting procurement and the order in which they occur.
Figure 18-1 shows the inputs, tools and techniques and outputs for the Conduct Procurements process. Figure 18-2 shows a data flow diagram for the Conduct Procurements process.
Figure 18-1 Conduct Procurements: Inputs, Tools and Techniques, Outputs
Source: PMBOK® Guide—Fifth Edition
Figure 18-2 Conduct Procurements Data Flow Diagram
Source: PMBOK® Guide—Fifth Edition
INPUTS
The procurement management ...
The outputs for this process should be obvious given the tools and techniques such as Bidder Conferences and Proposal Evaluation discussed in the last post: the list of selected sellers as a result, and of course the agreements themselves. NOTE: for some reason, PMI likes to refer to contracts as “agreements” in this 6th Edition of the PMBOK® Guide.
Then the procurements needed to fitted into the overall project, by making change requests to the project management plan, and if approved, incorporating those changes into the plan and any relevant project documents.
12.2.3 Conduct Procurements: Outputs
12.2.3.1 Selected Sellers
Based on the proposal or bid evaluation, the selected sellers are those who have been judged to be in a competitive range. There may be some procurements which are complex, high-value, or high-risk which may require the approve of senior management approval (specification of these thresholds of approval should be specified in the Procurement Management Plan).
12.2.3.2 Agreements
A contract is a mutually binding agreement between the seller and the buyer:
- the seller is obligated to provide the specified product, service, or result under the specified conditions
- the buyer is obligated to compensate the buyer according to the specified amount (and specified conditions, as in the case of an incentive or award fee)
This binds each party legally; if one side contests thinks that the other side has broken the agreement, it may to be handled through alternative dispute resolution (ADR) if negotiations between parties break down. If ADR does not resolve the issue, then as a result each party may file a lawsuit and take the other party to court. But the only basis for taking the matter to court is the contract.
Okay, what’s in an agreement? Let’s break it down by knowledge area:
Integration management
- Performance reporting
- Change request handling
Scope management
- Procurement statement of work (or major deliverables)
Schedule management
- Schedule, milestones, or date by which a schedule is required
Cost management
- Pricing and payment terms
- Incentives and penalties
Quality management
- Inspection, quality, and acceptance criteria
- Warranty and future product support
Procurement management
- Insurance and performance bonds
- Subordinate subcontractor approvals
- General terms and conditions
- Termination clause and alternative dispute resolution (ADR) mechanisms
12.2.3.3 Change requests
The procurements of agreed-upon sellers will necessarily add to the original project management plan, based on what the buyer can do alone. These change requests are sent on to process 4.3 Perform Integrated Change Control. If approved, then the content of those requests are added to the project management plan (see next paragraph 12.2.3.4) and any relevant project documents (see paragraph 12.2.3.5).
12.2.3.4 Project Management Plan Updates
As mentioned in the post on inputs, not only the procurement management plan component of the overall project management plan, but other components such as the management plans of other knowledge areas and the project baselines (scope, schedule and scope) will be updated as a result of changes that are approved (see paragraph 12.2.3.3).
Here are the components that may be updated as a result of change requests coming from procurements.
- Requirements management plan–project requirements may be updated due to changes identified by sellers.
- Quality management plan–sellers may offer alternative quality standards or alternative solutions that impact the quality approaches defined in the original quality management plan.
- Communications management plan–the communications management is updated to incorporate the communications needs and approaches of sellers.
- Risk management updates–each agreement and seller has its own set of risks that may require updates to the risk management plan. Specific risks are incorporated into the risk register (see project document updates in paragraph 12.2.3.5)
- Procurement management plan–the results of the contracting and negotiations process are added to the procurement management plan.
- Scope baseline–the project WBS and deliverables documented in the scope baseline are considered when performing procurement activities.
- Schedule baseline–if delivery deadline changes are created by sellers that impact overall project schedule performance, the baseline schedule may need to be updated and approved to reflect the current expectations.
- Cost baseline–The price of contractors and materials may change during the delivery of a project. These changes can occur because of the fluctuating cost of materials and labor created by the external economic environment and need to be incorporated into the cost baseline.
12.2.3.5 Project Document Updates
Here are the project documents that may need to be updated as a result of this process.
- Lessons learned register–in a similar way as with all processes, any information or challenges encountered while conducting procurements and how they could have been avoided, as well as approaches that worked well.
- Requirements documentation–this may include:
- Technical requirements that the seller is required to satisfy;
- Requirements with contractual and legal implications
- Requirements traceability matrix–the requirements register and the traceability matrix may change depending on the capabilities of the specific seller.
- Resource calendar–schedule resource calendars may be needed to be updated depending on the availability of the sellers
- Risk register–risk related to the approved sellers are added to the register, including those related to:
- The seller’s organization
- The duration of the contract
- The external environment
- The project delivery method
- Type of contracting vehicle chosen (fixed-cost or cost-reimbursable)
- Final agreed-upon price
- Stakeholder register–updates are made to the register regarding those stakeholders who are influenced by or who have influence on agreements that are made with specific sellers.
12.2.3.6 Organizational Process Assets Updates
As typical with many processes, the inputs include Environmental Enterprise Factors (external and not just control of the organization) as well as Organizational Process Assets (internal and under control of the organization), but the outputs are confined to updates to the Organizational Process Assets, such as:
- Listings of prospective and prequalified sellers may be updated with the list of new sellers identified as a result of this process
- Information on relevant experience with sellers, both good and bad, is added as the procurement proceeds
The final process is 12.3 Control Procurements, which covers monitoring, controlling, and closing the procurement when it is completed.
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