procurement management presentation - dphuprocurement management plan (updates) inputs outputs tools...
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Project Procurement ManagementProject Procurement Management
Presented by:
Michael G. Judd, Ph.D., M.P.A., PMPAdjunct Professor of Project Management
Computer Information Systems DepartmentBrigham Young University- Idaho
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Michael G. Judd Michael G. Judd EducationEducation
Post Doctoral Diploma in Defense Program ManagementPost Doctoral Diploma in Defense Program ManagementPh.D. Engineering ManagementPh.D. Engineering ManagementMasters of Public AdministrationMasters of Public AdministrationBachelors of Science in Criminal JusticeBachelors of Science in Criminal Justice
Professional CertificationsProfessional CertificationsCertified Project Management ProfessionalCertified Project Management ProfessionalMember of the Army Acquisition CorpsMember of the Army Acquisition CorpsCertified Project Manager with U.S. Department of EnergyCertified Project Manager with U.S. Department of Energy
Professional RecognitionProfessional RecognitionOutstanding Young Men of AmericaOutstanding Young Men of America--19871987United WhoUnited Who’’s Who in Executives & Professionalss Who in Executives & Professionals-- 20032003--20072007
ExperienceExperienceRetired from Federal Government after 27 yearsRetired from Federal Government after 27 yearsSenior level positions includes:Senior level positions includes:
Executive Office of the President (U.S.) Executive Office of the President (U.S.) –– Department of AdministrationDepartment of AdministrationDOE Liaison to the Under Secretary Defense (Environmental SecuriDOE Liaison to the Under Secretary Defense (Environmental Security)ty)DOE Principle Investigator and member of the DOE Principle Investigator and member of the ““PaldiskiPaldiski International Expert Reference GroupInternational Expert Reference Group”” PIERGPIERGProgram AnalystProgram Analyst-- Air , Space, and Land Combat SystemsAir , Space, and Land Combat Systems-- U.S. Department of ArmyU.S. Department of ArmyProgram ManagerProgram Manager-- DOE Environmental Security OfficeDOE Environmental Security OfficeVice President (Education and Certification) Project Management Vice President (Education and Certification) Project Management InstituteInstitute’’ss--College of Performance College of Performance ManagementManagementProject ManagerProject Manager-- National and Environmental Security SystemsNational and Environmental Security SystemsProject Control ManagerProject Control Manager-- Multiple Major System Acquisition ProjectsMultiple Major System Acquisition ProjectsProfessor of Program Management Professor of Program Management –– U.S. Department of DefenseU.S. Department of Defense-- Defense Acquisition UniversityDefense Acquisition UniversityProfessor of Project Management (Adjunct Faculty) Brigham Young Professor of Project Management (Adjunct Faculty) Brigham Young UniversityUniversity--IdahoIdaho
Introduction
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Procurement Terms & ConceptsProcurement Terms & Concepts
Review Review PMBOKPMBOK’’ss Procurement Procurement Process GroupsProcess Groups
Current Issues in Procurement Current Issues in Procurement ManagementManagement
Questions and AnswersQuestions and Answers
OutlineOutline
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Procurement Terms and Concepts
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The fancy word for "The fancy word for "purchasingpurchasing." The ." The procurement department within an procurement department within an organization manages all the major organization manages all the major purchases.purchases.
ProcurementProcurement
Source: www.answer.com
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““The document that describes how procurement The document that describes how procurement processes from developing procurement processes from developing procurement documentation through contract closure will be documentation through contract closure will be managed.managed.””
Procurement PlanProcurement Plan
Source: PMBOK 3rd Edition, P. 367
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““A business decision that compares the A business decision that compares the costs and benefits of manufacturing a costs and benefits of manufacturing a product or product component against product or product component against purchasing itpurchasing it…”…”
MakeMake--oror--Buy DecisionBuy Decision
Source: www.answer.com
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““The process of managing the contract and the The process of managing the contract and the relationship between the buyer and seller, relationship between the buyer and seller, managing contract related changes and, when managing contract related changes and, when appropriate, managing the contractual relationship appropriate, managing the contractual relationship with the outside buyer of the project.with the outside buyer of the project.””
Contract AdministrationContract Administration
Source: PMBOK 3rd Edition, p.355
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“…“…Refers to a method of soliciting offers Refers to a method of soliciting offers and are used when and are used when negotiations are not negotiations are not anticipatedanticipated. Bids are typically read aloud in . Bids are typically read aloud in public at the time and place specified in the public at the time and place specified in the solicitation.solicitation.””
Invitation For BidInvitation For Bid
Source: U.S. Army Contracting Agency Customer Desk-side Dictionary
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“…“… A type of solicitation that is used A type of solicitation that is used typically with large dollar contracts when typically with large dollar contracts when negotiations are anticipatednegotiations are anticipated. Offers in . Offers in response to response to RFPsRFPs can be accepted without can be accepted without negotiations and become legally binding.negotiations and become legally binding.””
Request For ProposalRequest For Proposal
Source: U.S. Army Contracting Agency Customer Desk-side Dictionary
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AA contractcontract isis a mutually a mutually binding agreementbinding agreement that that obligates the obligates the sellerseller to provide the specified to provide the specified products products or or servicesservices -- obligating the obligating the buyer buyer to pay for them.to pay for them.
Contracts should Contracts should clarify responsibilitiesclarify responsibilities and define and define key deliverableskey deliverables..
Contracts are used because they are Contracts are used because they are legally legally bindingbinding, there is more , there is more accountabilityaccountability!!
There is aThere is a trendtrend to to outsourceoutsource work! work!
The The ““ContractContract””
Source: IT Project Management-Schwabe 2006
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Fixed Price (Lump Sum) Contracts:Fixed Price (Lump Sum) Contracts:Firm Fixed PriceFirm Fixed Price
Fixed Price Incentive FeeFixed Price Incentive Fee
Cost ReimbursementCost ReimbursementCost Plus Award Fee (CPAF)Cost Plus Award Fee (CPAF)
Cost Plus Fixed Fee (CPFF)Cost Plus Fixed Fee (CPFF)
Cost Plus Incentive Fee (CPIF)Cost Plus Incentive Fee (CPIF)
Cost Plus Percentage of Cost (CPPC)Cost Plus Percentage of Cost (CPPC)-- [Feds don[Feds don’’t use]t use]
Time and MaterialsTime and Materials
Contract TypesContract Types
Source: PMBOK 3rd Edition, P. 277&278
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““A narrative description of products, services, or A narrative description of products, services, or results to be supplied.results to be supplied.””
Statement of Work (SOW)Statement of Work (SOW)
Source: PMBOK, 3rd Edition, P. 376
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PMI’s PMBOK: Procurement Process Groups
Copyright: JSPMCopyright: JSPMCopyright: JSPM---200720072007
Inputs Outputs
Tools & Techniques
12.112.1-- Plan Purchases Plan Purchases And Acquisitions And Acquisitions Process Group:
Enterprise environmental factorsEnterprise environmental factorsProcurement management planProcurement management plan
MakeMake--oror--buy analysisbuy analysis
WBS dictionaryWBS dictionary
Work breakdown structureWork breakdown structure
Project scope statementProject scope statement
Organizational process assetsOrganizational process assets
Requested changesRequested changes
MakeMake--oror--buy decisionsbuy decisions
Contract statement of workContract statement of work
Contract typesContract types
Expert judgmentExpert judgment
Project management planProject management plan
••Risk registerRisk register
••RiskRisk--related contractual related contractual agreementsagreements
••Resource requirementsResource requirements
••Project scheduleProject schedule
••Activity cost estimatesActivity cost estimates
••Cost baselineCost baseline
Copyright: JSPMCopyright: JSPMCopyright: JSPM---200720072007
Inputs Outputs
Tools & Techniques
12.212.2-- Plan ContractPlan ContractProcess Group:
Procurement management planProcurement management plan Procurement documentsProcurement documents
Standard formsStandard forms
••Risk registerRisk register••RiskRisk--related contractual related contractual agreementsagreements••Resource requirementsResource requirements••Project scheduleProject schedule••Activity cost estimateActivity cost estimate••Cost baselineCost baseline
Project management plan Project management plan
MakeMake--oror--buy decisionsbuy decisions
Contract statement of workContract statement of work
Contract statement of work (updates)Contract statement of work (updates)
Evaluation criteriaEvaluation criteria
Expert judgmentExpert judgment
Inputs Outputs
Tools & Techniques
12.312.3-- Request Seller Request Seller ResponsesResponsesProcess Group:
Copyright: JSPMCopyright: JSPMCopyright: JSPM---200720072007
Organizational process assetsOrganizational process assetsQualified sellers listQualified sellers list
Bidder conferencesBidder conferences
Procurement documentsProcurement documents
Procurement management planProcurement management plan
ProposalsProposals
Procurement document packageProcurement document package
Develop qualified sellers listDevelop qualified sellers list
AdvertisingAdvertising
Copyright: JSPMCopyright: JSPMCopyright: JSPM---200720072007
Procurement management plan (updates)Procurement management plan (updates)
Inputs Outputs
Tools & Techniques
12.412.4-- Select SellersSelect SellersProcess Group:
Organizational process assetsOrganizational process assetsSelected sellersSelected sellers
ProposalsProposals
Procurement document packageProcurement document package
Evaluation criteria Evaluation criteria
Procurement management planProcurement management plan
Resource availabilityResource availability
Contract management planContract management plan
Contract Contract
Qualified sellers listQualified sellers list
Project management planProject management plan
••Risk registerRisk register
••RiskRisk--related contractual related contractual agreementsagreements
Contract negotiationContract negotiation
Screening systemScreening system
Independent estimatesIndependent estimates
Weighting systemWeighting system
Seller rating systemsSeller rating systems
Expert judgmentExpert judgment
Proposal evaluation Proposal evaluation techniquestechniques
Requested changesRequested changes
Copyright: JSPMCopyright: JSPMCopyright: JSPM---200720072007
Inputs Outputs
Tools & Techniques
12.512.5-- Contract Contract AdministrationAdministrationProcess Group:
ContractContractContract documentationContract documentation
Approved change requestsApproved change requests
Performance reportsPerformance reports
Selected sellersSelected sellers
Contract management planContract management plan
Organizational process assets (updates)Organizational process assets (updates)
Project management plan (updates)Project management plan (updates)
Recommended corrective actionsRecommended corrective actions
Requested changesRequested changes
Work performance informationWork performance information
Claims administrationClaims administration
Payment systemPayment system
Inspections and adultsInspections and adults
BuyerBuyer--conducted performance reviewconducted performance review
Performance reportingPerformance reporting
Contract change control systemContract change control system
Records management systemRecords management system
Information technologyInformation technology
••Procurement management planProcurement management plan
••Contract management planContract management plan
12.612.6-- Contract ClosureContract Closure
Inputs Outputs
Tools & Techniques
Process Group:
Copyright: JSPMCopyright: JSPMCopyright: JSPM---200720072007
Procurement management planProcurement management planClosed contractsClosed contracts
Procurement auditsProcurement audits
Contract closure procedureContract closure procedure
Contract documentationContract documentation
Contract management planContract management planOrganizational process assets (updates)Organizational process assets (updates)
Records management systemRecords management system
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Current Issues in Procurement Current Issues in Procurement ManagementManagement
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The National Contract The National Contract Management AssociationManagement Association
NCMA was formed in NCMA was formed in 19591959 to foster the professional to foster the professional growth and educational advancement of its members.growth and educational advancement of its members.NCMA is an membershipNCMA is an membership--based, professional society, based, professional society, whose whose LeadershipLeadership is composed of is composed of volunteer elected volunteer elected officers. officers. Offers Offers professional certificationprofessional certification program for contracting program for contracting professionalsprofessionalsNCMA is located at 21740 NCMA is located at 21740 BeaumeadeBeaumeade Circle, Suite 125, Circle, Suite 125, Ashburn, Virginia 20147. Ashburn, Virginia 20147.
Source: NCMA Website: www.ncma.org
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Iraq contracting problemsIraq contracting problems
House appropriators on Thursday voiced dismay at the House appropriators on Thursday voiced dismay at the depth of contracting problemsdepth of contracting problems in Iraqin Iraq……BillionsBillions of reconstruction dollars of reconstruction dollars wastedwasted. . The Defense Department, spent The Defense Department, spent $151 billion$151 billion on service on service contracts in contracts in fiscal 2006fiscal 2006Problem CompaniesProblem Companies-- Parsons, DynCorp International, Parsons, DynCorp International, HaliburtonHaliburton (Kellogg, Brown and Root), Bechtel, Aegis (Kellogg, Brown and Root), Bechtel, Aegis Defense Systems, etc.Defense Systems, etc.
Source: NCMA Website Article with same title, Washington Post Wednesday, July 6, 2005; Page D01 & GAO Report- GAO-07-832T
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Cost Reimbursement ContractingCost Reimbursement Contracting
Sector:Sector: National LaboratoryNational Laboratory-- EG&G, LockheedEG&G, Lockheed--Martin Martin Idaho and Bechtel Idaho and Bechtel Situation:Situation: CPAFCPAF’’ss used by DOE with AF ~5% of used by DOE with AF ~5% of allocable cost based on performance against award fee allocable cost based on performance against award fee criteriacriteria-- C.O. sole decisionC.O. sole decision--maker (theoretically).maker (theoretically).Observations:Observations:1.1. Work scope poorly defined in contract.Work scope poorly defined in contract.2.2. 95 % of work force remains the same.95 % of work force remains the same.3.3. Approximately 70% of award fee criteria were broad scope statemeApproximately 70% of award fee criteria were broad scope statements with no measurable nts with no measurable
objectives objectives –– yet specific requirements were known in advance by DOE staff. Ryet specific requirements were known in advance by DOE staff. R&D work had &D work had virtually virtually NONO measurable milestones.measurable milestones.
4.4. Most commercial companies could not afford to work with a 5% proMost commercial companies could not afford to work with a 5% profit margin.fit margin.5.5. Companies drawn to such contracts probably are motivate by spinCompanies drawn to such contracts probably are motivate by spin--off benefitsoff benefits
Results:Results: DOE Management compensated for DOE Management compensated for contracting deficiencies awarding maximum fee (despite contracting deficiencies awarding maximum fee (despite poor performance assessments) and profiting from poor performance assessments) and profiting from technology developed at taxpayer expense.technology developed at taxpayer expense.
Source: Personal views of M. Judd at Idaho National Laboratory
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Fixed Priced ContractingFixed Priced Contracting
Sector:Sector: Residential Building ConstructionResidential Building ConstructionSituation:Situation: General development contractors prefer to General development contractors prefer to use fixed price subcontracts to control costs.use fixed price subcontracts to control costs.Observations:Observations:1.1. There are There are many variablesmany variables that subcontractors that subcontractors cancan’’t anticipatet anticipate (late material, weather, labor (late material, weather, labor
force, poor coordination, etc.).force, poor coordination, etc.).2.2. No enforceable knowledge and skill level metricsNo enforceable knowledge and skill level metrics have been established for some trades.have been established for some trades.3.3. UnderstaffingUnderstaffing, no , no credentialing of inspectorscredentialing of inspectors, , general corruptiongeneral corruption of the inspection processof the inspection process4.4. Motivation is to make Motivation is to make quick profitsquick profits then move to new area.then move to new area.5.5. Small subcontractorsSmall subcontractors lack the lack the sophistication or resourcessophistication or resources to protect themselves against to protect themselves against
unscrupulous General Contractors.unscrupulous General Contractors.6.6. Serious lack of Serious lack of knowledge based & ethical licensingknowledge based & ethical licensing requirements of General Contractors.requirements of General Contractors.
Results:Results: Many general contractors focus on windMany general contractors focus on wind--fall fall profits resulting in highly inflated residential property profits resulting in highly inflated residential property with poor workmanship and many failed subcontractor with poor workmanship and many failed subcontractor businessesbusinesses
Source: Personal views of M. Judd at Trademark Woodworks, LLC, Bozeman, MT
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Questions & AnswersQuestions & Answers