Quick Recap

Monitoring and Controlling

PROJECT RISK MANAGEMENT OVERVIEW

Risk IdentificationInputs

Product DescriptionOther Planning OutputsHistorical Information

Tools & TechniquesChecklistsFlowchartingInterviewing

OutputsSources of RiskPotential Risk EventsRisk SymptomsInputs to other Processes

Risk QuantificationInputs

Stakeholder risk tolerancesSources of RiskPotential Risk EventsCost EstimatesActivity Duration Estimates

Tools & TechniquesExpected Monetary ValueStatistical SumsSimulationDecision TreesExpert Judgment

OutputsOpportunities to pursue, threats to respond toOpportunities to ignore, threats to accept

Response DevelopmentInputs

Opportunities to pursue, threats to respond toOpportunities to ignore, threats to accept

Tools & TechniquesProcurementContingency PlanningAlternative StrategiesInsurance

OutputsRisk Management PlanInputs to other ProcessesContingency PlansReservesContractual Agreements

Response ControlInputs

Risk Management PlanActual Risk EventsAdditional Risk Identification

Tools & TechniquesWorkaroundsAdditional Risk Response Development

OutputsCorrective ActionUpdates to Risk Management Plan

Lesson 8: Planning Project ProcurementsTopic 8A: Plan Project ProcurementsTopic 8B: Prepare a Procurement Statement Of WorkTopic 8C: Prepare a Procurement Document

in Project Procurement Management

Key indicators forMonitoring and controlling

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Learning Objectives

Understand the importance of project procurement management and the increasing use of outsourcing for information technology projects.

Describe the work involved in planning purchases and acquisitions for projects, the contents of a procurement management plan and contract statement of work, and calculations involved in a make-or-buy analysis.

Discuss what is involved in planning contracting, including the creation of various procurement documents and evaluation criteria for sellers.

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Learning Objectives (cont’d)

Understand the process of requesting seller responses and the difference between proposals and bids.

Describe the seller selection process and recognize different approaches for evaluating proposals or selecting suppliers.

Discuss the importance of good contract administration.

Describe the contract closure process. Discuss types of software available to assist in project

procurement management.

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Importance of Project Procurement Management

Procurement means acquiring goods and/or services from an outside source.

Other terms include purchasing and outsourcing.

Experts predict that global spending on computer software and services will continue to grow.

India is the leading country for U.S. offshore outsourcing.

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Debates on Outsourcing

Some companies, such as Wal-Mart, prefer to do no outsourcing at all, while others do a lot of outsourcing.

Most organizations do some form of outsourcing to meet their IT needs and spend most money within their own country.

The U.S. temporary workforce continues to grow as people work for temporary job agencies so they can more easily move from company to company.

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Why Outsource?

To reduce both fixed and recurrent costs.

To allow the client organization to focus on its core business.

To access skills and technologies.

To provide flexibility.

To increase accountability.

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Contracts

A contract is a mutually binding agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay for them.

Contracts can clarify responsibilities and sharpen focus on key deliverables of a project.

Because contracts are legally binding, there is more accountability for delivering the work as stated in the contract.

A recent trend in outsourcing is the increasing size of contracts.

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Project Procurement Management Processes

Project procurement management: Acquiring goods and services for a project from outside the performing organization.

Processes include: Planning purchases and acquisitions: Determining

what to procure, when, and how. Planning contracting: Describing requirements for

the products or services desired from the procurement and identifying potential sources or sellers (contractors, suppliers, or providers who provide goods and services to other organizations).

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Project Procurement Management Processes (cont’d)

Requesting seller responses: Obtaining information, quotes, bids, offers, or proposals from sellers, as appropriate.

Selecting sellers: Choosing from among potential suppliers through a process of evaluating potential sellers and negotiating the contract.

Administering the contract: Managing the relationship with the selected seller.

Closing the contract: Completing and settling each contract, including resolving any open items.

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Planning Purchases and Acquisitions

Identifying which project needs can best be met by using products or services outside the organization.

If there is no need to buy any products or services from outside the organization, then there is no need to perform any of the other procurement management processes.

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What Went Right?

Several organizations, such as The Boots Company PLC in England, outsource their IT services to save money compared with the cost of running the systems themselves.

Carefully planning procurement can also save millions of dollars, as the U.S. Air Force did by using a unit pricing strategy for a large office automation project.

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Tools and Techniques for Planning Purchases and Acquisitions

Make-or-buy analysis: General management technique used to determine whether an organization should make or perform a particular product or service inside the organization or buy from someone else.

Often involves financial analysis.

Experts, both internal and external, can provide valuable inputs in procurement decisions.

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Make-or-Buy Example

Assume you can lease an item you need for a project for $800/day. To purchase the item, the cost is $12,000 plus a daily operational cost of $400/day.

How long will it take for the purchase cost to be the same as the lease cost?

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Make-or Buy Solution

Set up an equation so both options, purchase and lease, are equal.

In this example, use the following equation. Let d be the number of days to use the item:$12,000 + $400d = $800dSubtracting $400d from both sides, you get:$12,000 = $400dDividing both sides by $400, you get:d = 30

If you need the item for more than 30 days, it is more economical to purchase it.

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Types of Contracts Different types of contracts can be used in different situations:

Fixed price or lump sum contracts: Involve a fixed total price for a well-defined product or service.

Cost reimbursable contracts: Involve payment to the seller for direct and indirect costs.

Time and material contracts: Hybrid of both fixed price and cost reimbursable contracts, often used by consultants.

Unit price contracts: Require the buyer to pay the seller a predetermined amount per unit of service.

A single contract can actually include all four of these categories, if it makes sense for that particular procurement.

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Contract Clauses

Contracts should include specific clauses to take into account issues unique to the project.

Can require various educational or work experience for different pay rights.

A termination clause is a contract clause that allows the buyer or supplier to end the contract.

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Procurement Management Plan

Describes how the procurement processes will be managed, from developing documentation for making outside purchases or acquisitions to contract closure.

Contents varies based on project needs.

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Contract Statement of Work (SOW)

A statement of work is a description of the work required for the procurement.

If a SOW is used as part of a contract to describe only the work required for that particular contract, it is called a contract statement of work.

A SOW is a type of scope statement.

A good SOW gives bidders a better understanding of the buyer’s expectations.

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Figure 12-2. Statement of Work (SOW) Template

I. Scope of Work: Describe the work to be done to detail. Specify the hardware andsoftware involved and the exact nature of the work.

II. Location of Work: Describe where the work must be performed. Specify thelocation of hardware and software and where the people must perform the work

III. Period of Performance: Specify when the work is expected to start and end,working hours, number of hours that can be billed per week, where the work mustbe performed, and related schedule information.

IV. Deliverables Schedule: List specific deliverables, describe them in detail, andspecify when they are due.

V. Applicable Standards: Specify any company or industry-specific standards thatare relevant to performing the work.

VI. Acceptance Criteria: Describe how the buyer organization will determine if thework is acceptable.

VII. Special Requirements: Specify any special requirements such as hardware orsoftware certifications, minimum degree or experience level of personnel, travelrequirements, and so on.

Industry Example for Procurement

In accordance with organization Financial Regulations and Rules, the following general principles must be given due consideration while executing procurement on behalf of the organization:

Best Value for Money

Fairness, Integrity, Transparency

Effective International Competition

The Interest of the organization

Basic Principles

In the context of the procurement process, obtaining “best value for money” means selection of the offer, which presents the optimum combination of life-cycle costs and benefits, which meet the organization Agency’s [program] needs.

Best value for money should not be equated with the lowest initial price option rather requiring an integrated assessment of technical, organizational and pricing factors in light of their relative importance (i.e., reliability, quality, experience, reputation, past performance, cost/fee realism and reasonableness).

Best Value for Money

The Agency’s parameters can also include social, environmental and other strategic objectives defined in the procurement plan. The principle of best value for money is applied at the award stage to select the offer that effectively meets the stated requirement.

Best value for Money

To ensure that best value for money is obtained, the process of soliciting offers and selecting a Contractor should:

maximize competition; minimize the complexity of the solicitation,

evaluation, and the selection process; ensure impartial and comprehensive evaluation of

solicited offers; and ensure selection of the Contractor whose offer has

the highest degree of realism and whose performance is expected to best meet the specs, statement of works/ terms of reference.

Best Value for Money

As competition is the basis for efficient, impartial and transparent procurement, organization Agencies are responsible for ensuring the integrity of the procurement process and maintaining fairness in the organization treatment of all offers.

Fairness, Integrity and Transparency

So organization procurement (i.e., openness of the process; probity; complete and accurate records; accountability of organization; confidentiality) establishes and then maintains rules and procedures that are attainable and unambiguous.

Fairness, Integrity and Transparency

The objective of competitive processes as described in these Guidelines is to provide all eligible prospective Offers with timely and adequate notification of the procuring entity’s requirements and an equal opportunity organization to tender for the required goods, civil works and services.

Procurement organization should ensure that restrictions are not placed on the competitive processes limiting the pool of potential Offers.

Effective Competition

• In practice, the specific procurement rules and procedures established for the implementation of a program are contingent upon the individual circumstances of the particular case; however the following four considerations generally guide the organization interest for the acquisition of inputs:

• The need for economy and efficiency in the implementation of the programe, including the procurement of goods, civil works and services involved.

Interest of the organization

• the access to procurement opportunities for all interested and qualified Offers worldwide.

• giving all eligible Offers the same information and equal opportunity to compete in providing goods, civil works or services; and

• the importance of transparency in the procurement process

Interest of the organization

As organization are entrusted to the public at large, it is imperative that all transactions committing organization are carried to the highest degree of public trust and should be conducted with the highest degree of integrity.

Procurement Ethics

The award of a contract shall be made after due consideration has been given to the general principles described in Regulation 21.02 and in accordance with the following:

When a formal invitation to bid has been issued, the procurement contract shall be awarded to the qualified bidder whose bid substantially conforms to requirements set forth in the solicitation documentation and offers the lowest cost to The organization;

Award of Procurement contracts

When a formal request for proposals has been issued, the procurement contract shall be awarded to the qualified proposer whose proposal, all factors considered, is the most responsive to the requirements set forth in the solicitation documentation.

Award of procurement contracts

In selecting the members of the evaluation team, the type of procurement being carried out should be considered. In particularly complex procurement cases, an external expert may be included to assist in the evaluation process as one of the team members.

Evaluation of offers

In these cases it is important to identify the need for an expert early in the process (i.e., during the planning stage) in order to avoid organization unnecessary delays and to ensure that proper funds are budgeted

Evaluation of offers

The work of the evaluation team is strictly confidential and information about submissions or proposals shall not be publicly revealed

Representatives from the funding source, the client organization, or national representatives may participate in the evaluation process only as observers.

Evaluation of offers

Evaluation Team members must be instructed to immediately indicate if they are in a potential conflict of interest situation with one of the suppliers (e.g., owing shares in the supplier’s company, familiar relationship with suppliers, etc)

Conflict of Interest

All observers or participants in the evaluation team who are non-organization staff must sign confidentiality and no conflict of interest statements.

Conflict of Interest

How do the organization procurement regulations and rules impact on specific questions

Organization should be committed to making information about their programs and operations available to the public. considers public access to information a key component of effective participation of all stakeholders, including the public, in the human development process.

Disclosure of Information

Organization should recognizes that there is a positive correlation between a high level of transparency through information sharing and public participation in organization-supported development activities

Disclosure of Information

Public access to comprehensive and timely information held or generated by organization will continue to facilitate the transparency, accountability and national ownership of organizational programes and operations.

Disclosure of information

To the extent that much of organization information is already available to the public through various means, including through the corporate website and individual Office websites, this Policy codifies existing principles, practices and procedures.

Disclosure of information

Information under the following categories is deemed confidential and not available to the public:◦ Information received from or sent to third parties,

under an expectation of confidentiality.

◦ Information whose disclosure is likely to endanger the safety or security of any individual, violate his or her rights, or invade his or her privacy;

Principles of confidentiality

◦ Information whose disclosure is likely to endanger the security of Member States or prejudice the security or proper conduct of any operation or activity of organization;

◦ Information covered by legal privilege or related to access to internal audit reports;

◦ Internal inter-office or intra-office documents, including e-mails and draft documents;

Principles of confidentiality

◦ Internal inter-office or intra-office documents, including e-mails and draft documents;

◦Commercial information where disclosure would harm either the financial interests of organization or those of other parties involved;

◦ Information which, if disclosed, in organization view would seriously undermine the policy dialogue with Member States or implementing partners.

Abusive, excessive or vexatious requests may be denied.

Principles of confidentiality

Based on the organization decentralized structure, consolidated procurement plans are developed at different levels, including Corporate, Business unit and Country Office.

Procurement planning will also take place at the project level or even at the activity level, depending on the complexity of the activity and the number of interrelated procurement actions.

Request for submission of procurement plans

All procurement plans are based on the Annual Work Plans (AWP’s). AWP’s are agreed in consultation with Government.

Procurement plans are internal documents and under the confidentiality clause (e), are not for public disclosure.

Request for submission of procurement plans

Contracts are confidential. However, generally the organization makes public all its awarded contracts in excess of “certain amount” online on Office websites, by region and kind of services/goods (type, scope and amount of the contract).

Requests for copies of contracts issued

However, for security reasons, certain countries Office has a waiver from posting this information on its website for public view. This is line with the confidentiality clause (b) & (c) cited above. The other organization Agencies have a similar policy.

Requests for copies of contracts issued

Based on the procurement principles the organization should ensure that restrictions are not placed on the competitive processes limiting the pool of potential Offers.

However, where possible local procurement is encouraged where it provides value for money, creates local employment, helps to build local capacity and is in the interests of the organization. Local Long Term Agreements (LTA’s) are being developed resulting from a competitive process for regularly purchased goods and services.

Local Purchase requirement for goods/services less than USD30,000

Under the international agreements governing the procurement for country program four considerations consistently guide the organization interest for the acquisition of inputs:

the need for economy and efficiency in the implementation of the program, including the procurement of goods, civil works and services involved;

Permission to be sought for all international procurement in excess of USD30,000

the access to procurement opportunities for all interested and qualified Offers worldwide, except where other criteria mandated by the Globe office prevails.

Permission to be sought for all international procurement in excess of USD30,000

giving all eligible Offers the same information and equal opportunity to compete in providing goods, civil works or services; and

the importance of transparency in the procurement process.

Permission to be sought for all international procurement in excess of USD30,000

Contracts for rentals are granted based on the results of a competitive bidding exercise resulting in the development of Long Term Agreements (1 year) with multiple service providers who the Somaliland authorities registered companies with proof of liability coverage etc and who provide the most competitive rates that meet the safety and technical requirements of organization Agencies.

Rentals

Consistent with the provisions contained in organization’s Regulation 21.02 and except as otherwise provided in Rule 121.05, procurement contracts shall be awarded on the basis of effective competition, and to this end, the competitive process will, as necessary, include:

Market research to identify potential Contractors

Contracting International Expertise

Competition on as wide a geographical basis as practicable and suited to market circumstances;

Consideration of prudent commercial practice; If organization Agencies do not feel that market research

has provided a pool of suitably qualified Consultants locally, such Consultants must then be sourced from elsewhere

Contracting International Expertise

Projects in security risk countries use the following principles when undertaking civil works projects:◦Liaise with other offices on preparation of all Bills of

Quantity (BOQ), Scopes of Work (SOW), and Technical Drawings.

◦Ensure Signed approval of all BOQ’s and technical drawings by other offices governing that area, recognizing that they are the lead main focal point for all infra-structure works projects.

Construction of public buildings

Certification of Land Titles on which proposed new constructions are to be built

Ensure that all pre-qualified Contractors are registered with the appropriate authorities and have current business licences

Reference check and capacity assessment of any Contractor recommended for award of contract.

Construction of public buildings

The organization Engineers welcome the involvement of client Engineers in reviewing work progress during regular scheduled site visits and attesting to final satisfaction of completed works. However, The organizations Engineers authority is the deciding factor in awarding final payment or retention of payments, as appropriate.

It should be noted however, that Agencies vary in their approach to Government interaction for civil works projects; some working specifically with their respective Line Ministry for approval of BOQ’s, Scopes of Work.

Construction of public buildings

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