Project Procurement Management

Presented by:

Michael G. Judd, Ph.D., M.P.A., PMP Adjunct Professor of Project Management Computer Information Systems Department Brigham Young University- Idaho

Introduction
Michael G. Judd Education
Post Doctoral Diploma in Defense Program Management Ph.D. Engineering Management Masters of Public Administration Bachelors of Science in Criminal Justice

Professional Certifications
Certified Project Management Professional Member of the Army Acquisition Corps Certified Project Manager with U.S. Department of Energy

Professional Recognition
Outstanding Young Men of America-1987 United Whos Who in Executives & Professionals- 2003-2007

Experience
Retired from Federal Government after 27 years Senior level positions includes:
Executive Office of the President (U.S.) Department of Administration DOE Liaison to the Under Secretary Defense (Environmental Security) Security) DOE Principle Investigator and member of the Paldiski International Expert Reference Group PIERG Group Program Analyst- Air , Space, and Land Combat Systems- U.S. Department of Army AnalystSystemsProgram Manager- DOE Environmental Security Office ManagerVice President (Education and Certification) Project Management Institutes-College of Performance Institute Management Project Manager- National and Environmental Security Systems ManagerProject Control Manager- Multiple Major System Acquisition Projects ManagerProfessor of Program Management U.S. Department of Defense- Defense Acquisition University DefenseProfessor of Project Management (Adjunct Faculty) Brigham Young University-Idaho UniversityJudd-PMI-EIC-Spring 2007 2 Judd- PMI- EIC-

Outline
Procurement Terms & Concepts Review PMBOKs Procurement Process Groups Current Issues in Procurement Management Questions and Answers

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Procurement Terms and Concepts

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Procurement

The fancy word for "purchasing." The procurement department within an organization manages all the major purchases.
Source: www.answer.com

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Procurement Plan
The document that describes how procurement processes from developing procurement documentation through contract closure will be managed.

Source: PMBOK 3rd Edition, P. 367

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Make-or-Buy Decision
A business decision that compares the costs and benefits of manufacturing a product or product component against purchasing it

Source: www.answer.com

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Contract Administration
The process of managing the contract and the relationship between the buyer and seller, managing contract related changes and, when appropriate, managing the contractual relationship with the outside buyer of the project.

Source: PMBOK 3rd Edition, p.355

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Invitation For Bid

Refers to a method of soliciting offers and are used when negotiations are not anticipated. Bids are typically read aloud in public at the time and place specified in the solicitation.

Source: U.S. Army Contracting Agency Customer Desk-side Dictionary

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Request For Proposal

A type of solicitation that is used typically with large dollar contracts when negotiations are anticipated. Offers in response to RFPs can be accepted without negotiations and become legally binding.
Source: U.S. Army Contracting Agency Customer Desk-side Dictionary

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The Contract
A contract is a mutually binding agreement that obligates the seller to provide the specified products or services - obligating the buyer to pay for them. Contracts should clarify responsibilities and define key deliverables. Contracts are used because they are legally binding, there is more accountability! There is a trend to outsource work!
Source: IT Project Management-Schwabe 2006
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Contract Types
Fixed Price (Lump Sum) Contracts:
Firm Fixed Price Fixed Price Incentive Fee

Cost Reimbursement
Cost Plus Award Fee (CPAF) Cost Plus Fixed Fee (CPFF) Cost Plus Incentive Fee (CPIF) Cost Plus Percentage of Cost (CPPC)- [Feds dont use]

Time and Materials

Source: PMBOK 3rd Edition, P. 277&278
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Statement of Work (SOW)

A narrative description of products, services, or results to be supplied.

Source: PMBOK, 3rd Edition, P. 376

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PMIs PMBOK: Procurement Process Groups

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Process Group:

12.1- Plan Purchases And Acquisitions

Outputs
Procurement management plan Contract statement of work Make-or-buy decisions Make- orRequested changes

Inputs
Enterprise environmental factors Organizational process assets Project scope statement Work breakdown structure WBS dictionary Project management plan Risk register Risk-related contractual Riskagreements Resource requirements Project schedule Activity cost estimates Cost baseline Make-or-buy analysis Make- orExpert judgment Contract types

Tools & Techniques

Copyright: JSPM--2007 Copyright: JSPM 2007

12.2- Plan Contract

Process Group: Inputs
Procurement management plan Contract statement of work Make-or-buy decisions Make- or-

Outputs
Procurement documents Evaluation criteria Contract statement of work (updates)

Project management plan Risk register Risk-related contractual Riskagreements Resource requirements Project schedule Activity cost estimate Cost baseline

Standard forms Expert judgment

Tools & Techniques

Copyright: JSPM--2007 Copyright: JSPM 2007

Process Group:

12.3- Request Seller Responses

Outputs
Qualified sellers list Procurement document package Proposals

Inputs
Organizational process assets Procurement management plan Procurement documents

Bidder conferences Advertising Develop qualified sellers list

Copyright: JSPM--2007 Copyright: JSPM 2007

Tools & Techniques

12.4- Select Sellers

Process Group: Inputs
Organizational process assets Procurement management plan Evaluation criteria Procurement document package Proposals Qualified sellers list Requested changes Project management plan Risk register Risk-related contractual Riskagreements Weighting system Independent estimates Screening system Contract negotiation Seller rating systems Expert judgment Proposal evaluation techniques Contract Contract management plan Procurement management plan (updates) Resource availability

Outputs
Selected sellers

Tools & Techniques

Copyright: JSPM--2007 Copyright: JSPM 2007

Process Group:

12.5- Contract Administration

Outputs
Contract documentation Requested changes Recommended corrective actions Organizational process assets (updates) Procurement management plan Project management plan (updates) Contract management plan

Inputs
Contract Contract management plan Selected sellers Performance reports Approved change requests Work performance information

Contract change control system Buyer-conducted performance review BuyerInspections and adults Performance reporting Payment system Claims administration Records management system Information technology

Tools & Techniques

Copyright: JSPM--2007 Copyright: JSPM 2007

12.6- Contract Closure

Process Group:

Inputs
Procurement management plan Contract management plan

Outputs
Closed contracts Organizational process assets (updates)

Contract documentation Contract closure procedure

Procurement audits Records management system

Tools & Techniques

Copyright: JSPM--2007 Copyright: JSPM 2007

Current Issues in Procurement Management

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The National Contract Management Association

NCMA was formed in 1959 to foster the professional growth and educational advancement of its members. NCMA is an membership-based, professional society, whose Leadership is composed of volunteer elected officers. Offers professional certification program for contracting professionals NCMA is located at 21740 Beaumeade Circle, Suite 125, Ashburn, Virginia 20147.
Source: NCMA Website: www.ncma.org
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Iraq contracting problems

House appropriators on Thursday voiced dismay at the depth of contracting problems in Iraq Billions of reconstruction dollars wasted. The Defense Department, spent $151 billion on service contracts in fiscal 2006 Problem Companies- Parsons, DynCorp International, Haliburton (Kellogg, Brown and Root), Bechtel, Aegis 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 Contracting

Sector: National Laboratory- EG&G, Lockheed-Martin Idaho and Bechtel Situation: CPAFs used by DOE with AF ~5% of allocable cost based on performance against award fee criteria- C.O. sole decision-maker (theoretically). Observations:
1. 2. 3.

4. 5.

Work scope poorly defined in contract. 95 % of work force remains the same. Approximately 70% of award fee criteria were broad scope statements with no measurable objectives yet specific requirements were known in advance by DOE staff. R&D work had virtually NO measurable milestones. Most commercial companies could not afford to work with a 5% profit margin. Companies drawn to such contracts probably are motivate by spin-off benefits

Results: DOE Management compensated for contracting deficiencies awarding maximum fee (despite poor performance assessments) and profiting from technology developed at taxpayer expense.
Source: Personal views of M. Judd at Idaho National Laboratory
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Fixed Priced Contracting

Sector: Residential Building Construction Situation: General development contractors prefer to use fixed price subcontracts to control costs. Observations:
1. 2. 3. 4. 5.

6.

There are many variables that subcontractors cant anticipate (late material, weather, labor force, poor coordination, etc.). No enforceable knowledge and skill level metrics have been established for some trades. Understaffing, no credentialing of inspectors, general corruption of the inspection process Motivation is to make quick profits then move to new area. Small subcontractors lack the sophistication or resources to protect themselves against unscrupulous General Contractors. Serious lack of knowledge based & ethical licensing requirements of General Contractors.

Results: Many general contractors focus on wind-fall profits resulting in highly inflated residential property with poor workmanship and many failed subcontractor businesses
Source: Personal views of M. Judd at Trademark Woodworks, LLC, Bozeman, MT
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Questions & Answers

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