understanding Procurement Management

Procurement Management is the processes necessary to purchase or acquire products, services, or results needed from outside the project team

It involves contracts that are legal between a buyer and a seller

Procurement Management processes

• Plan Procurements
• Conduct Procurements
• Administer Procurements
• Close Procurements

1. Plan Procurements

Documenting project purchasing decisions, specifying the approach, and identifying potential sellers

Qs to answer in this process:
- Shall we acquire outside support?
- If so, what to acquire?
- How to acquire?
- How much to acquire?
- When to acquire?

Types of Contracts:

1- Fixed-price Contracts
2- Cost-reimbursable Contracts
3- Time & Material Contracts

1- Fixed-price Contracts

Fixed total price for a service or product
1.1 Firm-fixed Contract (FFP): price of good is set at the outset and not subject to change
1.2 Fixed-price Incentive Fee Contract (FPIF): allows for deviation from performance, with financial incentives
1.3 Fixed-price with Economic price adjustment Contact (FP-EPA): for long period contracts/years considers inflation changes

2- Cost-reimbursable Contracts
covers Legitimate Actual Cost for work completed + A Profit Fee

2.1Cost plus fixed fee contracts (CPFF): profit fee is fixed and calculated as a percentage for initial estimated project cost


2.2 Cost plus Incentive fee Contracts (CPIF): profit fee is predetermined incentive based upon achieving certain performance objectives
2.3 Cost plus Award fee Contracts (CPAF):
the majority of the fee is only earned based on the satisfaction of certain performance criteria, determined by the buyer

3- Time and Material Contracts

Hybrid type. Contains aspects of both fixed-price and cost-reimbursement contracts.

2. Conduct Procurement

Obtaining seller responses (bids and proposals), selecting a seller (based on previously defined selections criteria), and awarding a contract

Conduct Procurement Techniques may include:

1- Bidder Conferences
2- Proposal Evaluation Techniques
3- Independant Estimates
4- Expert Judgements
5- Advertising
6- Internet Search
7- Procurement Negotiations

3. Administer Procurement

Managing procurement relationships, monitoring contract performance, and making changes and corrections as needed

Administering Procurement activities may include:

1- Control Change Control System : define the process by which the procurement can be modified
2- Procurement Performance Reviews : structured review provided by the seller
3- Inspections and Audits
4- Performance Reporting : for mgmt
5- Payment Systems
6- Claims Administration : when the buyer and seller cannot reach an agreement on compensation for change, or that a change has occurred, it falls under 'Contested Changes' or 'Potential Constructive Changes'
7- Records Mgmt Systems

4. Close Procurement

Completing each project procurement
Supports the Close Project Process

Buy this we close our Project and update our organizational process assets

this was the last presentation for the pmbok series