1、Chapter 12: Project Procurement Management,Information Technology Project Management, Fourth Edition,2,Information Technology Project Management, Fourth Edition,Learning Objectives,Understand the importance of project procurement management and the increasing use of outsourcing for information techn
2、ology 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
3、of various procurement documents and evaluation criteria for sellers.,3,Information Technology Project Management, Fourth Edition,Learning Objectives (contd),Understand the process of requesting seller responses and the difference between proposals and bids. Describe the seller selection process and
4、 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.,4,Information Technology Project Management
5、, Fourth Edition,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 c
6、ountry for U.S. offshore outsourcing.,5,Information Technology Project Management, Fourth Edition,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 a
7、nd 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.,6,Information Technology Project Management, Fourth Edition,Why Outsource?,To reduce both fixed and recurrent c
8、osts. To allow the client organization to focus on its core business. To access skills and technologies. To provide flexibility. To increase accountability.,7,Information Technology Project Management, Fourth Edition,Contracts,A contract is a mutually binding agreement that obligates the seller to p
9、rovide 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 recen
10、t trend in outsourcing is the increasing size of contracts.,8,Information Technology Project Management, Fourth Edition,Project Procurement Management Processes,Project procurement management: Acquiring goods and services for a project from outside the performing organization. Processes include: Pla
11、nning 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 o
12、ther organizations).,9,Information Technology Project Management, Fourth Edition,Project Procurement Management Processes (contd),Requesting seller responses: Obtaining information, quotes, bids, offers, or proposals from sellers, as appropriate. Selecting sellers: Choosing from among potential supp
13、liers 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.,10,Information Technology Project Man
14、agement, Fourth Edition,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 pro
15、curement management processes.,11,Information Technology Project Management, Fourth Edition,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 procure
16、ment 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.,12,Information Technology Project Management, Fourth Edition,Tools and Techniques for Planning Purchases and Acquisitions,Make-or-buy analysis: General management
17、 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.,13,Information T
18、echnology Project Management, Fourth Edition,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?,14,Inf
19、ormation Technology Project Management, Fourth Edition,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 = $800d Subtracting $400d from both sides, you get:
20、 $12,000 = $400d Dividing 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.,15,Information Technology Project Management, Fourth Edition,Types of Contracts,Different types of contracts can be used in different situations: Fixed pric
21、e 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. Un
22、it 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.,16,Information Technology Project Management, Fourth Edition,Cost Reimbursable C
23、ontracts,Cost plus incentive fee (CPIF): The buyer pays the supplier for allowable performance costs plus a predetermined fee and an incentive bonus. Cost plus fixed fee (CPFF): The buyer pays the supplier for allowable performance costs plus a fixed fee payment usually based on a percentage of esti
24、mated costs. Cost plus percentage of costs (CPPC): The buyer pays the supplier for allowable performance costs plus a predetermined percentage based on total costs.,17,Information Technology Project Management, Fourth Edition,Figure 12-2. Contract Types Versus Risk,18,Information Technology Project
25、Management, Fourth Edition,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
26、 contract.,19,Information Technology Project Management, Fourth Edition,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.,20,Info
27、rmation Technology Project Management, Fourth Edition,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 statem
28、ent of work. A SOW is a type of scope statement. A good SOW gives bidders a better understanding of the buyers expectations.,21,Information Technology Project Management, Fourth Edition,Figure 12-2. Statement of Work (SOW) Template,22,Information Technology Project Management, Fourth Edition,Plannin
29、g Contracting,Involves preparing several documents needed for potential sellers to prepare their responses and determining the evaluation criteria for the contract award. Request for Proposals: Used to solicit proposals from prospective sellers. A proposal is a document prepared by a seller when the
30、re are different approaches for meeting buyer needs. Requests for Quotes: Used to solicit quotes or bids from prospective suppliers. A bid, also called a tender or quote (short for quotation), is a document prepared by sellers providing pricing for standard items that have been clearly defined by th
31、e buyer.,23,Information Technology Project Management, Fourth Edition,Figure 12-3. Request for Proposal (RFP) Template,24,Information Technology Project Management, Fourth Edition,Evaluation Criteria,Its important to prepare some form of evaluation criteria, preferably before issuing a formal RFP or
32、 RFQ. Beware of proposals that look good on paper; be sure to evaluate factors, such as past performance and management approach. Can require a technical presentation as part of a proposal.,25,Information Technology Project Management, Fourth Edition,Requesting Seller Responses,Deciding whom to ask
33、to do the work, sending appropriate documentation to potential sellers, and obtaining proposals or bids. Organizations can advertise to procure goods and services in several ways: Approaching the preferred vendor. Approaching several potential vendors. Advertising to anyone interested. A bidders con
34、ference can help clarify the buyers expectations.,26,Information Technology Project Management, Fourth Edition,Selecting Sellers,Also called source selection. Involves: Evaluating proposals or bids from sellers. Choosing the best one. Negotiating the contract. Awarding the contract.,27,Information T
35、echnology Project Management, Fourth Edition,Figure 12-4. Sample Proposal Evaluation Sheet,28,Information Technology Project Management, Fourth Edition,Seller Selection Process,Organizations often do an initial evaluation of all proposals and bids and then develop a short list of potential sellers f
36、or further evaluation. Sellers on the short list often prepare a best and final offer (BAFO). Final output is a contract signed by the buyer and the selected seller.,29,Information Technology Project Management, Fourth Edition,Media Snapshot,Many organizations realize that selecting appropriate sell
37、ers can often provide a win-win situation. Several companies, including those owned by famous celebrities, work closely with outside sources to help both parties come out ahead. For example, Oprah Winfrey celebrated the premiere of her shows nineteenth season by giving each of her 276 audience membe
38、rs a new car that was donated by Pontiac.,30,Information Technology Project Management, Fourth Edition,Administering the Contract,Ensures that the sellers performance meets contractual requirements. Contracts are legal relationships, so it is important that legal and contracting professionals be inv
39、olved in writing and administering contracts. Many project managers ignore contractual issues, which can result in serious problems.,31,Information Technology Project Management, Fourth Edition,Suggestions for Change Control in Contracts,Changes to any part of the project need to be reviewed, approv
40、ed, and documented by the same people in the same way that the original part of the plan was approved. Evaluation of any change should include an impact analysis. How will the change affect the scope, time, cost, and quality of the goods or services being provided? Changes must be documented in writ
41、ing. Project team members should also document all important meetings and telephone phone calls.,32,Information Technology Project Management, Fourth Edition,Suggestions for Change Control in Contracts (contd),Project managers and teams should stay closely involved to make sure the new system will m
42、eet business needs and work in an operational environment. Have backup plans. Use tools and techniques, such as a contract change control system, buyer-conducted performance reviews, inspections and audits, and so on.,33,Information Technology Project Management, Fourth Edition,Closing the Contract,
43、Involves completing and settling contracts and resolving any open items. The project team should: Determine if all work was completed correctly and satisfactorily. Update records to reflect final results. Archive information for future use. The contract itself should include requirements for formal
44、acceptance and closure.,34,Information Technology Project Management, Fourth Edition,Tools to Assist in Contract Closure,Procurement audits identify lessons learned in the procurement process. A records management system provides the ability to easily organize, find, and archive procurement-related
45、documents.,35,Information Technology Project Management, Fourth Edition,Using Software to Assist in Project Procurement Management,Word processing software helps write proposals and contracts, spreadsheets help evaluate suppliers, databases help track suppliers, and presentation software helps prese
46、nt procurement-related information. E-procurement software does many procurement functions electronically. Organizations also use other Internet tools to find information on suppliers or auction goods and services.,36,Information Technology Project Management, Fourth Edition,Chapter Summary,Project procurement management involves acquiring goods and services for a project from outside the performing organization. Processes include: Planning purchases and acquisitions Planning contracting Requesting seller responses Selecting sellers Administering contracts Closing contracts,
