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Project Procurement Management

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Jerry Chong

on 6 May 2015

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Transcript of Project Procurement Management

Plan Procurements
Increase accountability/flexibility
Plan Procurements
Identifying which project needs can best be met by using products or services outside the organization
Conduct Procurements
Deciding whom to ask to do the work
Close Procurements
Project Procurement Management
Mutually binding agreement
that obligates the
seller to provide
the specified products or services and obligates the
buyer to pay
for them
Final Selection
Evaluating proposals or bids from sellers
"To outsource or not to outsource....that is the question"
Administer Procurements
by someone with


that can be construed to have the same effect as a written change order
Acquiring goods and/or services from an outside source
What for?
Reduce both fixed and recurrent costs
Allow organization to focus on its core business
Access skills and technologies
More Accountability
Legally Binding
Make-or-Buy Analysis
Technique used to determine whether to make or perform a particular product or service internally or buy externally
Assume you can lease an item 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?
Dividing both sides by $400, you get:
$12,000 + $400d = $800d
Subtracting $400d from both sides, you get:
$12,000 = $400d
d = 30
**If you need the item for more than 30 days, it is more economical to purchase it
Types of Contracts
Fixed Price or Lump Sum
Involve payment to the seller for direct and indirect costs
Hybrid of both fixed price and cost reimbursable contracts, often used by consultants
Require the buyer to pay the seller a predetermined amount per unit of service
The buyer pays the supplier for allowable performance costs plus
a predetermined percentage based on total costs
Involve a fixed total price for a well-defined product or service
Cost Reimbursable
Time and Material
Unit Price
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 estimated costs
Cost plus percentage of costs (CPPC)
Cost Reimbursable Contracts
Contract Types vs Risk
Contract Clauses
A bid, also called a tender or quote (short for quotation), is prepared by providing pricing for items defined by the buyer
A proposal is prepared when there are different approaches for meeting buyer needs
Contract Statement of Work (SOW)
Include specific clauses that take into account issues that are unique to the project
A termination clause allows the buyer/supplier to end the contract
description of the work required for the procurement, as part of a contract to describe the work required for that particular contract
Request for
RFP Template
Awarding a contract
Selecting a seller
Obtaining proposals or bids
Sending appropriate documentation to potential sellers
Bidders’ Conference
anyone interested (advertising)
several potential vendors
preferred vendor
Organizations often develop a short list of potential sellers to prepare a best and final offer (BAFO)
Awarding the contract (Contract Signing)
Negotiating the contract
Choosing the best one
Ensures Seller’s Performance
Legal and contracting professionals involved in writing and administering contracts
Constructive Change Orders
Written acts
Contractual Requirements
The contract itself should include requirements for formal acceptance and closure
The Project Team should:
resolving any open items
completing and settling contracts
Archive information for future use
Determine if all work was completed correctly and satisfactorily
Update records to reflect final results
Close Procurements
Administer Procurements
Conduct Procurements
Monitor & Control
Full transcript