Project Mangement - overview of the Procurement Management knowledge area within project management. Describes the 3 processes within Project Procurement Management and the process groups impacted. Blog: https://agile-mercurial.com YouTube: https://www.youtube.com/channel/UCPM82of2YuqIR1SgLGHa1eg Twitter: https://twitter.com/agile_mercurial Tumblr: https://agilemercurial.tumblr.com/

1. PROJECT PROCUREMENT
MANAGEMENT
KNOWLEDGE AREA

2. Overview of
Procurement
Management
◦ The processes that are needed
to purchase products or
services for use within the
project
◦ Includes contract management
to handle agreements with
external sellers

3. Procurement Management Processes
12.1 PLAN PROCUREMENT
MANAGEMENT
12.2 CONDUCT PROCUREMENTS 12.3 CONTROL PROCUREMENTS

4. Procurement - Centralized Contracting
Procurement
management is handled
by a centralized source
Procurement managers
may worry about multiple
projects at a time

5. Procurement - Decentralized
Contracting
Procurement is handled
by someone dedicated
to the project
The procurement
manager handles the
projects contracts

6. 12.1 PLAN
PROCUREMENT
MANAGEMENT
Part of the Planning Process Group

7. 12.1 Plan Procurement Management
◦ Part of the Planning Process Group
◦ Concerned with documenting the specific
approaches to procurement and identifying
possible sellers of the goods or services that
may be needed
◦ Determines if outside support will be needed,
what products will be needed and when they
may be needed

8. CONTRACT TYPES

9. Fixed Price
Contracts
A fixed price is agreed upon for the
delivery of a product or service
The buyer defines what they need,
the seller agrees to the need and a
fixed price is agreed upon
The product or services being
procured need to be specifically
defined
Variations of the Fixed Price Contract
Firm Fixed Price (FFP): Most common contract type;
additional costs beyond agreed level are the
responsibility of the seller
Fixed Price Incentive Fee Contract (FPIF): A fixed price is
set, but incentives can be offered if agreed expectations
are exceeded such as superior quality or reduced delivery
time
Fixed Price with Economic Price Adjustment (FP-
EPA): Long-term contracts or relationships that
considers future economic conditions that adjust
the costs of goods or services to protect from
external conditions

10. Cost
Reimbursable
Contracts
Contract variations
Cost Plus Fixed Fee Contracts (CPFF):
Costs for performing the contract
work and a fixed fee or fixed
percentage fee is paid by the buyer
Cost Plus Incentive Fee Contracts
(CPIF): Costs for performing the
work and an incentive fee based on
achievement is paid by the buyer
Cost Plus Award Fee (CPAF): Costs for
performing work is paid, and the profit is
earned primarily on subjective and
agreed upon performance of the seller
Can include financial incentives for exceptional performance or agreed
performance levels
It includes the variable costs for completed work plus a profit fee for
the seller
If the scope is uncertain or highly variable (complex) the costs may not
be accurately known

11. Time and Materials Contract
A hybrid contract that merges cost
reimbursable and fixed-price contract
Used for bringing in external experts,
consultants, or resources not present
in the company when the required
needs cannot be explicitly defined
The buyer may pay on a per-hour, per-
day, per-month or per-item rate as
agreed upon in advance
Typically used in shorter project
increments and should include a “Not
to Exceed” clause defining limits to the
work or costs

12. Contract
Terms
•Given to the seller with the hope of bringing the
seller’s goals inline with the buyers objectives
Incentives
•Defines when payments occur such as monthly or
quarterly payments
Payment Schedule
•The amount charged to the buyer by the sellerPrice
•The profit planned by the seller that is included in
the total price
Profit
•The amount the seller pays to deliver the goods or
services
Cost
•Proportion of payments split between the buyer
and seller
Sharing Ratio
•The agreed upon highest price the buyer will pay
to the seller
Ceiling Price

13. Contract
Terms
◦ Point of Total Assumption (PTA)
◦ Applies to FPIF contracts, a cost level
that assumes mismanagement if costs
rise above the calculated PTA

14. PROCUREMENT MANAGEMENT

15. Make or
Buy
Analysis
Determine if work can be completed by the project
team or if it should be purchased from external
sources
Buying can decrease risks and place that risk on the
seller
Making can increase the efficiency of project budget
and allow for better control over the quality,
amount, and even costs of the work output
Proprietary nature of the work and legal regulations
should be considered and my require making the
product internally

16. Procurement
Management
Plan
The output of the Plan Procurement
Management Process and a part of
the Project Management Plan
The procurement decisions should
be documented and maintained in
the Procurement Manage Plan

17. What is
Included in the
Procurement
Management
Plan?
Contracts used
Management processes
related to suppliers
Procurement
coordination with
scheduling, costs, and
other projects
Constraints and
assumptions with
procurement
Scheduled delivery
dates of the sellers
Possible sellers or
prequalified sellers and
related metrics for seller
evaluation
Risk management
related to procurements

18. Procurement Statement of Work
The scope of the needed work
to be done within the
procurement
The scope can be broken down
and sellers can bid on the
broken down work; providing
services or goods for one or
more work activities

19. Bid
Documents
◦ Documents that describe the buyer’s needs
from the seller
◦ Describes the requirements needed from
the sellers
◦ Types of Bid Documents
◦ Request for Proposal (RFP): Contains detailed
information about the required work and
possible ways the work will be completed or
objectives met
◦ Request for Bid (RFB) or Invitation for Bid
(IFB): Invitation to sellers where the buyer
expects sellers to bid on the work
◦ Request for Quotation (RFQ): A request for the
price of goods or services based on the
required needs

20. 12.2 CONDUCT
PROCUREMENTS
Part of the Executing Process Group

21. 12.2 Conduct Procurements
◦ Part of the Executing Process Group
◦ The process involved with collecting seller
bids or responses to requests, selecting the
sellers, and awarding the contracts
◦ Aligns stakeholder expectations through
contractual and established agreements

22. Conducting Procurements
Bid Conferences
• Meeting between a
buyer and possible
sellers before bid
submission that allows
sellers to clarify points of
the requests
Seller Proposal or Bid
• The seller evaluates the
work and sends in a bid,
proposal, or price quote
Proposal Review
• The buyer reviews the
seller proposals and
selects the seller based
on defined selection
method in the
Procurement
Management Plan

23. 12.3 CONTROL
PROCUREMENTS
Part of the Monitoring & Controlling Process Group

24. 12.3 Control Procurements
◦ Part of the Monitoring & Controlling Process
Group
◦ The managing of relationships related to
procurement and monitoring sellers
performance in relation to the agreed
requirements
◦ Works to make sure obligations on both the
project and the supplier are being met

25. Controlling Procurements
• A system that defines a change control system for procurements and dispute resolutionContract Change Control
• Audit or review of the seller’s progress when compared to the procurement scope and costsProcurement Performance Reviews
• Verifying compliance to the stated agreements for the procurementInspections and Audits
• Measuring the work performance information as compared to expected performancePerformance Reporting
• Monitoring changes that cannot be agreed upon and working to solve any disputesClaims Administration
• The records of communication related to procurement or handling a procurementRecords Management

26. Sources
A Guide to the Project
Management Body of
Knowledge – PMBOK 6th Edition
https://www.pmi.org/
Joshua Render
https://agile-mercurial.com