Other Planning - Procurement Planning

Procurement management

• Sometimes external resources are needed to provide the project deliverables
• Procurement management involves activities from deciding to purchase a product to selecting the external party to produce the product

Procurement performance processes

• Procurement planning – whether to buy or not?
• Solicitation planning – create the statement of work (SOW) and RFP on WHAT to be done
• Solicitation – finding potential external vendors WHO can provide the service or goods
• Source selection – determine WHO to award the deal to
• Contract Adminstration

Procurement planning

• Before you go ahead to purchase something, you need to determine whether you need to procure it or produce it on your own
• The decision to procure or not is called Make or Buy Analysis
• Things to consider
• Equipment – Company has the resource to produce equipment?
• Staff – Company has the staff with necessary skill?

Make-or-Buy Analysis

• Make-or-buy analysis involves estimating the internal costs of providing a product or service, and comparing that estimate to the cost of buying
• Example: Assume you need a new software that cost $12,000 to buy off-the-shelve. However, you can employ someone to write the software at $2000 per month. Which is a better option?

Requests for proposal (RFP)

• A document by the buyer that list out the basic requirements for the products and/or services
• For example, a company which is trying to connect all PCs to the Internet will create an RFP that requires vendor provide solution on how it can be done

Request for quote (RFQ)

• Is a document used to get quotes/pricing from prospective sellers
• Used for items that are common and standard (e.g. 100 LCD monitor )
• Doesn’t take as long to prepare as an RFP

Solicitation planning

• Involves sending out the RFP/RFQ and obtaining proposals or bids from prospective sellers
• Prospective vendors/sellers complete most of the work in this process, at no cost to the buyer or the project
• The main output of this process is receipt of proposals or bids

Type of contracts

• A contract is a legal document the covers the work to be done and how the work will be paid and penalties for noncompliance
• These are
• Fixed price contracts – A single sum to cover everything
• Cost reimbursable contracts – will only know the final
  cost after the work is done. More for work that are new and unfamiliar to be able to give a good estimate
• Time and material contracts – No. of units not fixed but cost per unit is fixed

Source selection criteria

• This step involves the deciding which vendor to select
• Decision can be based on
• Cost $$
• Vendor experience
• Vendor company financial status

Contract Administration

• Deals with the activities involved when dealing with the vendor when work is in the executing stages. (E.g. Monitoring the quality of work)

Contract close-out

• Contract close-out involves activities related to the vendor when the work is done. (E.g. payment)

The comprehensive project plan

• A collection of project-related documents
• A guide and baseline for the project manager during the execution, control and closure phases of the project
• When approved, signals the end of the planning phase

Putting the project plan together

• Administrative component (e.g. TOC, Version)
• Planning component (executive high level summary, requirements)
• Major deliverables and tasks
• Issues and person responsible
• Communication plan
• Implementation plan (E.g. Configuration, method of testing)
• Support/maintenance
• Training for helpdesk
• Appendix – Schedule and budget baseline

Formal project plan review meeting

• Assess the completion of the planning documentation
• Obtain feedback from stakeholders
• If necessary, adjust the project plan
• Assess the viability of the business case
• Obtain formal approval by having it signed

Source: PMP, Prince2