Nexus Between
Project Management
and
Supply Management
Henry F. Garcia, C.P.M.
May 26, 2011
Asentrene, Inc. ®
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“Nothing stops an organization faster
than people who believe that the way
they worked yesterday is the best way
to work tomorrow. To succeed, not
only do your people have to change
the way they act, they’ve got to
change the way they think about the
past.”
—John Madonna, Former Chairman, KPMG International
Asentrene, Inc. ®
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Learning Objectives
• Assess Value of Project Management to
Purchasing and Supply Management
Professionals
• Relate Project Management Processes to
Those of Supply Management
• Compare Skill Sets Used in Project
Management and Supply Management
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Definitions
Project Management:
“Project management is the application of
knowledge, skills, tools and techniques to project
activities to meet the project requirements.”
─ Project Management Institute
Supply Management:
“The Identification, acquisition, access, positioning,
management of resources and related capabilities
the organization needs or potentially needs in the
attainment of its strategic objectives”
─ Institute for Supply Management
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Assess Value of Project
Management to Purchasing and
Supply Management Professionals
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Value of Project Management and
Supply Management
Implementation of Project Management Creates:
• Significant increases in productivity, customer satisfaction,
employee satisfaction, and requirements performance,
• Improved stakeholder expectations for risk-informed project
scope definition, cost estimating and activity scheduling,
• Greater use of cross-functional (matrix-managed) teaming,
• Better decision making through more effective intra- and interorganizational communication,
• Higher customer satisfaction by improved quality management,
and
• Fewer problems/issues through use of project management
processes and practices
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Value of Project Management and
Supply Management (Cont’d)
Purchasing and Supply Management’s Contribution:
• Early Purchasing/Supply Management and Supplier
Involvement in:
─ Scope Definition, including Planning, Statement of
Work and Change Control
─ Cost Estimation, including Life Cycle Costing, Earned
Value Analysis
─ Time (Schedule) Management, including Resource
Allocation, PERT and CPM Methodologies
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The Triple Constraint
SCOPE
COST
TIME
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Value of Project Management and
Supply Management (Cont’d)
• Best Practices for Project Management as well as
Purchasing and Supply Management Professionals
► Leadership ─ Ability to influence results
► Communication ─ Ability to explain knowns and ask for
unknowns
► Planning ─ Ability to collaborate in project development
► Big Picture ─ Ability to contribute to goals and objectives
► Detail ─ Ability to see “the devil in the details”
► Budgeting ─ Ability to tract budgets and understand
Earned Value
► Rules and Regs ─ Ability to understand these constraints
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Project Management and
Supply Management Similarities
• Project (Program/Portfolio) Management is used to
achieve organizational goals and objectives in the
context of the organization’s strategic plan.
• Supply Management focuses on strategic resource
management that will optimize the organization’s
goals and objectives.
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Project Management and
Supply Management Similarities
(Cont’d)
• Project Management uses “systems engineering” as
an interdisciplinary approach to holistically manage
project complexity.
• Supply Management uses “systems management”
in a cross-functional team approach to selection,
acquisition, utilization and disposition of a good or
service.
• Both systems provide relevant, timely, complete,
and accurate data/information for decision support.
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Project Management and
Supply Management Similarities
(Cont’d)
•
•
•
•
•
Project Management
Processes
Initiating
Planning
Executing
Monitoring and
Controlling
Closing
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•
•
•
•
Supply Management
Processes
Defining Requirements
Selecting Supplier
Producing Agreement
Administering Changes
Assessing Performance
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Relate Processes of Project
Management to Those of
Supply Management
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Procurement Processes
• Procurement
Planning
• Source Selection/
Evaluation
• Solicitation
Planning
• Contract
Administration
• Solicitation Types
• Contract Closeout
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Who Should Be Involved in
Procurement Planning?
Identify the group(s)
that would add value
through knowledge,
experience, and
expertise (e.g., crossfunctional teams).
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Procurement Planning
• Reconcile
Organization and
Procurement
Strategies
• Consider Market
Conditions
• Select Appropriate
Sources
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• Recognize
Boundaries and
Constraints
• Choose Among
Solicitation Types
• Prepare for Award
and Contract
Administration
Cycles
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Procurement Planning (Cont’d)
The objective is to answer
these questions:
• Whether to procure
• What to procure
• How much to
procure
• How to procure
• When to procure
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Procurement Planning (Cont’d)
• Seek support from contracting and/or
procurement disciplines
– Involve these disciplines Early
– Involve as a member of the project team
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Procurement Planning (Cont’d)
Marketplace
Market Types
• Consider traditional and
electronic markets
 Traditional use legacy technology
 Electronic use virtual connectivity
Market Conditions
• Consider availability of specialized or
general products or services as well as terms
and conditions affecting the acquisition of
such products/services
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Procurement Planning
Marketplace
(Cont’d)
(Cont’d)
Constraints
• Consider limitations to the buyer’s options
Assumptions
• Consider factors that, for planning purposes,
will be considered to be true, real, or certain
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Procurement Strategy
• Relationship Between Specific
Procurement Actions to Organizational
Strategy
• Relationship Between Specific
Procurement Actions to Operating
Environment of Project
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Solicitation Planning
Scope Statement
• Describes an overview of the project





Project boundaries
Project needs and strategies
Project requirements (products & services)
Project methods and mechanics
Project outcomes and deliverables
• Must be considered during solicitation
planning
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Solicitation Planning (Cont’d)
•
•
•
•
Creation of Product/Service Description
Development of Statement of Work (SOW)
Use of Standard Forms (e.g., RFP, RFQ, IFB)
Selection of Cross-functional Teams
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Solicitation Planning (Cont’d)
Product/Service
Description VS SOW
• Product/service description
documents characteristics of
product/services the project
needs or will secure.
• SOW describes portion of
product/service to be
provided by a supplier to the
project.
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Solicitation Planning
(Cont’d)
Statement of Work
• Facilitates accurate and
complete responses from
suppliers
• Specifies desired form/type of
response
• Includes required contractual
provisions, including requisite
regulations
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Solicitation Planning
(Cont’d)
Standard Forms
• Bid or Quotation customarily used when decision
(award) is based on price and products/services
are standard
• Proposal generally used when other considerations
(e.g., technical skills or approach) influence
decision (award)
• Terms may be used interchangeably; implications
of terms used may promote different assumptions
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Solicitation Planning
(Cont’d)
Cross-functional Teams
• Procurement Strategy
Teams
• Specification or SOW
Teams
• Commodity Teams
• Sourcing Teams
• Temporary Teams
• New Product
Development Teams
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• Supplier Selection/
Negotiating Teams
• Supplier Certification
Teams
• Supplier Evaluation
Teams
• Make-or-Buy Teams
• Value Analysis Teams
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Solicitation Planning (Cont’d)
Cross-functional Teams (Cont’d)
• Team Membership and
Leadership Based on
Impact of Product or
Service on
Organizational Unit
• Team Collaboration
with Procurement
Integral to Success
Project Procurement
Processes – Except
Contract Closeout
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Solicitation Types
• Request for Proposal (RFP)
• Request for Quotation (RFQ) or Invitation
for Bid (IFB)
• Non-Competitive Negotiation
• Two-Step Bidding
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Solicitation Types (Cont'd)
Comparing Procurement Documents
Examples:
- Invitation for Bid (IFB)
- Request for Quotation (RFQ)
- Request for Proposal (RFP)
- Non-Competitive Negotiation
- Two-Step Bidding
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Typically for pricedriven commodities
Typically for
professional services
or technical skills
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Source Selection
• Local, Regional, National Suppliers
• Single, Sole, or Multiple Suppliers
• Special Sources (e.g., HUB, W/MBE, local
preference, and regulated commodities)
• Special Circumstances (i.e., degree of
influence or control over source selection
and product/service)
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Source Selection/Evaluation
• Supplier selection based on price, quality,
delivery, service, and other considerations
• Proposal or bid/quotation evaluation based
on select criteria
• Evaluation tools/techniques based on
impact on organization’s cost/price
strategies
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Boundaries and Constraints
• Capacity Assessment
• Funds Availability
• Time
Requirements/Constraints
• Acceptance Criteria
• Internal/External Audit
Requirements
• Stakeholder Expectations
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Boundaries
And
Constraints
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Award and Contract
Administration Cycles
• Award Criteria
• Contract Form Selection
 Completion – Deliver definitive end
product or service
 Term – Deliver specific “level of
effort”
• Contract Administration Requirements and
Responsibilities
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Contract Administration
Contract Administration is the process of
ensuring that the supplier’s performance meets
contractual requirements
• The project team should be sensitive to the legal/
regulatory implications of taking contract
administrative action
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Contract Administration (Cont'd)
Project Manager in Contract Administration:
• Integral to successful execution of the contract
• Collaborates with Contract Administrator on
accomplishment of contract provisions
• Defers to the Contract Administrator to make “legal”
changes to the contract
• May require interface with other organizational
elements (e.g., Accounting/Finance, Legal, Quality,
etc.)
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Contract Administration (Cont'd)
Work results
• Assessment of suppliers’ performance; tied to
project execution
– Work completed
– Quality of work
– Costs incurred/committed
– Deliverables completed
– Quality standards met
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Contract Administration (Cont'd)
Change requests
• Change requests may include
modifications to the terms of
the contract or to the description
of the product or service to be
provided
Change
Order
• Decision to terminate the contract
would also be handled as a change request
• Contested changes are variously called
claims, disputes, or appeals, depending upon
the industry
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Contract Administration (Cont'd)
Supplier Invoices
• Periodic invoices for payment of work
performed
• Invoicing requirements and payment terms
should be defined in the contract
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Contract Administration (Cont'd)
Correspondence
• Written documentation of
certain aspects of buyer/supplier
communications
Contract changes
• Fed back through the appropriate project
planning and project procurement
processes
Payment requests
• Cooperation with those aspects of the
organization responsible for supplying
data for and payment of invoices
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Contract Closeout
Contract Closeout is similar to
Administrative Closure in that it
involves both product/service
verification and administrative
closeout
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Contract Closeout (Cont'd)
Contract Documentation
• The contract itself, along with all supporting
schedules, requested and approved contract
changes, any supplier-developed technical
documentation, supplier performance reports,
financial documents, and results of any contractrelated inspections.
• May contain results of contract-related inspections,
including audits
• Early termination of a contract is a contract
closeout.
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Contract Closeout (Cont'd)
Procurement Audits
• Structured review of the procurement process
• Used to determine success or failure of the
procurement process
• Source of Lessons Learned process on the conduct
of the project
• Could result in transfer to other
procurement items on the project
or to other projects
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Audit
Files
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Contract Closeout (Cont'd)
Contract file
• Complete set of indexed records for inclusion in
completed project file
Formal acceptance and closure
• Public announcement to the
supplier of project completion
(as defined in contract)
• Supplier receives formal notice of contract
completion from Contract Administrator
• Requirements for formal acceptance and closure
usually defined in the contract
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Compare Skill Sets Used in
Project Management and
Supply Management
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Project Management and
Supply Management Skill Set
Application Area Knowledge, Standards,
and Regulations
–
–
–
Understanding the Project Environment
General Management Knowledge and
Skills
Interpersonal Skills
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Project Environment
Organizational
Cultural
Project
Manager
Political
Technical
Legal
Logistical
Interpersonal
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General Management
Knowledge and Skills
•
•
•
•
•
•
•
Strategic, Tactical and Operational Planning
Information Technology
Accounting and Finance
Marketing and Sales
Legal and Regulatory Context
Purchasing and Supply Management
Compliance Requirements
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Interpersonal Skill Set
•
•
•
•
•
•
•
•
Leader and Manager
Competent Professional
Problem Solver
Negotiator
Organizer
Planner
Communicator
Budget Analyst
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What Questions
Do You Have?
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© 2010 Asentrene, Inc.
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