Project Procurement Management
(Outsourcing)
Picture source: Refer bottom left hand corner of picture
1
What is Procurement Management?
 Deciding what work to give to outside
contractors (if any) and how to do
that.
 Requesting and receiving proposals.
 Selecting the right contractor and
proposal.
 Negotiation and managing a contract.
2
Tutorial exercise
Sales Managers
Purchase Managers
Charlies Cargo
Bravo Flying
Boats
Alpha Aircraft
3
Project Procurement Management
Procurement Solicitation
Solicitation
Planning
Planning
Source
Selection
-Assess
proposals
- If, what,
when,
how?
- Determine
- Inform
SOW
bidders
- Determine
- Seek
Selection
proposals
Criteria
P-Plan
Proposals
Contract
- Make-orbuy
SOWs
Evaluation
Criteria
RFP
Contract
Admin
Contract
Close
-Audit
-Assess
performance -Close
project
-Manage
-Contract
negotiation changes
Contract
Changes
Acceptance
Work
done
Payments
4
A
A
Government Order
B
C
D
E
F
What can Alpha make
itself?
What parts have to be
outsourced?
5
B
Government Order
A
B
C
D
E
F
What can Bravo make
itself?
What parts have to be
outsourced?
6
C
Government Order
A
B
C
D
E
F
What can Charlie make
itself?
What parts have to be
outsourced?
7
Tutorial: Deciding what to outsource
Charlies Cargo
Bravo Flying
Boats
Alpha Aircraft
8
Solicitation Planning
Procurement Solicitation
Solicitation
Planning
Planning
Source
Selection
-Assess
proposals
- If, what,
when,
how?
- Determine
- Inform
SOW
bidders
- Determine
- Seek
Selection
proposals
Criteria
P-Plan
Proposals
Contract
- Make-orbuy
SOWs
Evaluation
Criteria
RFP
Contract
Admin
Contract
Close
-Audit
-Assess
performance -Close
project
-Manage
-Contract
negotiation changes
Contract
Changes
Acceptance
Work
done
Payments
9
Tutorial – Preparing RFPs
Our criteria are “Must look like our
drawing” & “A promise that it will be
delivered before our time deadline”.
Let’s prepare RFP’s for the two items
we must outsource and send them to
two different suppliers
10
Tutorial: RFP to 1st supplier
Alpha Aircraft
Bravo Boats
3:20pm
11
A “real” RFP
1.
2.
3.
4.
5.
6.
Purpose of RFP
Background of organisation
Hardware and Software Environment
The RFP process
Statement of Work and Schedule Information
Appendices
a) Current system overview
b) System requirements
c) Volume and size data
d) Required contents of Vendor’s repsonse to RFP
e) Sample Contract
Source:IT Project Management, Schwalbe
12
Tutorial: RFP to 2nd supplier
Alpha Aircraft
Charlie’s Cargo
3:20pm
13
Tutorial: Prepare RFPs
RFP1c-b
RFP1c-a
RFP2c-b
RFP2c-a
RFP1b-c RFP1b-a
RFP2b-c RFP2b-a
RFP1a-b RFP1a-c
RFP2a-b RFP2a-c
14
Solicitation & Source Selection
Procurement Solicitation
Solicitation
Planning
Planning
Source
Selection
-Assess
proposals
- If, what,
when,
how?
- Determine
- Inform
SOW
bidders
- Determine
- Seek
Selection
proposals
Criteria
P-Plan
Proposals
Contract
- Make-orbuy
SOWs
Evaluation
Criteria
RFP
Contract
Admin
Contract
Close
-Audit
-Assess
performance -Close
project
-Manage
-Contract
negotiation changes
Contract
Changes
Acceptance
Work
done
Payments
15
Tutorial: Seek Proposals
RFP1c-b
RFP1c-a
RFP2c-b
RFP2c-a
RFP1b-c RFP1b-c
RFP2b-a RFP2b-a
RFP1a-b RFP1a-c
RFP2a-b
RFPa-c
16
Tutorial: Write Proposals
Ok, guys. We have to
respond to these 4 RPFs
with 4 proposals. Sales
Manager…take the lead!
17
From this...
Write Proposal
...via this...
...to this.
Charlies Cargo
Alpha Aircraft
5 minutes
3:20pm
2 gold bars
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Tutorial: Submit Proposals
P1c-b
P2c-b
P1b-c
P1a-c
P2b-c
P2a-c
P1a-b
P1b-a
P2a-b
P2b-a
P1c-a
P2c-a
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Tutorial: Proposals duly received
P1c-b
P1c-a
P2c-b
P2c-a
P1b-c
P1b-a
P2b-c
P2b-a
P1a-b
P1a-c
P2a-b
Pa-c
20
Tutorial: Audit
At this point the Purchasing Manager has to show the
tutor that he has two proposals for each of two parts
21
Solicitation & Source Selection
Procurement Solicitation
Solicitation
Planning
Planning
- If, what,
when,
how?
- Determine
- Inform
SOW
bidders
- Determine
- Seek
Selection
proposals
Criteria
P-Plan
Proposals
- Make-orbuy
SOWs
Evaluation
Criteria
RFP
Source
Selection
-Identify
winning
proposal
- Negotiate
contract
Contract
Contract
Admin
Contract
Close
-Audit
-Assess
performance -Close
project
-Manage
changes
Contract
Changes
Acceptance
Work
done
Payments
22
Which is the correct way to select the
winning proposal/bid?
A.
B.
C.
D.
E.
Select the proposal with the most beautiful drawing.
Choose at random so as to be fair to everyone.
Select the company which employs your best friend.
Determine which supplier is offering the largest bribe.
Use the original criteria as the basis for selection.
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Tutorial: Select Proposals
P1c-b
P1c-a
P2c-b
P2c-a
P1b-c
P1b-a
P2b-c
P2b-a
P1a-b
P1a-c
P2a-b
P2a-c
24
Tutorial: Negotiate Contract
You need to agree a contract for each part you outsource
25
Contract Administration
Procurement Solicitation
Solicitation
Planning
Planning
Source
Selection
-Assess
proposals
- If, what,
when,
how?
- Determine
- Inform
SOW
bidders
- Determine
- Seek
Selection
proposals
Criteria
P-Plan
Proposals
Contract
- Make-orbuy
SOWs
Evaluation
Criteria
RFP
Contract
Admin
Contract
Close
-Audit
-Assess
performance -Close
project
-Manage
-Contract
negotiation changes
Contract
Changes
Acceptance
Work
done
Payments
26
Make, sell, buy, check, accept, pay
27
Contract Close
Procurement Solicitation
Solicitation
Planning
Planning
Source
Selection
-Assess
proposals
- If, what,
when,
how?
- Determine
- Inform
SOW
bidders
- Determine
- Seek
Selection
proposals
Criteria
P-Plan
Proposals
Contract
- Make-orbuy
SOWs
Evaluation
Criteria
RFP
Contract
Admin
Contract
Close
-Audit
-Assess
performance -Close
project
-Manage
-Contract
negotiation changes
Contract
Changes
Acceptance
Work
done
Payments
28
If both sides are happy then sign off.
29
Assemble and hand over to government
and keep the gold bars
30
The finished product in the last photo
matches which government proposal?
A.
B.
C.
D.
E.
The one given to Alpha
The one given to Bravo
The one given to Charlie
None of them – it’s original work of art
None of them – there’s been a diabolical
breakdown in communications!
31
So far, I understand what’s going on
1.
2.
3.
4.
5.
Strongly agree
Agree
Not sure
Disagree
Strongly disagree
32