Overview

Figure 12-1 provides an overview of the Project Procurement Management processes, and Figure 12-2 provides a process flow view of the processes and their inputs, outputs, and related processes from other Knowledge Areas.

The Project Procurement Management processes include the following:

12.1 Plan Purchases and Acquisitions - determining what to purchase or acquire and determining when and how.

12.2 Plan Contracting - documenting products, services, and results requirements and identifying potential sellers.

12.3 Request Seller Responses - obtaining information, quotations, bids, offers, or proposals, as appropriate.

12.4 Select Sellers - reviewing offers, choosing among potential sellers, and negotiating a written contract with each seller.

12.5 Contract Administration - managing the contract and relationship between the buyer and seller, reviewing and documenting how a seller is performing or has performed to establish required corrective actions and provide a basis for future relationships with the seller, managing contract-related changes and, when appropriate, managing the contractual relationship with the outside buyer of the project.

12.6 Contract Closure - completing and settling each contract, including the resolution of any open items, and closing each contract applicable to the project or a project phase.

These processes interact with each other and with the processes in the other Knowledge Areas as well. Each process can involve effort from one or more persons or groups of persons, based on the requirements of the project. Each process occurs at least once in every project and occurs in one or more project phases, if the project is divided into phases. Although the processes are presented here as discrete components with well-defined interfaces, in practice they overlap and interact in ways not detailed here. Process interactions are discussed in detail in Chapter 3.

The Project Procurement Management processes involve contracts that are legal documents between a buyer and a seller. A contract is a mutually binding agreement that obligates the seller to provide the specified products, services, or results, and obligates the buyer to provide monetary or other valuable consideration. A contract is a legal relationship subject to remedy in the courts. The agreement can be simple or complex, and can reflect the simplicity or complexity of the deliverables. A contract includes terms and conditions, and can include other items such as the seller's proposal or marketing literature, and any other documentation that the buyer is relying upon to establish what the seller is to perform or provide. It is the project management team's responsibility to help tailor the contract to the specific needs of the project. Depending upon the application area, contracts can also be called an agreement, subcontract, or purchase order. Most organizations have documented policies and procedures specifically defining who can sign and administer such agreements on behalf of the organization.

Although all project documents are subject to some form of review and approval, the legally binding nature of a contract usually means that it will be subjected to a more extensive approval process. In all cases, the primary focus of the review and approval process ensures that the contract language describes products, services, or results that will satisfy the identified project need. In the case of major projects undertaken by public agencies, the review process can include public review of the agreement.

The project management team may seek support early from specialists in the disciplines of contracting, purchasing, and law. Such involvement can be mandated by an organization's policy.

The various activities involved in the Project Procurement Management processes form the life cycle of a contract. By actively managing the contract life cycle and carefully wording the terms and conditions of the contract, some identifiable project risks can be avoided or mitigated. Entering into a contract for products or services is one method of allocating the responsibility for managing or assuming potential risks.

A complex project can involve managing multiple contracts or subcontracts simultaneously or in sequence. In such cases, each contract life cycle can end during any phase of the project life cycle (see Chapter 2). Project Procurement Management is discussed within the perspective of the buyer-seller relationship. The buyer-seller relationship can exist at many levels on any one project, and between organizations internal to and external to the acquiring organization. Depending on the application area, the seller can be called a contractor, subcontractor, vendor, service provider, or supplier. Depending on the buyer's position in the project acquisition cycle, the buyer can be called a client, customer, prime contractor, contractor, acquiring organization, governmental agency, service requestor, or purchaser. The seller can be viewed during the contract life cycle first as a bidder, then as the selected source, and then as the contracted supplier or vendor.

The seller will typically manage the work as a project if the acquisition is not just for materiel, goods, or common products. In such cases:

• Buyer becomes the customer, and is thus a key project stakeholder for the seller

• Seller's project management team is concerned with all the processes of project management, not just with those of this Knowledge Area

• Terms and conditions of the contract become key inputs to many of the seller's management processes. The contract can actually contain the inputs (e.g., major deliverables, key milestones, cost objectives), or it can limit the project team's options (e.g., buyer approval of staffing decisions is often required on design projects).

This chapter assumes that the buyer of items for the project is within the project team and that the seller is external to the project team. This relationship is true if the performing organization is the seller of a project to a customer. This relationship is also true if the performing organization is the buyer from other vendors or suppliers of products, services, results, or subproject components used on a project.

This chapter assumes that a formal contractual relationship is developed and exists between the buyer and the seller. However, most of the discussion in this chapter is equally applicable to non-contractual formal agreements entered into with other units of the project team's organizations.

Figure 12-1. Project Procurement Management Overview

Note

Note: Not all process interactions and data flow among the processes are shown. Figure 12-2. Project Procurement Management Process Flow Diagram