Project Management/Procurement

Procurement means acquiring goods and services from an outside source. The term procurement is widely used in government; many private companies use the terms purchasing and outsourcing. Organizations or individuals who provide procurement services are referred to as suppliers, vendors, contractors, subcontractors, or sellers; of these terms, suppliers is the most widely used. Many IT projects involve the use of goods and services from outside the organization.

Objectives and Skills

Objectives and skills for the procurement portion of Project+ certification include:

• Explain the procurement process in a given situation
  • Project needs assessment / gap analysis
  • Make or buy decision
  • RFI, RFQ, RFP (Request for: Information, Quote, Proposal)
  • Request seller response
  • Evaluate seller response
  • Vendor selection
  • Contract development
• Explain the purpose and common components of a transition plan
  • Ownership
  • Transition dates
  • Training
  • Extended support
  • Warranties

Objectives and skills for the procurement portion of Project+ PK0-004 certification include:

• Identify common partner or vendor-centric documents and their purpose.
  • Request for Information
  • Request for Proposal
  • Request for Quote
  • Mutually binding documents
    • Agreements/contract
    • Non-disclosure agreement
    • Cease and Desist letter
    • Letter of Intent
    • Statement of Work
    • Memorandum of Understanding
    • Service Level Agreement
    • Purchase Order
    • Warranty

Readings

1. Wikipedia: Procurement
2. Wikipedia: Gap analysis
3. pmtips.net: Make or buy analysis in 5 easy steps
4. Wikipedia: Request for proposal (Please see Request for Information (RFI) and Request for Quotation (RFQ) inside)
5. mypmps.net: Request Seller Response
6. itil.org: Six steps for a successful vendor selection
7. pmstudycircle.com: Types of procurement contract used in project management
8. wiki.en.it: Transition Planning and Support
9. Wikipedia: Transition methodology

Multimedia

1. YouTube : Introduction to Procurement
2. YouTube: How to do a Gap Analysis
3. YouTube: Make or buy decision
4. YouTube: Request for Proposal
5. YouTube: How to Write a RFP
6. YouTube: Difference between RFQ and RFI
7. YouTube: Proposal/Response Evaluation
8. YouTube: Supplier selection
9. YouTube: Defining contract types
10. YouTube: Transition plan
11. YouTube: Procurement,Purchasing, and Supply Chain Management Training

Activities

1. Read Tutorialspoint.com: Procurement management.
   • How does procurement management work?
   • How can you make the process work efficiently?
2. Read concordnow.com:Steps to create an effective procurement management plan and watch YouTube: Project procurement management.
   • Why is Procurement important in project management?
   • List and explain steps of procurement project management.
3. Read cleverism.com: Make or buy decision step by step guide and practice this exam alaska.edu: Relevant Costs for Decision Making.
   • Make a 'Make or buy decision' based on the practice exam.
4. Read investopedia.com: request for proposal and create a request for proposal for your organization/college using this online tool formswift.com:request for proposal.
5. Read captureplanning.com: Writing a transition plan and watch YouTube: How to Transition Team Members to New Projects.
   • Put yourself in the place of the customer and consider what questions they would have about how you will implement what you propose.
   • Make a list of steps in a transition plan.

Lesson Summary

• Procurement is the act of finding, acquiring, buying goods, services or works from an external source, often via a tendering or competitive bidding process. The process is used to ensure the buyer receives goods, services or works at the best possible price, when aspects such as quality, quantity, time, and location are compared.
• Gap analysis is a formal study of what a business is doing currently and where it wants to go in the future. It can be conducted, in different perspectives, as follows- Organization (e.g., Human Resources), Business Direction, Business Processes and Information technology.
• The‘make or buy’ decision is to decide if it’s better to do the task or make the product in-house or whether you should contract with a vendor to do it for you. Here’s an easy 5 step approach that can be used in procurement discussions-Review existing skills, Review potential skills, Review time, Review costs and Compare quality.
• A request for proposal (RFP) is a document that solicits proposal, often made through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals. An RFP is used where the request requires technical expertise, specialized capability, or where the product or service being requested does not yet exist and the proposal may require research and development to create whatever is being requested.
• A request for information (RFI) is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes. An RFI is primarily used to gather information to help make a decision on what steps to take next. RFI's are therefore seldom the final stage and are instead often used in combination with the following: request for proposal (RFP), request for tender (RFT), and request for quotation (RFQ).
• A request for quotation (RFQ) is a standard business process whose purpose is to invite suppliers into a bidding process to bid on specific products or services. An RFQ typically involves more than the price per item. Information like payment terms, quality level per item or contract length may be requested during the bidding process.
• Six steps for a successful vendor selection-Kick-off and requirements definition, Market research and first vendor filtering, Request for Proposal (RFP), Evaluate responses, Proof of Concept (POC) and Select Vendor.
• The Contract: A contract is a legally binding agreement between two or more parties. Usually, one party is known as a buyer and another as a seller. The contract is the key to the buyer and seller relationship. It provides the framework for how they will deal with each other. Procurement contracts can be broadly divided into three categories- Fixed-Price Contract, Cost Reimbursable Contract, Time and Materials.
• Transition Plan: A project management transition plan is simply a document that outlines the processes to be followed during the implementation stage of any project. Upon the completion of a defined task, the project team cannot simply present the findings and deliverables to the company executives and walk away. They must also provide a thorough plan for the implementation of these ideas into the processes that already exist and this plan is called a 'transition plan' because the company will literally experience a period of change while the plans are put in motion.
• An ownership transition plan is a written and comprehensive document that outlines how and when the ownership of a business will be transferred to others, either internally or externally, in order to achieve the owner’s goals.

Key Terms

bidding

An offer to set a price by an individual or business for a product or service or a demand that something be done. Bidding is used to determine the cost or value of something.

buyer

Any person who contracts to acquire an asset in return for some form of consideration.

cease and desist letter

A document sent to an individual or business to stop purportedly illegal activity ("cease") and not to restart it ("desist").

contract

A voluntary arrangement between two or more parties that is enforceable by law.

cost analysis

The accumulation, examination, and manipulation of cost data for comparisons and projections. A cost analysis is important to help an organization make a make-buy decision.

deliverables

A term used in project management to describe a tangible or intangible good or service produced as a result of the project that is intended to be delivered to a customer (either internal or external).

letter of intent

A document outlining one or more agreements between two or more parties before the agreements are finalized.

memorandum of understanding

An agreement between two (bilateral) or more (multilateral) parties. It expresses a convergence of will between the parties, indicating an intended common line of action.

non-disclosure agreement

A legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to or by third parties.

procurement

The act of finding, acquiring, buying goods, services or works from an external source, often via a tendering or competitive bidding process.

proposal (Business)

A written offer from a seller to a prospective buyer. Business proposals are often a key step in the complex sales process—i.e., whenever a buyer considers more than price in a purchase.

purchase order

A commercial document and first official offer issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services.

quote

Allows a prospective buyer to see what costs would be involved for the work they would like to have done.

service level agreement

A commitment between a service provider and a client.

statement of work (SOW)

A document routinely employed in the field of project management. It defines project-specific activities, deliverables, and timelines for a vendor providing services to the client.

vendor

A supply chain management term that means anyone who provides goods or services to a company or individuals. A vendor often manufactures inventoriable items, and sells those items to a customer.

Review Questions

1. ___________is the act of finding, acquiring, buying goods, services or works from an external source.

   Procurement is the act of finding, acquiring, buying goods, services or works from an external source.
2. ____________ is a formal study of what a business is doing currently and where it wants to go in the future.

   Gap Analysis is a formal study of what a business is doing currently and where it wants to go in the future.
3. The _________ decision is to decide if it’s better to do the task or make the product in-house or whether you should contract with a vendor to do it for you.

   The ‘make or buy’ decision is to decide if it’s better to do the task or make the product in-house or whether you should contract with a vendor to do it for you.
4. _________is a document that solicits proposal, often made through a _______process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit ________ proposals.

   A request for proposal (RFP) is a document that solicits proposal, often made through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals.
5. A _________________is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes.

   A request for information (RFI) is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. Normally it follows a format that can be used for comparative purposes.
6. A __________is a standard business process whose purpose is to invite suppliers into a bidding process to bid on specific products or services.

   A request for quotation (RFQ) is a standard business process whose purpose is to invite suppliers into a bidding process to bid on specific products or services.
7. A contract is a legally __________ agreement between two or more parties.

   A contract is a legally binding agreement between two or more parties.
8. A Fixed-Price Contract is also known as a _______contract.

   A Fixed-Price Contract is also known as a lump-sum contract.
9. In __________ the seller is reimbursed for completed work plus a fee representing his profit.

   In Cost Reimbursable Contract the seller is reimbursed for completed work plus a fee representing his profit.
10. A __________ type of contract is generally used when the deliverable is “labor hours.”

    A Time and Materials type of contract is generally used when the deliverable is “labor hours.”
11. A project management ___________ is simply a document that outlines the processes to be followed during the implementation stage of any project.

    A project management transition plan is simply a document that outlines the processes to be followed during the implementation stage of any project.
12. An _______________ is a written and comprehensive document that outlines how and when the ownership of a business will be transferred to others, either internally or externally, in order to achieve the owner’s goals.

    An ownership transition plan is a written and comprehensive document that outlines how and when the ownership of a business will be transferred to others, either internally or externally, in order to achieve the owner’s goals.
13. _______________ is an agreement between two (bilateral) or more (multilateral) parties. It expresses a convergence of will between the parties, indicating an intended common line of action.

    Memorandum of Understanding is an agreement between two (bilateral) or more (multilateral) parties. It expresses a convergence of will between the parties, indicating an intended common line of action.
14. _______________ is a document sent to an individual or business to stop purportedly illegal activity ("cease") and not to restart it ("desist").

    Cease and Desist letter is a document sent to an individual or business to stop purportedly illegal activity ("cease") and not to restart it ("desist").
15. _______________ is a document outlining one or more agreements between two or more parties before the agreements are finalized

    Letter of Intent is a document outlining one or more agreements between two or more parties before the agreements are finalized.

Assessments

• Flashcards:Procurement
• Quiz:Quizlet: Procurement

See Also

1. Read:ehow.com: How to create a procurement plan for project
2. Read: pmi.org: Contract/Procurement management
3. Read: study.com: What is project procurement management?- Definition & Process
4. Watch:YouTube: Project Procurement Management

References

Type classification: this is a lesson resource.