Conduct Procurements – Buying and selling
In the previous processes you have established what deliverables within the project need to be procured, and you have created the procurement management plan. The procurement management plan defines HOW (so its really a strategy document) all procurement management processes are to be carried out.
The procurement management plan also contains:
- what will be procured for the project
- how a seller will be selected
- what types of contracts will apply to this procurement
- how all risks and Sellers will be managed including how their performance will be measured.
You may recall that the two main roles involved within conduct procurements are:
The buyer. This role represents the organization who is purchasing the goods or services from the seller.
The seller. This role represents the organization who is providing or delivering the goods or services to the buyer.
The project manager MAY fill either or both of the above roles.
Conduct Procurements activities.
The activities that need to take place during the conduct procurements process are:
- Issue the bid package to potential Sellers
- Hold bidder conferences
- Evaluate potential seller proposals
- Select the winning seller proposal
Because procurement aspects of each individual project will be unique, then this process may need to occur once or multiple times if there are multiple contracts. Of course, if the decision is to create all of the project deliverables ‘in house’, there may be no need to plan nor use the process conduct procurements.
This process, conduct procurements, receives almost all of the outputs from the plan procurements process as inputs.
There are a total of nine inputs in the conduct procurements process:
The project management plan.
This is a common input and it is important as the plan will contain relevant information such as scope, resources, time and cost.
Conduct Procurements documents.
These are an output from the plan procurements process, and will be unique according to the particular organisation but as an example may consist of invitation for bid, and ‘request for proposal’ documents. These are created by the buyer and sent to the prospective Sellers containing a clear description of the work that is to be performed.
Source selection criteria.
This is also an output from the plan procurements process. Such resource selection criteria must be agreed before the seller is selected to enable the process to be both objective and unbiased. The criteria may be chosen to cover any aspect of procurement such as price, competence, support and maintenance, track record, etc.
Qualified seller list.
If procurement is a typical part of your organizations business, then it is highly likely that a procurement or contract department will exist within your organisation. Similarly a list of Sellers who are qualified may exist, and it is only from this list that a potential seller can be selected.
Since conduct procurements is where the documents are to be reviewed then an obvious input are the proposals that the Sellers have provided to the buying organisation. Such proposals will lay out clearly how the seller intends to approach the work, and of course how much they will charge.
Depending upon when this process is carried out within the project, the range of documents may be small or large. But as a simple example, any documentation that lays out risk, scope, or the environment within which the project deliverables will need to operate, would be helpful as an input to the conduct procurements process.
Make or buy decisions.
This is another output from the plan procurements process and it will have been generated with help from the make or buy analysis tool. The data from this analysis will have been gathered and decisions made providing sufficient information to justify such decisions. This document can now be used within this process
This is an input from the plan procurements process and is used whenever two or more groups formal partnership to work on a contract or a deliverable. One of the groups will become the buyer and the other a seller even though they both serve the buying organisation. Such a teaming agreement lays out how this relationship would need to work.
Organisational process assets.
These may be any assets that relate to procurement such as documents templates, policies procedures and guidelines, or lessons learned for example.
There are six outputs from the conduct procurements process:
Once the request for proposal has been created, and the Sellers have submitted their proposals, negotiations can now take place. This output states which seller has been selected to deliver goods or services to the project.
Procurement contract award.
Such contracts will normally be written by a contract department or procurement experts, and not normally be created by the project manager. The award is normally in the form of a contract which is legally binding that describes the work to be performed by the way in which such work will be carried out.
The information within a contract can vary greatly but will often include who will do the work, when and how the seller will be paid, how disputes (claims) will be resolved, and the delivery terms. Such information must be mutually agreed by both the buyer and seller.
Such calendars only apply to those external resources that are being procured and should reflect their availability for example as a result of the contract now being let.
This is an output from the plan procurements process, and refers to such changes that may be needed to facilitate procurement. Like all change requests, these also should be passed back through the perform integrated change control process so that the impact on such changes may be evaluated on the rest of the project.
Project management plan updates.
As a result of conducting procurements, virtually any aspect of the project management plan may need to be updated. Typical examples may include costs and time baselines, lessons learned, risks etc.
There are seven tools and techniques used in the conduct procurements process:
When evaluating bidder responses, is vital to be scrupulously fair and honest, so that all bidders are on a level playing field. To ensure this happens, the bidder conference provides equal information to all potential Sellers including any answers to questions posed by one bidder, and this is therefore shared with all other bidders. In this way, all communications are shared with everyone.
Proposal evaluation techniques.
This particular technique is there to evaluate the proposals and is really a summation of the following tools within the conduct procurements process.
The buyer may ask an independent group to prepare an estimate that is used as an objective source of information. Such estimates are often called ‘should cost’ estimates.
It is the most commonly used to all by the buyer to seek out and use expert judgement in order to aid evaluate the bids and proposals.
In some procurement environments this is mandatory, but in any case it is a useful way to elicit many more seller responses in order to give the buyer both an improved volume and quality of responses so that the best possible selection choice can be made. From the seller’s perspective this will also encourage more competitive prices which is a clear advantage to the buyer. Typically such advertising may occur online, in trade publications or even newspapers.
This can be helpful in identifying products, but the procurement process is not normally carried out online as even the Internet may not have sufficient data for the required goods or services.
This is not so much a tool, rather an activity where the objective is to reach a win-win outcome between both the buyer and seller. The objective here is to reach a mutual agreement of the contractual terms and conditions.
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