Lecture Project management in practice - Chapter 15: Project procurement management

Lecture Project management in practice - Chapter 15: Project procurement management. This chapter presents the following content: Procurement and project management, procurement management plan, outsourcing project work, contracting and contract types,...

CHAPTER 15

Project Procurement

Management

Procurement and Project

Management

Procurement and Project

Management (cont.)

• Long lead-time items

• Large capital items

• Make or Buy decision

Procurement Management Plan

• Governance

• Organisational policy and procedures in

relation to procurement, contracting and

legal processes

• Requirements of long lead-time items and large capital-purchase items

• Purchasing assumptions

• Risk analysis of procurement decision

• Review of procurement lessons learned

from previous projects

Common Tender Types

Outsourcing Project Work

I

f the decision is to ‘buy’ into the

project, one of the most frequently

used phases is to outsource.

Outsourcing Project Work (cont.)

Advantages

• Cost reduction

• Faster project

completion

• High level of expertise

• Flexibility

Disadvantages

•Coordination breakdowns

•Loss of control

•Conflict

•Security issues

Outsourcing Project Work (cont.)

Best practices

• Well-defined requirements and procedures

• Extensive training and team-building

activities

• Well-established conflict management

processes in place

• Frequent review and status updates

• Co-location when needed

• Fair and incentive-laden contracts

• Long-term outsourcing relationships

Contracting and Contract

Types

• Infrastructure ‘type’ contracts

 Build, Own, Operate, Transfer (BOOT)

 Build, Own, Operate (BOO)

 Build, Operate, Transfer (BOT)

• Partnerships

• Time and material contracts

Contracting and Contract

Types (cont.)

• Fixed Price Contracts

 Firm fixed price (FFP)

 Fixed price incentive fee (FPIF)

 Fixed price with economic price adjustment

(FP-EPA)

• Cost Reimbursable Contracts

 Cost plus fixed fee (CPFF)

 Cost plus incentive fee (CPIF)

 Cost plus award fee (CPAF)

Summary of Contract Types

Essential Elements

of a Contract

1 Offer and acceptance (agreement).

2 Intention to create legal relations.

3 Consideration.

4 Legal capacity.

5 Consent.

6 Illegal and void contracts.

The Art of Negotiating

Project Procurement Integration

Project Procurement Integration

(cont)

Key Terms