PROCUREMENT MANAGEMENT

.Formal process to gain (obtain) goods and services

:CENTRLIZED / DECENTRALIZED CONTRACTING

,In Centralized Contracting there is one procurement department handle all projects

In decentralized contracting the procurement department is assigned for the project (full time) and
.reporting to the project manager

PLAN PROCUREMENT MANGEMENT: (PLANNING) ]1

What goods and services do we need to buy, how will we purchase them, who are potential sellers to
?use

:Make -or- buy Analysis

.Buy is to decrease risk to the projects constraints

:Make if
.You have idle plant or work – force

.You want to retain control

.The work involves proprietary information or procedures

:Procurements management plan

.Plan to manage the procurement

:Procurement statement of work

.Determine the scope of work to be done

Must be clear, complete and concise‫ مختصر‬as possible, and must describes all the work and activities
the seller is required to complete. (Includes all meetings, reports and communications).

:Types of procurement state of work

.Performance: what the final product will be able to accomplish ]1

Functional: the end result or purpose (car with 23 cup holders) ]2

?Design: precisely what work is to be done ]3

 Performance and functional statement of work are commonly used for information systems,
High-tech, R and D, and projects that have never been done before.
 Design is commonly used for construction and equipment purchasing.
  Selecting a contract type for each procurement.

:Factors to determine the contract type

1. What is being purchased (product or service)?
2. The completeness of the statement of work.
3. The level of effort the buyer can devote‫يكرس‬-‫ يخصص‬to manage the seller.
4. Market place.
5. Industry standards.

:CONTRACTS TYPES

:Fixed price contracts ]1

:Fixed price (lump sum, firm fixed price)

.Used in well – defined specifications or requirements

:Fixed price award fee ]2
.Fixed price + award amount (bonus)

)The bonus is determined in advance(

:Fixed price incentive fee ]3

.for each month earlier finish $ 10,000+ $ 1,000,000

:Fixed price economic price adjustment ]4

.Contract = 1000,000 $ but price can be increased if the U.S.A dollar price increased

:Purchase order ]5
Simplest form of fixed price contract and is a unilateral ‫( من جانب واحد‬signed by one party).

.EX: 30 Linear meters of wood at go $ per meter

2] Cost Reimbursable‫السداد‬:
.Used when the exact scope is uncertain

)Used in R and D and information technology (

:Cost contract )1
Contract =cost (there is no profit)

:Cost plus fee or percentage of costs )2

.Contract = cost + 10% of costs
: Cost plus fixed fee )3
.$ Contract = cost + 10,000

:Cost plus incentive fee )4

Contract = 500,000 $ target cost +50,000 $ target fee, share saving and over runs at 80%buyer and 20%
.seller

:Cost plus award fee )5

Contract = cost + base fee +award (no penalty)

:Time and material or unit price ]3

.Pays on a per-hour or per-item basis

.Used for services

.No incentives to get the work done quickly or effectively

.Used for small time and small amount projects

.Contract = 100 $ per hour plus materials at cost

.Read 435, 436, and 437

.SHARING RATIO: Buyer /seller

.CEILLING PRICE: The highest price the buyer will pay

POINT OF TOTAL ASSUMPTION: The amount above which the seller bears all the loss of a cost
.overrun

PTA = [(ceiling price – target price)/Buyers share ratio + target cost]

.Read 442, 443

:Creating the procurement documents

.Describes the Buyers needs to the seller

:Request for proposal ]1

Request a detailed proposal on how the work will be accomplished, company experience, price, etc. (CR
Contract)

:Request for quotations ]2

.Request a price quote per item, hour, meter or other unit of measure (T AND M)

:Invitation for bid ]3

Just request a total price to do all the work. (Fixed price contract)
:Determine the source selection criteria
:Included in the procurement documents examples

.The price, financial stability, the technical level

:IMPROTANT TERMS

NONDISCLOSURE‫ عدم أفشاء‬AGREEMENT:

.For many procurements, there is a great need for confidentiality

MASTER SERVICES AGREE MENT (RETINER‫مقدم اتعاب المحامي‬-‫كفالة‬-‫عربون‬

CONTRACT):
‫أتفاقية بين البائع والشاري و تفعل عند ظهور عمل مطلوب في مجال األتفاقية (مثال‬
)‫الشؤون القانونية‬

:STANDARD CONTRACT
All companies keep a standard contact format which can be used in all similar projects without needing
more legal review; the project manager can add special provisions‫ أحكام‬according to project needs.

.Read 447, 448, and 449

:LETTER OF INTENT
.Is not a contract, is not legally binding

PRIVITY‫تبعية‬:
.Contractual Relation

:NONCOMPETITIVE PROCUREMENT
Reasons may be: project is under extreme schedule pressure, seller holds a patent ‫أمتياز‬-‫ براءة أختراع‬,
and seller has unique qualifications.

:TWO TYPES OF NON COMPETITIVE

.Single source: preferred seller, for various reasons you don’t want to look for another ]1

2] Sole ‫منفرد‬source: seller hold a patent.

CONDUCT PROCUREMENTS: (EXECUTING) ]2
This involves sending the procurement documents to the sellers, answering seller’s questions, receive
.seller’s responses and review responses to select the seller

:Advertising
.In newspapers, magazines on the internet

:Pre-qualified seller list

.Part of O.P.A

:Bidder conferences (contractor, vendor, pre-bid conferences)

To answer the seller questions, the questions and answers documented and sent back to the sellers as
an addenda ‫ملحق‬

)The conference benefits both seller and buyer (

:The project manager must watch out for

1-Collussion.‫تواطؤ‬

.Sellers not asking questions in front of competition -2

3-Making sure all questions and answers are documented and sent to all sellers as an addenda. ‫ملحق‬

:Seller proposal (price quote or bid)

.The seller official response (offer)

:Proposal Review
The buyer represented by an evaluation committee uses the selection criteria to review the received
.proposals

:Weighting system -1
Each selection criteria is weighted in numbers and the seller got final score of adding the weighted
.selection criteria

:screening system-2
.Eliminates the seller who does not meet the minimum requirement of selection criteria

:past performance history-3

.)The same as prequalified list(

:Independent estimates-4
.Compare the proposed cost with an estimate created the in – house or with outside assistance

:Presentations-5
.It provides the seller the opportunity to present their proposals

:negotiations-6
.Project manager is involved although not necessarily leading the negotiations

:Objectives of negotiations

.Obtain affair and reasonable price -1

.Develop a good relationship with the seller -2

.Negotiation tactics: read 455

Items to negotiate: (in order)

 Scope. Performance.
 Schedule. Time.
 Price. Price.

:The purpose of the contract

.Define roles and responsibilities-1

.Make things legally binding-2

.Mitigate or allocate risks-3

. VERY IMPORYANT NOTE: You cannot have a contract for the sale of illegal goods or services

CONTROL PROCUREMENTS: [MONITOR AND CONTROL] ]3

.Assure that both parties perform as required by the contract

:Conflict
Any change in the contract must be approved by the procurement manager even if in the statement of
.work (under project manager control)

:Contract change control system

Includes change procedures, forms, dispute‫ نزاع‬resolution processes, it is specified in the contract (all
changes must done formally) –need more sign – off and documentation than project change control
system.

:Procurement performance report

Verify that the seller is performing as they should (to determine if changes are needed to help progress
the work)
:Claims administration
The buyer did something that has hurt the seller, and the seller is asking for compensation. (Claims can
.be resolved using dispute resolving method in the contract)

:Records management system

In large or complex projects a records management system can include indexing system , archiving
. systems , information retrieval system

:Contract interpretation
?What does the contract really say

.May need a lawyer's assistance

:Termination
.The contract should have provisions for termination

Termination can be for a reason or for convenience ‫المالئمة‬-‫الراحة‬-‫السهولة‬.

.If termination for a reason the seller paid the completed work only

.If termination for convenience the seller paid the completed work and work in process

CLOSE PROCUREMENT: (CLOSING) ]4

Verifying that all works and deliverables are accepted, finalizing open claims, pay back the withheld
.retainage

.Read 469, 470

:RITTA REMARKABLE QUESTIONS

34 ,33 ,30 ,29 ,18 ,6

STAGE 2 :34