1. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
PROJECT PROCUREMENT MANAGEMENT
1
 The process necessary to process and acquire
product or services, or result needed from outside
the project team.
 Involve planning, acquiring the product or services
from sources, choosing a source, administering the
contract, and closing out the contract.
 Buyers and Sellers
 Buyers: Client, Customer, prime contractor, contractor,
purchaser. -> that’s us ^^
 Sellers: Contractor, Subcontractor, provider, vendor,
supplier.

2. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
PROJECT PROCUREMENT MANAGEMENT
 Centralized/Decentralized Contracting
 Centralized Contracting: There is one procurement
department, and a procurement manager may
handle procurements on many projects.
 Decentralized contracting: A procurement manager
is assigned to one project full-time and reports
directly to the project manager.
2

3. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
PROJECT PROCUREMENT MANAGEMENT
3
Knowledge
Area
Process
Initiating Planning Executing
Monitoring &
Contol
Closing
Project
Procurement
Management
12.1 Plan
Procurement
Management
12.2 Conduct
Procurements
12.3 Control
Procurements
12.4 Close
Procurements

4. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
12.1 PLAN PROCUREMENT MANAGEMENT
 Plan Procurement Management is the process of documenting
project procurement decisions, specifying the approach, and
identifying potential sellers.
 The Plan Procurements process answers the questions of "What
goods and services do we need to buy for this project, how will
we purchase them, and who are potential sellers to use?"
4
Inputs Tool&Techniques Outputs
.1 Project management plan
.2 Requirements
documentation
.3 Risk register
.4 Activity resource
requirements
.5 Project schedule
.6 Activity cost estimates
.7 Stakeholder register
.8 EEFs
.9 OPAs
.1 Make-or-buy analysis
.2 Expert judgment
.3 Market research
.4 Meetings
.1 Procurement
management plan
.2 Procurement statement
of work
.3 Procurement documents
.4 Source selection criteria
.5 Make-or-buy decisions
.6 Change requests
.7 Project documents
updates

5. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
12.1 PLAN PROCUREMENT MANAGEMENT
 The Plan Procurements process includes the following
activities:
 Performing make-or-buy analysis
 Creating a procurement management plan
 Creating a procurement statement of work for each
procurement
 Selecting a contract type for each procurement
 Creating the procurement documents
 Determining the source selection criteria
5

6. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
12.1 PLAN PROCUREMENT MANAGEMENT
 Make-or-Buy Analysis, It is better to "make'' if:
 You have a limitted plant or workforce.
 You want to retain control.
 The work involves proprietary information or procedures.
 One of the main reasons to "buy" is to decrease risk to the
project's constraints.
 Contract Types
 Fixed-price contracts
 Cost-reimbursable contracts
 Time and Material Contracts (T&M)
6

7. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
FIXED-PRICE CONTRACTS
 Used for acquiring goods or services with well defined
specifications or requirements.
 Bad points:
 Seller would need huge amount of reserves
 Seller can try to increase profit by cutting scope
 Type of FP contracts:
 Fixed Price (FP), or Lump Sum, or Firm Fixed Price (FFP)
 Example: ??
 Fixed Price Incentive Fee (FPIF)
 Example: ??
 Fixed Price with Economic Price Adjustment (FP-EPA)
 Example: = ??
 Purchase order : simplest type of fixed-price contract;
unilateral (signed by one party)
7

8. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
COST-REIMBURSABLE CONTRACTS
 Used when work is uncertain and, therefore,
costs cannot be estimated accurately enough
 Bad points?
 Types:
 Cost Plus Fixed Fee (CPFF) or Cost Plus Percentage of
Cost (CPPC). Ex: Contract = cost + fee (10% of cost)
 Cost Plus Incentive Fee (CPIF) : cost + additional fee
based on performance
 Cost Plus Award Fee (CPAF): cost + additional fee
bases on manager satisfaction (performance criteria)
8

9. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
TIME & MATERIAL (T&M) CONTRACTS
 Used for service efforts in which the level of
effort cannot be defined at the time the contract
is awarded
 To make sure the costs do not become higher
than budgeted, the buyer may put a "Not to
Exceed" and time limits clause in the contract.
 Often used for staff overtime, acquisition of
experts, outside support
9

10. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
TYPES OF CONTRACT - EXAMPLES
 Fixed-Price?
 Cost-reimbursable?
 Time & Material?
 100$/shot -> ?
 1000$/trip -> ?
 500$/month -> ?
10

11. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
RISK FOR WHO?
11
Fixed Price
FFP
FPIF
Time and Materials
Cost Reimbursable
CPIF
CPFF
CPF
CPPC
SELLER
RISK
Low
BUYER
RISK
High
T&M can be a high risk for buyer
if contract does not include a
“total not-to-exceed” (NTE)
HighLow

12. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
PROCUMENT DOCUMENTS
 Request for Information (RFI)
 Invitation For Bid (IFB)
 Request For Proposal (RFP)
 Request For Quotation (RFQ)
 Tender notice
 Invitation for negotiation
 Invitation for seller’s initial response
 ….
12
Procurement
document
Contract Type
RFP CR
IFB FP
RFQ T&M

13. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
11.2 CONDUCT PROCUREMENTS
 This process involves getting the procurement documents that
were created in the Plan Procurements process to the sellers,
answering the sellers‘ questions, having them prepare responses,
and reviewing the responses to select a seller.
13
Inputs Tool&Techniques Outputs
.1 Procurement
management plan
.2 Procurement documents
.3 Source selection criteria
.4 Seller proposals
.5 Project documents
.6 Make-or-buy decisions
.7 Procurement statement of work
.8 Organizational process assets
.1 Bidder conference
.2 Proposal evaluation techniques
.3 Independent estimates
.4 Expert judgment
.5 Advertising
.6 Analytical techniques
.7 Procurement negotiations
.1 Selected sellers
.2 Agreements
.3 Resource calendars
.4 Change requests
.5 Project management plan
updates
.6 Project documents
updates

14. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
11.2 CONDUCT PROCUREMENTS
 Tools and Techniques
 Bidder Conferences
 Proposal Evaluation Techniques
 Independent Estimates
 Expert Judgment
 Advertising
 Analytical Techniques
 Procurement Negotiations
 Outputs:
 Selected sellers
 Agreements
 Resource calendars
 Change requests
 Project management plan opdates
 Project documents updates
14

15. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
12.3 CONTROL PROCUREMENTS
 This process ensures both the seller’s and buyer’s
performance meets procurement requirements
according to the terms of the legal agreement.
15
Inputs Tool&Techniques Outputs
.1 Project management plan
.2 Procurement documents
.3 Agreements
.4 Approved change requests
.5 Work performance reports
.6 Work performance data
.1 Contract change control
system
.2 Procurement performance
reviews
.3 Inspections and audits
.4 Performance reporting
.5 Payment systems
.6 Claims administration
.7 Records management system
.1 Work performance
information
.2 Change requests
.3 Project management plan
updates
.4 Project documents
updates
.5 OPAs updates

16. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
11.4 CLOSE PROCUREMENTS
 The process of completing each project procurement
16
Inputs Tool&Techniques Outputs
.1 Project management plan
.2 Procurement documents
.1 Procurement audits
.2 Procurement negotiations
.3 Records management
system
.1 Closed procurements
.2 OPAs updates

17. SMSVN – PMP Training Course 2013 – Chapter 12 Prepared by Nguyen Quy Son – Nguyen Nam Trung - 03/09/2013
17