Sales closing plan for procurement

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[Music] hi everyone welcome back to these processes from the project management body of knowledge now we're looking into planning our procurement management and as you know we've been through all of the other other knowledge areas for our project risk scope schedule cost the quality and now we we might need someone else to actually do the work for us we might be procuring their services and of course with every other plan process group here where we're creating the plan for our knowledge area then we're actually planning the process of how we're going to manage procurement throughout our project so the plan procurement management process is that process of documenting project procurement decisions specifying the approach that will take and identifying potential sellers as well the key benefit of this process is it determines whether to acquire goods and services from outside the project and if we do what to acquire as well as how and when to acquire it so it's quite a hefty plan goods and services may be procured from other parts of the performing organization as well so it might not be from external to our organization it might just be from from you know someone else another part of the organization itself or it might be from external sources as well inputs tools and techniques and outputs for planned procurement management include the project charter our initial high level view the business documents like business case and benefits management plan that we might be needing to adhere to what benefits are we seeking to get plan the project management plan project documents enterprise environmental factors and organizational process assets tools and techniques that we'll see are expert judgment as always data gathering for so market research data analysis whether we need to make the item or deliverables or whether it's easier or cheaper to buy the particular deliverables source selection analysis so the different sources we have available and meetings to tie everything together as usual outputs there are a lot of outputs for planning procurement management all related to contracts and the sellers and making sure that everything remains on track and is very very clear as part of those contracts we've got the procurement management plan itself the overarching process that we're going to go through the procurement strategy bid documents the procurement statement of work what are the items that they're going to deliver the source selection criteria what's the criteria that we're basing our decisions on make or buy decisions so did we determine that it was easier or cheaper to buy it instead of making it independent cost estimates change requests if changes are needed to be made project documents updates and organizational process assets updates as well and the plan procurement management as you can see has that input into the project management plan procurement documentation change control processes and project documents in a big way too so participants in the procurement process may include personnel from the purchasing or procurement department within your organization as well as personnel from the buying organization's legal department because a contract is involved typical steps in procurement management might be preparing the statement of work or terms of reference you'll see these two key terms come up so what is the actual statement of work line by line that our third party is going to deliver preparing a high level cost estimate to determine into the budget advertising the opportunity to sellers identifying a short list of sellers preparing and issuing bid documents to those sellers so that they can then bid uh you know what they're going to provide and how much it's going to cost prepare and submit proposals by the seller so the seller then submits those proposals so that we can have a look at them conducting a technical evaluation of all of those proposals including the quality that will be involved performing a cost evaluation as well how much is it going to cost preparing the final combined quality and cost evaluation to select the winning proposal based on quality and cost and finalize negotiations and finally sign that contract between the buyer and the seller let's look at the inputs in more detail we've got the project charter which is our high level view of the project might contain the original objectives the project description summary milestones and pre-approved financial resources of course we've got the business documents like the business case which has our cost benefit analysis our feasibility study originally done when we initiated this project and of course we might have the benefits management plan uh what benefits are we expecting and how are we going to manage and report on those at the end of the project the project management plan is an input as well our scope quality resources and the scope baseline of course these things will need because we need to know what the third party is going to be delivering or creating for us so what sort of quality do they need to match up to what's the cost and what's what part of our scope will they be delivering project documents like our milestone list project team assignments so who's involved in our project team the requirements documentation like the technical requirements and any requirements with contractual or legal implications might need to go into the contract requirements traceability matrix so how do the requirements meet the deliverables and all of the other surrounding information around that as well resource requirements risk register and stakeholder register who's involved in our project that they might need to know or that we might need to work with enterprise environmental factors we'll see as an input could be marketplace conditions maybe the current marketplace makes it better to buy something than to make it or vice versa product services and results that are available in the marketplace as a commercial off the shelf for example maybe we could just buy something off the shelf and fit it into our project fairly neatly sellers including their past performance or reputation typical terms or conditions for products or services for specific to that industry unique local requirements such as regulatory requirements in the particular country or city that you are working in legal advice regarding those procurements as well is very important contract management systems so that could be online where we're managing the contract and having it signed online these days established multi-tier supplier systems of pre-qualified sellers so maybe there's a list of pre-qualified sellers nice and easy for us to tap into and financial accounting and contract payments systems if we're making ongoing payments to our seller organizational process assets as well we might have an existing list of pre-approved sellers in our organization that we can use or formal procurement policies procedures and guidelines so maybe our organization has a specific way that we need to do this a legal department a procurement department and we need to work with them to make this contract happen we'll also see contract types so the different contract types will see a fixed price where we've got firm fixed price fixed price plus incentive fee uh or fixed price with economic adjustments so that might be uh if there are currency differences or if we're using materials like iron or you know things like that resources that might have fluctuations in price so we might need to put those economic adjustments into the actual contract itself cost reimbursable is where we're paying the seller their cost plus a fixed fee or cost plus an incentive fee for finishing early or finishing within a certain amount of quality for example and then cost plus award fee where we're we're reimbursing them for their costs on their project on what they're delivering plus any amount that that's just a subjective amount based on how happy we are as a as a buyer so that's cost plus award fee and of course time and materials is a combination of all of those where maybe we're paying for someone's time plus materials uh could be a combination of all of those things that we've seen tools and techniques for planned procurement management we will need expert judgment as usual for people with uh with information around procurement and purchasing in that department legal department for example contract types and contract documents are there any experts that we can use their expertise from and regulations and compliance topics do we need to meet any regulations for that particular industry we'll also need meetings to tie all of these items together so research alone may not provide specific information to formulate a procurement strategy without additional information that we might need to meet with our potential bidders so seeing them face to face or what they can do showcasing what they can do might be a very important part of this and that's where we need to facilitate meetings so meetings can be used to determine the strategy for managing and monitoring the procurement as well we'll need data gathering around market research potentially this includes examination of industry and specific seller capabilities so can we just get information from the market uh general information about their capabilities and what they can do without having to meet them or without having to go through the bidding process in the first place data analysis is also a big one our make or buy analysis where we're basically looking at how much does it cost to make versus how much does it cost to buy plus what are the what are the ongoing costs and so that is our payback period so if we buy it for a low amount but then it has a high ongoing cost then maybe it's just not worthwhile because it's actually going to cost us more in the long run so our payback period to actually making it becomes less it might be a lower amount of time return on investment can be used internal rate of return can be used discounted cash flow or net present value and cost or benefit analysis or benefit cost analysis whichever one you see there benefit versus cost we just look at let's say it's 5 million benefit versus one million to buy then our cost benefit becomes five to one so that's our ratio there and we'll do more on this in a key concept video for you as well because these can get fairly involved source selection analysis so it's necessary to review the prioritization of the competing demands of the project before deciding on the selection method so this just means that we actually include the evaluation method how are we evaluating the people who would potentially do the work for us we include those in the procurement documents so everyone is on the same page and source selection analysis could include things like least cost so who's going to be the cheapest or qualifications so who has the most qualifications quality based who has the highest quality or quality versus cost of course is a good one sole source so sole is when there's only one when there's only one sort of selection that we can actually make so then we have no choice and then there could be fixed budget as well so we're saying it's going to cost this amount can you actually provide it within that amount outputs that we'll see as part of planning procurement management other is the procurement management plan itself so this contains the activities to be undertaken during the procurement process like with all our other documents and other plans it can be formal or informal it can be highly detailed or it can be broadly framed and it's based upon the needs of each project the procurement management plan can include guidance for how procurement will be coordinated with the other project aspects a timetable of key procurement activities stakeholder roles and responsibilities procurement metrics that we'll be judging our third party on any legal jurisdiction any risk management issues and pre-qualified sellers lists if necessary we'll need the procurement strategy so the once the make or buy analysis is complete and the decision is made to acquire from outside the project then a procurement strategy should be identified and that can include the delivery methods how are they delivering the item or the service contract payment types how are we paying for this service and procurement phases so are we delivering in at milestones are there certain features that need to be delivered over time bid documents as well so bid documents are used to solicit proposals from prospective sellers so now we're sending out a bid document and terms such as bid tender or quotation are generally used when the seller selection decision is based on price while a term such as a proposal is generally used when other considerations such as their technical capability is used for example so can they actually do the work maybe they need to make a proposal but if we know that they can and it's just down to cost or you know price or or quality then bid tender and quotations can be given bid documents that we'll see a request for information you'll see that as rfi request for a quotation from someone as rfq or a request for a proposal in the event that yeah we're not sure if they can actually do the work or not we need a proposal from them the procurement statement of work will be a key output as well and this is developed from the project scope baseline and defines the scope to be included in the contract itself so the terms of reference that you might see in a procurement statement of work include the tasks that a contractor is required to perform the standards that they will fulfill the data that needs to be submitted for approval and a detailed list of all data and services that will be provided at the end or you know along the course of the contract and then a definition of the schedule that they will work to as well source selection criteria is another key output that we'll see and this could be things like their capability or capacity to work product cost and life cycle cost the delivery dates so all of these things are how we selecting these sellers and so technical expertise is it relevant experience is it to their qualifications or the financial stability of that firm the management experience or the suitability of the knowledge transfer once everything is complete outputs as well are make or buy decisions so a make or buy analysis results in a decision as to whether a particular work can be best accomplished by the project team or if it needs to be purchased from outside sources a typical measure is that payback period where ongoing cost is measured against the initial cot cost for each whether we're doing it or we're procuring it from someone else as we've seen if it costs five million dollars for us to make it but only and one million dollars to buy it so we're making it or buying it but then ongoing costs are say a million dollars a month once we've bought it or and then nothing if we actually make it ourselves then it's only going to take five months for us to to make our money back so it's five million dollars five months for example that's it's going to be worth us to make the item because after five months it actually will be less cost for us to have made it because of the ongoing costs scenario there so that's our make or buy or pay back period that you will see and we'll go into more detail on that in the key concepts as well other outputs we'll have our independent cost estimates so the procuring organization may elect to have a cost estimate prepared by an outside professional and that can serve as a benchmark on proposed responses so that gives us a baseline and then all of the other seller responses that we get might come in and they might be higher or lower but we've got that baseline idea of the cost change requests will happen as well if we need to make changes to our scope schedule or cost along the way and as we know that goes through our change request process project document updates we'll see are the assumption log any issues that have been raised lessons learned and of course the risk register and risk report if we're reporting on those items and for projects with few procurements and relatively simple procurements some of these outputs may be combined however for projects with large complex procurements where much of the work is done by contractors there might be several different types of documentation so we'll see things like the procurement management plan procurement strategy the statement of work what are they actually going to be doing and then the bid documents request for information quote or proposal and those are there's so many documents that you'll see because it is a legal document and a contract that we're looking at so it does get a little bit more complex but this is what happens when we're asking someone else to do the work for us and paying for that work and that's part of planning procurement management as part of the project management body of knowledge [Music]