Procurement Management 12.2 Conduct Procurements

Quick Link to Procurement Management

Procurement Management 12.1 Plan Procurements

Procurement Management 12.2 Conduct Procurements

Procurement Management 12.3 Administer Procurements

Procurement Management 12.4 Close Procurements

 

This process obtains information such as bids and proposals from prospective sellers, selects the winning response and awards a legally binding contract. For the exam, one notable activity is the use of qualified seller lists. Procurement (contracting) specialists develop such lists from a variety of sources and determine who might have the ability to perform the needed work. These lists can also speed up the process. Another notable fact is that bidder conferences, if used, are performed as part of this step. Independent estimates may be important if the procurement is noncompetitive and you need to ensure that prices are fair reasonable.

For large, complex procurements, this process may be performed numerous times for multiple contracts. Also, a common practice is to screen the initial responses and create a list of competitors “in the competitive range” (known to many people as the “short list”). More detailed evaluations and negotiations are then conducted with sellers on the short list. Another practice is the use of the “BAFO” technique (best and final offer). The technique is used when procurement personnel want lower prices in the proposals. Other key points:

·         Proposals are often organized into different sections or volumes that are evaluated separately by different experts. For example, common sections evaluated separately are technical approach, price, schedule, management approach and past performance.

·         In some instance, organizations prefer (as a risk mitigation strategy or as a cost competition factor) to have multiple suppliers for certain products.

Conduct Procurements
Inputs	Tools	Outputs
1.       Project management plan 2.       Procurement documents 3.       Source selection criteria 4.       Qualified seller list 5.       Seller proposals 6.       Project documents 7.       Make-or-buy decisions 8.       Teaming agreements 9.       Organizational process assets	1.       Bidder conferences 2.       Proposal evaluation techniques 3.       Independent estimates 4.       Expert judgment 5.       Advertising 6.       Internet search 7.       Procurement negotiations	1.       Selected sellers 2.       Procurement contract award 3.       Resource calendars 4.       Change requests 5.       Project management plan updates 6.       Project document updates

Nine Key Inputs for conduct Procurements:

1.       Project management plan: Contains the procurement management plan which was an output of the previous process (section 12.1).

2.       Procurement documents: Describe in section 12.1.3.4, an appropriate document is chosen to request seller responses (IFB, RFQ and RFP).

3.       Source selection criteria: The criteria were developed as an output of the previous process (section 12.1.3.5) and are now used to actually evaluate and compare the various bids or proposals.

4.       Qualified seller list: A previously screened list of potential sellers who have the ability to perform the work probably already exists. If desired, this step would build on that list using the internet, trade catalogs, site visits or references from previous customers.

5.       Seller proposals: Prepared and submitted in response to the buyer’s procurement document package (PDP). A proposal constitutes a legal offer and should be constructed carefully by the seller. The PDP is sent by the buyer to prospective sellers (based on the qualified seller list) and contains:

·         A procurement document (IFB, RFQ, RFP)

·         The evaluation

·         A cover letter with instructions: due date for the proposal, table of contents or required format (if any), number of copies and so on.

6.       Project documents: Project documents that may be considered at this point include the risk and any risk-related contract decisions.

7.       Make-or-buy decisions: Described in section 12.1.3.3.

8.       Teaming agreements: When teaming has already begun, an interim agreement of some type may be guiding activities. This step would finish formalizing and negotiating any necessary contractual agreements.

9.       Organizational process assets: Organizational Process Assets that may be relevant include:

·         Qualified lists

·         Information on relevant past experience with specific sellers

Seven Key Tools for Conduct Procurements:

1.       Bidder conferences: Used to ensure all prospective sellers share a clear, common understanding of technical and contract requirements. Most organizations are careful to ensure that all potential sellers are given equal treatment and information.

2.       Proposal evaluation techniques: Most organizations that conduct major procurements have established source selection procedures. These procedures establish the approach for evaluating, comparing and selecting winning proposals.

3.       Independent estimates: Procurement organization prepares its own estimates as a cross-check or verification that the bids are fair and reasonable. Also called “should cost” estimates, this tool is especially important for non-competitive procurements (e.g. sole source).

4.       Expert judgment: A multi-disciplinary team of experts (financial, technical, management) is usually required to effectively evaluate proposals.

5.       Advertising: The use of general circulation sources such as newspapers and professional journals and newsletters to expand the potential pool of sellers.

6.       Internet search: The internet is of great help in the procurement of items readily available in the marketplace. Source and prices can be located quickly. However, the internet is often insufficient for complex, developmental procurements.

7.       Procurement negotiations: Clarification and mutual agreement on the structure and requirements of the contract prior to signing.

Common negotiation tactics:

Deadline: "We have to catch a flight at 5:00 p.m. and must complete the deal before we leave."

Good cop/bad cop: One person is helpful and understanding while the other is difficult and demanding.

Fait accompli: Pretending that some condition is essentially a "done deal" or not negotiable at all.

Missing man: "I'm sorry, only my boss can agree to that request and he or she isn't here. Let's agree to do___________ instead. I can agree to that."

Limited authority: "l can't agree to reduce the price by $100,000. I'm only authorized to offer $50,000."

Delay: "Let's handle that issue at the next meeting." May be a ploy leading to a deadline tactic. "Oops, we're running out of time, so let's sign this deal and work out any issues later."

Personal insults: Designed to intimidate you and/or undermine your confidence.

Fair and reasonable: A personal appeal that may be posed with a great deal of charm and "folksiness." "You and I know what's going on here. Let's be reasonable and work this out."

1.       Selected Sellers: Sellers who have been chosen as being in the competitive range and who have submitted a proposal that has been accepted. The proposal becomes the basis for the contract (subject to any last-minute negotiating of terms and conditions).

2.       Procurement Contract Award: A legal relationship subject to remedy in the courts. A contract is a mutually binding agreement that obligates the seller to provide the specified product and obligates the buyer to pay for it.

You must know the elements of a legally enforceable contract:

·         The agreement must be voluntary- There must be both an offer and an acceptance.

·         The agents must be legally authorized to enter into a legal commitment. (The authorization can be written or verbal). In business contracts, a delegation of procurement authority is often used to identify precisely who is authorized to enter into a contract.

·         There must be sufficient cause, which is also known as "consideration." An exchange of value must take place.

·         The contract must be for a legal purpose.

While there may be differences, the major components in most contracts include the following:

·         Statement of work or deliverables

·         Period of performance and schedule baseline

·         Required performance reporting

·         Place of performance and delivery

·         Pricing and payment terms

·         Warranty and product support

·         Penalties and incentives

·         Subcontractor approvals

·         Handling of change requests

·         Dispute resolution procedures

·         Termination procedures

3.       Resource Calendars: Specific quantity and availability of contracted resources.

4.       Change Requests: lf change requests are generated during the procurement, they must be handled using integrated change control procedures.

5.       Project Management Plan Updates: Elements of the plan that may be changed include:

·         Cost, schedule, and scope baselines

·         Procurement management Plan

6.       Project Document Updates: Documents that may be updated include:

·         Requirements documentation

·         Requirements traceability documentation

·         Risk register