answer the 4 question attach

Project Procurement Management Chapter 07: The Procurement Management

Plan

Contract Negotiations Chapter 06: Conducting Contract Negotiations

Building Relationships and Successful Outcomes

Week 7

Question: What do you think about the following statements? “Plans are worthless, but planning is everything.”

President Dwight D. Eisenhower (PPM, p. 115)

“Without an adequate plan . . .success will be a matter of luck.” Russell D. Archibald (PPM, p. 115)

“There are two types of plans: Ones that might work, and ones that won’t work.”

General George William Casey Jr.

Answer: The Procurement Management Plan . . . The What, Why, When, How, Where, and Who “The six honest serving men…” per Rudyard Kipling (PPM, p.15)

Procurement Planning

Dimensions of the Plan Three from Kipling  What

 When

 How

The Procurement Management Plan

Project Management Triple Constraint  Scope  Schedule

 Budget

Reality of the Plan  As simple as a “Bill of Material”  As complex as a “Multi-Volume Definitive Plan”

Procurement Scope – The “What” Remember the Procurement Complexity Levels: Major, Minor, and COTS? Remember the Make or Buy Choices:

Must Make, May Make/Buy, or Must Buy?

Remember the Work Breakdown Structure: The WBS?

The Procurement “What”, the Procurement “Scope” Is Where They Meet

And . . . Remember Scope Creep

Procuring the “What”

Now We Complete the Procurement Matrix

Procuring the “What”

Project Procurement Management, Figure 3.3: Scope Definition – Identification & Classification of All Buys

And . . . Remember Scope Creep “Scope definition, outlining the ‘what’ the project is going to buy, is essential to successful project [procurement] management. Scope creep can only be prevented . . . With an adequate defined project scope.” (PPM, p, 118)

Procuring the “What”

How to Avoid Scope Creep  Be Vigilant From Day One.

The project manager must handle scope creep and ultimately say yes or no to new requests as soon as they come in.

 Understand Your Client’s Vision.

Ending well means starting well. Why is it a priority? Is the plan too ambitious?

 Understand the Project Requirements

What are the deliverables and their functionality? Don’t underestimate the project’s complexity.

 Include a Process for Changing Scope

Define how the changes will be done, and who will do them. Empower a limited number of people to request scope changes and an even more limited number to grant them.

Procuring the “What”

How to Avoid Scope Creep (continued)  Guard Against Gold Plating

This is a tendency to over-deliver on the scope and add features and complexity.

 Use Online Project Management Software

PM software is an important tool in managing scope creep.  Know When to Say “NO”

There are going to be unreasonable requests for scope changes that you can’t green light. Remember, not all scope changes are created equal.

 If You Can’t Say “NO” . . . there are alternatives:

- Zero sum game

- Start a back-log (or second project) for denied requests

- Price the scope creep

Procuring the “What”

When to Make Each Procurement The Must be Awarded – Supporting the Master Schedule

Determining the “When”

Project Procurement Management, Figure 7.2: Scheduling – Deciding When Each Buy “MUST BE” Awarded

When to Make Each Procurement The Can be Awarded – Understanding the Need for Lead-Time

Determining the “When”

Project Procurement Management, Figure 7.3: Scheduling – Deciding When Each Buy “CAN BE” Awarded

When to Make Each Procurement The Can be Awarded – Understanding the Need for Lead-Time

Determining the “When”

Project Procurement Management, Figure 7.4: Procurement Lead-Time – Essential to the Process

When to Make Each Procurement When Award DOESN’T Support the Schedule – The Case of NEGATIVE Float

or . . . The “when it was supposed to be done!”

Determining the “When”

Project Procurement Management, Figure 7.5: Procurements Sometimes Encounter Negative Float

Procurement Scope – The “How Much” Buying in Bulk or the “One-off” – How to Determine the Appropriate Quantity

Methods to Determine How Much:  By Analogy  By Parametric Modeling

 By Bottom-Up Estimate

 By Computer Estimating Tool  By Proposals from Viable Sellers

“How Much” to Procure

Determining How Much by Analogy Relationships The Rules of Thumb or The Use of Expert Judgment  Looking back at how we did it last time

 Top-Down Estimates based on Prior Experience or Correlation

“How Much” to Procure

Determining How Much by Parametric Modeling  Based on Procurement Characteristics: SF, Weight, Lines of Code, Functions  Top-Down Estimates – Works well for Construction, Aircraft, Automobiles, etc.

“How Much” to Procure

Determining How Much by Bottom-Up Estimate  The Summary of the Cost for Each Individual Package of the WBS  Can Quickly be Converted into an Actual Budget  May be Time-Prohibitive

Strengths  Estimate is based on a more detailed understanding of the job  Estimate is backed up by personal commitment of the individuals responsible  More stable, estimation errors balance each other out

Weaknesses  May overlook system-level costs – integration, configuration management,

quality assurance, project management  Requires more effort than top-down  Often underestimates cost

“How Much” to Procure

Determining How Much by Computer Estimation  Exploit the Database!!!

Determining How Much by Proposals from Viable Sellers  Conditioned upon a

STRONG RFP and no Collusion

 The Walmart Model

“How Much” to Procure

Phases to Complete

Organizing the Procurement

Project Procurement Management, Figure 7.1: Project Procurements Have Three Distinct Phases

Procurement Organization

Organizing the Procurement

Project Procurement Management, Figure 7.8: Organizing for Project Procurements Figure 7.9: Organizing for Project ‘Small Business’ Procurements

So, Just Who Does All of This?  The Buyer or Purchasing Manager

Traditionally / typically has the procurement / purchasing authority  The Engineer or Technical Manager

Traditionally / typically writes the procurement specification  The Project Manager

ALWAYS has the most at stake

And Finally . . .  Management

Has the responsibility to Buy-in to the Procurement Plan However simple or complex

Organizing the Procurement

Project Procurement Management Chapter 07: The Procurement Management

Plan

PPM Week 6 Discussion Question

Question 07a: Why is it necessary/advantageous to have a separate procurement management plan from that of the project management plan?

Critical Questions:  What skills are needed to achieve success?  Who in the organization has the necessary skills?

 Who is available, can be available, or can be hired to support the negotiation team?

 Who is going to lead the negotiation?  Who is the primary decision-maker or approver for the plan and/or results

 What is/are the limitations to authority?

Conducting Contract Negotiations

Contract Negotiations Form 6-1 Checklist, p.129

Conducting Contract Negotiations

Contract Negotiations Form 6-2 Contract Negotiations Methods – How?, p.130

Method Possible Advantages Possible Disadvantages

Face-to-Face  Able to use the power of nonverbals  Better opportunity to build a business

relationship

 Harder to say no  Nonverbals can be read by the other party  Travel and lodging expenses  Time away from the office

Teleconference

 No travel or lodging expenses  No time away from the office  Usually requires less time  Easier to give bad news or say no

 Less able to read or use the power of nonverbals

 More impersonal  Harder to build a business relationship

Videoconference  No travel and lodging expenses  No time away from the office  Able to use some power of nonverbals

 Less able to read of use the power of nonverbals

 Harder to build a business relationship

NetMeeting

 No travel and lodging expenses  No time away from the office  Able to share data real time  Able to use some power of nonverbal  Easier to say no

 More prone to technical difficulties  Less able to read of use the power of

nonverbals

Contract Negotiation Issues

Conducting Contract Negotiations

Buyer Issues  Aggressive Delivery Schedule  Quality  Products  Services  Quantity  Approval of Subcontractors  Getting What We Want  Acceptance  Maintenance  Training  Warranties  Choice of Law

Seller Issues  Realistic Delivery Schedule  Quality  Products  Services  Quantity  Management of Subcontractors  Buyer Micromanagement  Acceptance Criteria  Cost, timing  Value-added Services  Risk, Cost, Value  Desired; Choice of Law

Contract Negotiation Issues (continued)

Conducting Contract Negotiations

Contract Negotiations Form 6-4 Checklist of Typical Contract Negotiation Issues, p.133

Buyer Issues  Changes  Forum for Disputes

 Payment

 Limitation of Liabilities  Liquidated Damages

 Acts of God / Force Majeure

 Reputation of Seller  Past Experience

 Past Performance

Seller Issues  Change Management Process  Damages

 Disputes Process

 Limitation of Liabilities  Discounts

 Incentives

 Method of Payment  Progress Payments

 Advance Payments

 Cost Reimbursement

Active Listening – In Emotional / High Consequence Activities:  Take Time

If someone is troubled, let them speak. It may be worth your while. Let them clear their mind.

 Be Understanding Let exhaustion and emotion pass.

 Limit Verbal Reactions Use generic responses: Hmm, Oh, I see, etc.

 Do Not Attempt to Evaluate What Has Been Said There are no absolutes in emotional situations

 Do Not Give Advice…Even When Asked Let the speaker search for their solution

 Retrospectively Analyze the Information Received From multiple perspectives aver multiple opportunities

 Remember, Silence is the listener’s best Skill and Strength

Conducting Contract Negotiations

Price Comparison  Select Prices for Comparison (by):

- Competitive Price Proposals

Formal RFP Process with structured rules, timeframe, etc. - Catalog Prices

Seller-supplied price structure (COTS goods) - Historical Prices

Been there, done that before . . . from the same entity - Estimates (The aforementioned Analogy, Parametric, Bottom-up)

Use multiple “heuristics” or “yardsticks” to evaluate pricing - Independent Internal Company Estimates

The most common, most accurate, most time consuming . . . but most valuable

Conducting Contract Negotiations

Price Comparison (continued)  Items that Affect Comparability:

- Market Conditions

The timing of the procurement - Quantity or Size

Back to Economies of Scale - Geographic Location

Labor Market, Freight/Transportation Costs, Geographic Anomalies or Preferences

- Extent of Local Competition

Number of Competitors, Production Capabilities - Technology

Declining Industry or Advancing Industry, Product Changes

Conducting Contract Negotiations

Price Comparison (continued)  Identify the Impact of Factors:

- Is the Comparison Direct

- Are there Limitations

 Adjust Pricing (Accordingly): - Itemize Differences

- Determine Worth/Value to the Organization

 Compare Adjusted Prices: - Establish the “should-pay” price . . . Then,

- Negotiate, Negotiate, Negotiate!

Conducting Contract Negotiations

Contract Negotiations Chapter 06: Conducting Contract Negotiations

Building Relationships and Successful Outcomes

CN Week 6 Discussion Question

Question 07b: Compare and contrast one possible advantage and one possible disadvantage from each of the four contract negotiation methods.

Project Procurement Management Chapter 07: The Procurement Management

Plan

Contract Negotiations Chapter 06: Conducting Contract Negotiations

Building Relationships and Successful Outcomes

Week 7