answer the 4 question attach

Project Procurement Management Chapter 12: Administer Procurements

Week 12

So, Just When Does Administering the Procurement Begin?  When the contract signed? That’s the common belief.

But, we know different because . . .  Administering the Procurement BEGINS when . . .

“Project procurement management begins at the point WHEN the new project is initiated and detailed decisions are starting to be made as to what portion of the project will be performed with one’s own staff, and what portion will be sent to another company for performance.”

(PPM, p.207)

When Does Procurement Management Begin

BUT . . . “The MOST CRITICAL part of project procurement management is the planning that should take place before any contract is solicited, evaluated, and awarded. If not planned well, procurement management can be a bumpy road. If planned well, procurement management can add immensely to the successful implementation of any project.” (PPM, p.207)

Contract Administration = A [Recognized] Management System

 Think EVM, Earned Value Management:

The systematic measurement of Planned and Actual Cost measured in terms of: - “value” – the portion of work completed to date, and

- “time” – the duration used to do so

When Does Procurement Management Begin

The Fundamentals of EVM  Established by the Department of Defense (DOD) in 1962  First put in place in the Minuteman Missile program, spanning multiple

years and agencies

 Broke the project into “manageable” pieces – easier to track performance

 Added respective budget component to each piece

The Results  Applied to over 800 LARGE Government programs to date

Found that there is NO improvement in project performance between the 15% to 85% completion period . . . In fact, it declines!

Earned Value Management

The Basics of EVM  Planned Value (PV): The approved budget for the work scheduled to be

completed by a specified date - Also referred to as the Budgeted Cost of Work Scheduled (BCWS)

 Earned Value (EV): The approved budget for the work actually completed by the specified date - Also referred to as the Budgeted Cost of Work Performed (BCWP)

 Actual Cost (AC): The costs actually incurred for the work completed by the specified date - Also referred to as the Actual Cost of Work Performed (ACWP)

 Schedule Variance (SV): The difference between the amounts budgeted for the work you actually did and for the work you planned to do - Shows how much work is ahead of or behind approved schedule

 Cost Variance (CV): The difference between the amount budgeted and the amount actually spent for the work performed - Shows by how much work is under or over approved budget

Earned Value Management

The Basics of EVM  Schedule Performance Index (SPI): The ratio of the approved budget for

the work performed to the approved budget for the work planned - Reflects the relative amount the project is ahead of or behind schedule, A/K/A the project’s schedule efficiency, changes each period!

 Cost Performance Index (CPI): The ratio of the approved budget for work performed to what you actually spent for the work. - Reflects the relative value of work done compared to the amount paid, A/K/A the project’s cost efficiency changes each period!

 Estimate at Completion (EAC): Current estimate of the total cost of the task/project when finished

 Estimate to Complete (ETC): Current estimate of the amount of funds required to complete all work still remaining on the task/project

Earned Value Management

Earned Value Management

Mathematical Definitions of EVM  Schedule Variance (SV):

Earned Value (EV) – Planned Value (PV)  Cost Variance (CV):

Earned Value (EV) – Actual Cost (AC)  Schedule Performance Index (SPI):

Earned Value (EV) / Planned Value (PV)  Cost Performance Index (CPI):

Earned Value (EV) / Actual Cost (AC)

Earned Value Management

Analysis of EVM Curves

Problems on ALL Fronts Problem on COST Aspect

Problem on Schedule AspectNO Problems

Cost Estimate Analysis  Progress Payments

The periodic payment (generally monthly) for actual work completed

Based upon a predetermined “Schedule of Values”

Reduces the Risk of non-performance or under-performance

 Milestone Payments

Payment based upon achieving a “Predetermined Specific Deliverable” which triggers payment

Based upon a predetermined “Schedule of Values” May Increase the Risk of non-performance or under-performance . . .due to lack of cash flow issue

Paying for Things

The “War Room”  Space dedicated to the project and its administration

Contains ALL Project Management and Project Procurement Data

Can be used to hold meetings

May be the same as the office of the PM or adjacent thereto

 The Churchill Display Wall

Depiction of the following items for all to see and of which to be reminded:

Project War Rooms and Status Walls

- Diagram of the Project (site, system, layout)

- Near-term Objectives List - Work Breakdown Structure (WBS) - Major Critical Supplier Charts - Top 10 Concerns – the “Worry List”

- Project Master Schedule (and other schedules)

- Project “Action Item” List - Personnel Loading/Phasing Charts - Earned Value Metrics

Who is Contracted to Whom “Privity of Contract: That connection or relationship which exists between two or more contracting persons.” (Black’s Law Dictionary. PPM, p.218)

Privity of Contract

Project Procurement Management, Figure 12.3: Privity of Contract Issues

“Changes in project scope are inevitable. Likely, no project could ever expect to completely eliminate all changes . . . the project would never get done.”

(PPM, p.220)

“As the project progresses through the implementation phase, the project management must identify, evaluate, communicate, control, and coordinate all project changes.” (PPM. P.221)

The Cost of Incorporating Changes INCREASES Over Time

The Cost of Changes

Project Procurement Management, Figure 12.4: The Cost of Incorporating Changes

The Cost of Incorporating Changes INCREASES Over Time Another Perspective:

The Cost of Changes

The Cost of Incorporating Changes INCREASES Over Time Another Perspective:

The Cost of Changes

Constructive Changes – The MOST Dangerous Type  Definition:

A constructive change is sometimes called a "change by implication" and occurs when the Government, by its actions, changes the contract without specifically adhering to the requirements of the "Changes" clause. A constructive change order has been defined as an oral or written act or omission by the Contracting Officer or other authorized Government official which is of such a nature that it has the same effect as a formal written change order under the Changes clause.

 Effect:

Such a constructive change, which increases the burden on the contractor, is compensable. [By means of a Request for Equitable Adjustment]

Why? The contractor has NO Choice but to comply! And, generally has to wait for compensation following the REA process.

Changes

Project Procurement Management Chapter 12: Administer Procurements

PPM Week 12 Discussion Question

Question 12: Is earned value management a procurement management or project management tool? Explain your answer.?

Project Procurement Management Chapter 12: Administer Procurements

Week 12