answer the 4 question attach

Project Procurement Management Chapter 02: Procurement Categories

Contract Negotiations Chapter 02: Contract Negotiation Competencies: The Skills to Win

Week 2

Question: “Why might it be good practice to put all procurements into generic categories?” (PPM, p. 13)

Answer: “…because you manage project procurements differently, according to their complexity, their risks, their unique characteristics. Sometimes you must form project teams to manage the critical buys.” (PPM, p. 13)

What should be the categories? Which takes precedence: complexity, risk, characteristics….and why?

Procurement Categorization

1. Major (High Risk) Complexity Procurement(s): …to the BUYER’s Specification

“…the purchase of something which does not exist, tailored to the project’s unique specification. Considered critical subprojects.” (PPM, p. 14)

Procurement Categories

1. Major (High Risk) Complexity Procurement(s): …to the BUYER’s Specification

“…the purchase of something which does not exist, tailored to the project’s unique specification. Considered critical subprojects.” (PPM, p. 14)

Procurement Categories

Major (High Risk) Complexity Procurement(s): …to the BUYER’s Specification

Risks:  Technical  Quality

 Cost

 Schedule

Is there anything else possible?

Procurement Categories

Major (High Risk) Complexity Procurement(s): …to the BUYER’s Specification

Procurement Categories

Relationship:  Long-term  Strong economic tie

 Emotional Resistance to change

 Non-competitive

Examples:  New Building  New Factory

 IT Services

 New Software Program  Computer System

 Airplane  RADAR System

 GPS

 Any Critical Component

2. Minor (Low Risk) Complexity Procurement(s): …to the SELLER’s Product Specification

“…represent large monetary values, but the commodity exists and will conform to the seller’s specification.” (PPM, p. 14)

Procurement Categories

2. Minor (Low Risk) Complexity Procurement(s): …to the SELLER’s Product Specification

“…represent large monetary values, but the commodity exists and will conform to the seller’s specification.” (PPM, p. 14)

Procurement Categories

2. Minor (Low Risk) Complexity Procurement(s): …to the SELLER’s Product Specification

Risks:  Lack of Modification  High Cost / Value

Relationship:  May Require Long-term Relationship

 Lack of Future Competition

Procurement Categories

2. Minor (Low Risk) Complexity Procurement(s): …to the SELLER’s Product Specification

Examples:  Current model Automobiles,

Busses, Aircraft  Current technology systems

– Computers, Generators, etc.

 Software systems (large, well-established)

Procurement Categories

3. Routine buys of Commercial-Off-The-Shelf (COTS) Items or Purchased Services

Just the normal products and services necessary and specific to the mission and standard operation of an organization and/or project.

Risks – None, Standard Procurement Process:  Routine, fundamental procurements  A “supply chain” element

 Many competing and/or substitute products available

Procurement Categories

4. Special Procurements: Performed Under Strategic Teaming Agreements

Collaborative effort bringing together differing perspectives between multiple parties in support of a specific initiative.

Typically in support of a Type 1 or Type 2 Procurement (above).

Risks – None, Standard Procurement Process:  Requires prior formal Teaming Agreement – a quasi legal document

 Differing strengths / responsibilities of parties

 Limited focus

Procurement Categories

5. Special Procurements: Intra-Company / Inter-Divisional

Buying something from another part of the same company.

Typically in support of a Type 1 Procurement (above).

Risks – None, Standard Procurement Process:  Lack of Competition

 Painful to Manage – Differing Masters

 Management Fiat

Procurement Categories

Procurement Risks

Factors Determining Risk

Beyer et al., Procurement, Principles and Management, 11th Edition

Procurement Category Relationship

Project Procurement Management Figure 2.1: Placing Procurements into Five Generic Categories

Project Procurement Management Chapter 02: Procurement Categories

PPM Week 2 Discussion Question

Question 02a: Compare and contrast the risks and timing of Major Complexity Procurements and Commercial-off-the-Shelf procurements.

Question(s): Are there specific skills necessary to negotiate a contract? Should anyone take on the task of negotiating a contract?

Where do we negotiate “contracts” in our lives?

Negotiation Skills

Contract Negotiations, 2nd Edition, Figure 2-1: The Contract Negotiator’s Competencies Model

Contract Negotiator’s Competencies Model

Contract Negotiations, 2nd Edition, Figure 2-1: The Contract Negotiator’s Competencies Model

Contract Negotiator’s Competencies Model

Three (3) Levels and Two (2) Categories  The Three-Levels:

Apprentice (1st Level) – The Lowest Intermediate (2nd Level) – The Middle Master (3rd Level) – The Highest

 The Two-Categories:

Hard Negotiation Skills - Analytical & Financial - Computer Literacy - Contract Management &

Legal - Product-Service-technical

Soft Negotiation Skills - Integrity & Trust - Verbal / Non-Verbal - Leadership - Interpersonal Relationships

The Skills to Win at Negotiation

Negotiation Self-Assessment

Contract Negotiations, 2nd Edition, p. 14.

IN-CLASS EXERCISE SKILLS TO WIN SELF-ASSESSMENT

Read the following twenty (20) questions and evaluate yourself on a one (1) to five (5) scale with one being the lowest and five being the highest skill level. Enter the number on the line to the right. Your initial impression is typically the most accurate. 1. I am a person of high integrity.

1 2 3 4 5 2. I always act as a true business professional, especially in contract negotiations.

1 2 3 4 5 3. I ensure all of my business partners and team members act honestly, ethically, and legally, especially when involved in contract negotiations and formation.

1 2 3 4 5

5

4

4

Analytical & Financial Skills (Contract Negotiations Checklist Form 2-1, p. 17)  Understand Economic Principals: Opportunity Cost, Sunk Cost, Fixed &

Variable Costs, Direct & Indirect Costs, etc.

 Mathematically Capable / Competent

 GAAP Familiar  Estimating Capabilities / Proposal Generation

The Hard Negotiation Skills

Computer Literacy Skills (Contract Negotiations Checklist Form 2-2, p. 18)  Capable of using a Computer and associated / relevant Programs

 Understand the Interaction of Multiple Platforms – Computer, Smart Phone, Internet, Wireless Technology

 Know who the Experts are!

The Hard Negotiation Skills

Contract Management & Legal Skills (Contract Negotiations Checklist Form 2-3, p. 31)  Understand the Contract Management Process

 Understand basic Contract Law Concepts – i.e.: Offer, Agreement, Consideration

 Dispute Resolution Familiarity

The Hard Negotiation Skills

Project Procurement Management Figure 2.2: Contract Management Process

Product-Services-Technical Skills (Contract Negotiations Checklist Form 2-4, p. 32)  Understand the Marketplace

 Research Capable / Craft Tradeoffs / Generate Solutions

 Understand & Measure Performance

The Hard Negotiation Skills

Integrity & Trust Skills (Contract Negotiations Checklist Form 2-5, p. 36)  Saying what You Will Do – Doing What you Say

 Hard to Develop / Easy to Destroy

 Risk, Disclosure, Mitigation…Openness!

“Integrity in a negotiator is like consistency in an athlete. It’s not apparent right away and it takestime for other people to appreciate it. But it’s a talent or skill nonetheless, because if you are known for your integrity, the other side will be often more willing to accommodate you.” -Mark H. McCormack

The Soft Negotiation Skills

Verbal & Non-Verbal Communication Skills (Contract Negotiations Checklist Form 2-6, p. 41)

The Soft Negotiation Skills

Best Practices 1. Accuracy 2. Complete but Concise

3. Persuasive

4. Don’t Get Fancy 5. Skip the Fluff

6. Don’t Ignore Problems

7. Solve the “Right” Problems 8. Be Creative

9. Watch Your Numbers

10. Combine Substance with Style 11. Remember Readability

12. Don’t Waste Your Efforts

Verbal & Non-Verbal Communication Skills  Awareness of Yourself  Awareness of the Other Side

 Using Non-Verbal Communication to Manage Yourself and Others

The Soft Negotiation Skills

Leadership Skills (Contract Negotiations Checklist Form 2-7, p. 42 and Form 2-8, p 44.)  Talk the Talk

 Walk the Talk

 Build Leader at Every Level  Make a Difference

The Soft Negotiation Skills

Interpersonal Skills (Contract Negotiations Checklist Form 2-9, p. 46)

Building Blocks for Professional Relationships

The Soft Negotiation Skills

1. Demonstrate Competence 2. Non-Verbal to Verbal Alignment 3. Professional Appearance 4. Communicate Good Intentions 5. Do What you Say 6. Go Beyond Conventional Leadership 7. Listen 8. Over Communicate 9. Discuss the Undiscussable 10. Accurate Information / No Hidden

Agenda 11. Be Honest – Even When Costly 12. Be Patient 13. Safeguard Fairness

14. Negotiate Abundance, Not Scarcity 15. Take Calculated Risks

Contract Negotiations Chapter 02: Competencies: The Skills to Win

CN Week 2 Discussion Question

Question 02b: What are the most important skills for a master contract negotiator to possess and why?

Project Procurement Management Chapter 02: Procurement Categories

Contract Negotiations Chapter 02: Contract Negotiation Competencies: The Skills to Win

Week 2