Project Procurement Management
Project Procurement Management
Presented by:
Michael G. Judd, Ph.D., M.P.A., PMP
Adjunct Professor of Project Management
Computer Information Systems Department
Michael G. Judd
Michael G. Judd
Education
Education
Post Doctoral Diploma in Defense Program Management
Post Doctoral Diploma in Defense Program Management
Ph.D. Engineering Management
Ph.D. Engineering Management
Masters of Public Administration
Masters of Public Administration
Bachelors of Science in Criminal Justice
Bachelors of Science in Criminal Justice
Professional Certifications
Professional Certifications
Certified Project Management Professional
Certified Project Management Professional
Member of the Army Acquisition Corps
Member of the Army Acquisition Corps
Certified Project Manager with U.S. Department of Energy
Certified Project Manager with U.S. Department of Energy
Professional Recognition
Professional Recognition
Outstanding Young Men of America
Outstanding Young Men of America-
-1987
1987
United Who
United Who’
’s Who in Executives & Professionals
s Who in Executives & Professionals-
-
2003-
2003
-2007
2007
Experience
Experience
Retired from Federal Government after 27 years
Retired from Federal Government after 27 years
Senior level positions includes:
Senior level positions includes:
Executive Office of the President (U.S.) –
Executive Office of the President (U.S.)
–
Department of Administration
Department of Administration
DOE Liaison to the Under Secretary Defense (Environmental Security)
DOE Liaison to the Under Secretary Defense (Environmental Securi
ty)
DOE Principle Investigator and member of the “
DOE Principle Investigator and member of the
“Paldiski
Paldiski
International Expert Reference Group”
International Expert Reference Group
”
PIERG
PIERG
Program Analyst-
Program Analyst
-
Air , Space, and Land Combat Systems-
Air , Space, and Land Combat Systems
-
U.S. Department of Army
U.S. Department of Army
Program Manager-
Program Manager
-
DOE Environmental Security Office
DOE Environmental Security Office
Vice President (Education and Certification) Project Management Institute
Vice President (Education and Certification) Project Management
Institute’
’s
s-
-College of Performance
College of Performance
Management
Management
Project Manager-
Project Manager
-
National and Environmental Security Systems
National and Environmental Security Systems
Procurement Terms & Concepts
Procurement Terms & Concepts
Review
Review
PMBOK
PMBOK
’
’
s
s
Procurement
Procurement
Process Groups
Process Groups
Current Issues in Procurement
Current Issues in Procurement
Management
Management
Questions and Answers
Questions and Answers
Outline
Outline
The fancy word for "
The fancy word for "
purchasing
purchasing
." The
." The
procurement department within an
procurement department within an
organization manages all the major
organization manages all the major
purchases.
purchases.
Procurement
Procurement
“
“
The document that describes how procurement
The document that describes how procurement
processes from developing procurement
processes from developing procurement
documentation through contract closure will be
documentation through contract closure will be
managed.
managed.
”
”
Procurement Plan
Procurement Plan
“
“
A business decision that compares the
A business decision that compares the
costs and benefits of manufacturing a
costs and benefits of manufacturing a
product or product component against
product or product component against
purchasing it
purchasing it
…”
…”
Make
Make
-
-
or
or
-
-
Buy Decision
Buy Decision
“
“
The process of managing the contract and the
The process of managing the contract and the
relationship between the buyer and seller,
relationship between the buyer and seller,
managing contract related changes and, when
managing contract related changes and, when
appropriate, managing the contractual relationship
appropriate, managing the contractual relationship
with the outside buyer of the project.
with the outside buyer of the project.
”
”
Contract Administration
Contract Administration
“…
“…
Refers to a method of soliciting offers
Refers to a method of soliciting offers
and are used when
and are used when
negotiations are not
negotiations are not
anticipated
anticipated
. Bids are typically read aloud in
. Bids are typically read aloud in
public at the time and place specified in the
public at the time and place specified in the
solicitation.
solicitation.
”
”
Invitation For Bid
Invitation For Bid
“…
“…
A type of solicitation that is used
A type of solicitation that is used
typically with large dollar contracts when
typically with large dollar contracts when
negotiations are anticipated
negotiations are anticipated
. Offers in
. Offers in
response to
response to
RFPs
RFPs
can be accepted without
can be accepted without
negotiations and become legally binding.
negotiations and become legally binding.
”
”
Request For Proposal
Request For Proposal
A
A
contract
contract
is
is
a mutually
a mutually
binding agreement
binding agreement
that
that
obligates the
obligates the
seller
seller
to provide the specified
to provide the specified
products
products
or
or
services
services
-
-
obligating the
obligating the
buyer
buyer
to pay for them.
to pay for them.
Contracts should
Contracts should
clarify responsibilities
clarify responsibilities
and define
and define
key deliverables
key deliverables
.
.
Contracts are used because they are
Contracts are used because they are
legally
legally
binding
binding
, there is more accountability
, there is more
accountability
!
!
There is a
There is a
trend
trend
to
to
outsource
outsource
work!
work!
The
The
“
“
Contract
Contract
”
”
Fixed Price (Lump Sum) Contracts:
Fixed Price (Lump Sum) Contracts:
Firm Fixed Price
Firm Fixed Price
Fixed Price Incentive Fee
Fixed Price Incentive Fee
Cost Reimbursement
Cost Reimbursement
Cost Plus Award Fee (CPAF)
Cost Plus Award Fee (CPAF)
Cost Plus Fixed Fee (CPFF)
Cost Plus Fixed Fee (CPFF)
Cost Plus Incentive Fee (CPIF)
Cost Plus Incentive Fee (CPIF)
Cost Plus Percentage of Cost (CPPC)
Cost Plus Percentage of Cost (CPPC)
-
-
[Feds don
[Feds don
’
’
t use]
t use]
Time and Materials
Time and Materials
Contract Types
“
“
A narrative description of products, services, or
A narrative description of products, services, or
results to be supplied.
results to be supplied.
”
”
Statement of Work (SOW)
Statement of Work (SOW)
Inputs
Outputs
12.1
12.1
-
-
Plan Purchases
Plan Purchases
And Acquisitions
And Acquisitions
Process Group:
Enterprise environmental factors
Enterprise environmental factors
Procurement management plan
Procurement management plan
Make
Make--oror--buy analysisbuy analysis WBS dictionary
WBS dictionary
Work breakdown structure
Work breakdown structure
Project scope statement
Project scope statement
Organizational process assets
Organizational process assets
Requested changes
Requested changes
Make
Make--oror--buy decisionsbuy decisions
Contract statement of work
Contract statement of work
Contract types
Contract types
Expert judgment
Expert judgment
Project management plan
Project management plan
•
•Risk registerRisk register •
•RiskRisk--related contractual related contractual
agreements
agreements
•
•Resource requirementsResource requirements •
•Project scheduleProject schedule •
•Activity cost estimatesActivity cost estimates •
Inputs
Outputs
12.2
12.2
-
-
Plan Contract
Plan Contract
Process Group:
Procurement management plan
Procurement management plan
Procurement documents
Procurement documents
Standard forms
Standard forms
•
•Risk registerRisk register
•
•RiskRisk--related contractual related contractual agreements
agreements
•
•Resource requirementsResource requirements
•
•Project scheduleProject schedule
•
•Activity cost estimateActivity cost estimate
•
•Cost baselineCost baseline
Project management plan
Project management plan
Make
Make--oror--buy decisionsbuy decisions
Contract statement of work
Contract statement of work
Contract statement of work (updates)
Contract statement of work (updates)
Evaluation criteria
Evaluation criteria
Expert judgment
Inputs
Outputs
12.3
12.3
-
-
Request Seller
Request Seller
Responses
Responses
Process Group:
Organizational process assets
Organizational process assets
Qualified sellers list
Qualified sellers list
Bidder conferences
Bidder conferences
Procurement documents
Procurement documents
Procurement management plan
Procurement management plan
Proposals
Proposals
Procurement document package
Procurement document package
Develop qualified sellers list
Develop qualified sellers list
Advertising
Procurement management plan (updates)
Procurement management plan (updates)
Inputs
Outputs
12.4
12.4
-
-
Select Sellers
Select Sellers
Process Group:
Organizational process assets
Organizational process assets
Selected sellers
Selected sellers
Proposals
Proposals
Procurement document package
Procurement document package
Evaluation criteria
Evaluation criteria
Procurement management plan
Procurement management plan
Resource availability
Resource availability
Contract management plan
Contract management plan
Contract
Contract
Qualified sellers list
Qualified sellers list
Project management plan
Project management plan
•
•Risk registerRisk register
•
•RiskRisk--related contractual related contractual agreements agreements Contract negotiation Contract negotiation Screening system Screening system Independent estimates Independent estimates Weighting system Weighting system
Seller rating systems
Seller rating systems
Expert judgment Expert judgment Proposal evaluation Proposal evaluation Requested changes Requested changes
Inputs
Outputs
12.5
12.5
-
-
Contract
Contract
Administration
Administration
Process Group:
Contract Contract Contract documentation Contract documentationApproved change requests
Approved change requests
Performance reports
Performance reports
Selected sellers
Selected sellers
Contract management plan
Contract management plan
Organizational process assets (updates)
Organizational process assets (updates)
Project management plan (updates)
Project management plan (updates)
Recommended corrective actions
Recommended corrective actions
Requested changes
Requested changes
Work performance information
Work performance information
Claims administration
Claims administration
Payment system
Payment system
Inspections and adults
Inspections and adults
Buyer
Buyer--conducted performance reviewconducted performance review Performance reporting
Performance reporting
Contract change control system
Contract change control system
Records management system
Records management system
Information technology
Information technology
•
•Procurement management planProcurement management plan •
12.6
12.6
-
-
Contract Closure
Contract Closure
Inputs
Outputs
Process Group:
Procurement management plan
Procurement management plan
Closed contracts
Closed contracts
Procurement audits
Procurement audits
Contract closure procedure
Contract closure procedure
Contract documentation
Contract documentation
Contract management plan
Contract management plan
Organizational process assets (updates)
Organizational process assets (updates)
Records management system
Current Issues in Procurement
Current Issues in Procurement
Management
Management
The National Contract
The National Contract
Management Association
Management Association
NCMA was formed in
NCMA was formed in
1959
1959
to foster the professional
to foster the professional
growth and educational advancement of its members.
growth and educational advancement of its members.
NCMA is an membership
NCMA is an membership
-
-
based, professional society,
based, professional society,
whose
whose
Leadership
Leadership
is composed of
is composed of
volunteer elected
volunteer elected
officers.
officers.
Offers
Offers
professional certification
professional certification
program for contracting
program for contracting
professionals
professionals
NCMA is located at 21740
NCMA is located at 21740
Beaumeade
Beaumeade
Circle, Suite 125,
Circle, Suite 125,
Ashburn, Virginia 20147.
Iraq contracting problems
Iraq contracting problems
House appropriators on Thursday voiced dismay at the
House appropriators on Thursday voiced dismay at the
depth of contracting problems
depth of contracting problems
in Iraq…
in Iraq
…
Billions
Billions
of reconstruction dollars
of reconstruction dollars
wasted
wasted
.
.
The Defense Department, spent
The Defense Department, spent
$151 billion
$151 billion
on service
on service
contracts in
contracts in
fiscal 2006
fiscal 2006
Problem Companies
Problem Companies
-
-
Parsons, DynCorp International,
Parsons, DynCorp International,
Haliburton
Haliburton
(Kellogg, Brown and Root), Bechtel, Aegis
(Kellogg, Brown and Root), Bechtel, Aegis
Defense Systems, etc.
Defense Systems, etc.
Cost Reimbursement Contracting
Cost Reimbursement Contracting
Sector:
Sector:
National Laboratory
National Laboratory
-
-
EG&G, Lockheed
EG&G, Lockheed
-Martin
-
Martin
Idaho and Bechtel
Idaho and Bechtel
Situation:
Situation:
CPAF
CPAF
’
’
s
s
used by DOE with AF ~5% of
used by DOE with AF ~5% of
allocable cost based on performance against award fee
allocable cost based on performance against award fee
criteria
criteria
-
-
C.O. sole decision
C.O. sole decision
-
-
maker (theoretically).
maker (theoretically).
Observations:
Observations:
1.
1.
Work scope poorly defined in contract.
Work scope poorly defined in contract.
2.
2.
95 % of work force remains the same.
95 % of work force remains the same.
3.
3.
Approximately 70% of award fee criteria were broad scope statements with no measurable
Approximately 70% of award fee criteria were broad scope stateme
nts with no measurable
objectives
objectives –
–
yet specific requirements were known in advance by DOE staff. R
yet specific requirements were known in advance by DOE staff. R
&D work had
&D work had
virtually
virtually NO
NO
measurable milestones.
measurable milestones.
4.
4.
Most commercial companies could not afford to work with a 5% profit margin.
Most commercial companies could not afford to work with a 5% pro
fit margin.
5.
5.
Companies drawn to such contracts probably are motivate by spin-
Companies drawn to such contracts probably are motivate by spin
-off benefits
off benefits
Results:
Results:
DOE Management compensated for
DOE Management compensated for
contracting deficiencies awarding maximum fee (despite
contracting deficiencies awarding maximum fee (despite
poor performance assessments) and profiting from
poor performance assessments) and profiting from
technology developed at taxpayer expense.
Fixed Priced Contracting
Fixed Priced Contracting
Sector:
Sector:
Residential Building Construction
Residential Building Construction
Situation:
Situation:
General development contractors prefer to
General development contractors prefer to
use fixed price subcontracts to control costs.
use fixed price subcontracts to control costs.
Observations:
Observations:
1.
1.
There are many variables
There are
many variables
that subcontractors can
that subcontractors
can
’
’
t anticipate
t anticipate
(late material, weather, labor
(late material, weather, labor
force, poor coordination, etc.).
force, poor coordination, etc.).
2.
2.
No enforceable knowledge and skill level metrics
No enforceable knowledge and skill level metrics
have been established for some trades.
have been established for some trades.
3.
3.
Understaffing
Understaffing
, no credentialing of inspectors
, no
credentialing of inspectors
, general corruption
,
general corruption
of the inspection process
of the inspection process
4.
4.
Motivation is to make quick profits
Motivation is to make
quick profits
then move to new area.
then move to new area.
5.
5.
Small subcontractors
Small subcontractors
lack the sophistication or resources
lack the
sophistication or resources
to protect themselves against
to protect themselves against
unscrupulous General Contractors.
unscrupulous General Contractors.
6.
6.
