Project Procurement Management
Summary
TLDRThe video from PMC Mentor dives into project procurement management, highlighting the key objectives of acquiring external products, services, or results. It explains the importance of contract management, detailing the types of contracts and their risks. The script covers the contract life cycle, performance monitoring, and the conduct of procurement, including the selection criteria for sellers and procurement documents. It also addresses payments and claims administration, emphasizing the need for clear communication and documentation in managing project contracts.
Takeaways
- đ PMC Mentor is a coaching and mentoring organization focused on project management professionals.
- đ They offer mind map videos to simplify the understanding of knowledge areas in the PMBOK.
- đ The video discusses 'Project Procurement Management,' which is about acquiring products, services, or results from external sources.
- đ Contract management is a core part of procurement management, involving the handling of legal agreements between buyers and sellers.
- đ Contracts are categorized into fixed price, cost reimbursable, and time and material, each with different risk profiles for buyers and sellers.
- đ The contract life cycle includes requirement, requisition, solicitation, and award phases, with a change control process to manage modifications.
- đŁïž Communication between buyers and sellers should be documented for future reference as contracts are legally binding.
- đ Contract performance management involves monitoring and reporting to ensure both parties meet their obligations, including inspections and audits.
- đ Conduct procurement, or bidding, includes defining selection criteria and awarding contracts, sometimes involving bidder's conferences and negotiations.
- đ Procurement requirements detail the scope of work, which can be designed in various ways and must be clear and concise.
- đ° Payments and claims administration involves managing financial transactions and disputes under contract terms, including incentives and penalties.
Q & A
What is the primary purpose of project procurement management?
-The primary purpose of project procurement management is the purchase or acquisition of products, services, or results needed from outside the project team.
What are the four key concepts in procurement management?
-The four key concepts in procurement management are contract management, bidding, procurement requirement management, and payments and claims administration.
What are the three types of contracts mentioned in the script, and when are they typically used?
-The three types of contracts are fixed price, cost reimbursable, and time and material. Fixed price contracts are used when the project scope is well defined and cost can be reliably estimated. Cost reimbursable contracts are used in complex projects where cost estimation is difficult. Time and material contracts are used when the scope is clear but the duration and quantities cannot be estimated at the time of contract award.
What is the contract life cycle, and what are its phases?
-The contract life cycle consists of four phases: requirement, requisition, solicitation, and award. These phases are similar to the planned procurement and conduct procurement processes.
Why is a contract change control process important?
-A contract change control process is important because every contract goes through changes during its life cycle, and it helps manage these changes effectively.
What are the risks associated with different types of contracts for the buyer and seller?
-Fixed price contracts carry the highest risk for the seller and the lowest for the buyer. Conversely, cost reimbursable contracts have more risks for the buyer than the seller.
How is contract performance monitored throughout the contract life cycle?
-Contract performance is monitored through performance reporting techniques, inspections, and audits to ensure that both buyers and sellers meet their contractual obligations.
What is a bidder's conference, and why is it used in the bidding process?
-A bidder's conference is a tool used to explain procurement requirements to all bidders, especially useful in complex procurements to ensure clear understanding before contract award.
What is a procurement statement of work, and how should it be designed?
-A procurement statement of work is part of the procurement requirements and can be designed based on function, performance, or other criteria. It should be clear, complete, and concise, and can be revised until incorporated into a signed document between the buyer and seller.
What are some common terms used for procurement documents, and how do they differ based on selection criteria?
-Common terms for procurement documents include RFP (Request for Proposal), RFQ (Request for Quotation), IFB (Invitation for Bid), and RFI (Request for Information). Terms like bid, tender, or quotation are generally used when the selection is based on price, while proposal is used when technical capability is paramount.
What is a claim in the context of contract management, and how are constructive changes and contested changes handled?
-A claim is a request, demand, or assertion of rights by a seller against the buyer, or vice versa, for consideration, compensation, or payment under the contract terms. Constructive changes are those where the parties can't agree on compensation or the occurrence of a change, while contested changes involve disagreements that may require resolution.
How are payments and incentives managed in procurement management?
-Payments should be made to sellers as agreed in the contract. Incentives for good performance are also paid per contract, and the buyer can penalize the seller if performance criteria are not met.
Outlines
đ Project Procurement Management Overview
This paragraph introduces PMC Mentor, a coaching and mentoring organization for project management professionals. It explains the purpose of their mind map videos, which is to simplify the knowledge areas of the PMBOK. The focus of this particular video is on project procurement management, emphasizing its goal of acquiring external products, services, or results. The paragraph delves into the four key concepts of procurement management: contract management, bidding, procurement requirements, and payments and claims administration. It outlines the types of contracts, their uses, and the contract life cycle, including requirement, requisition, solicitation, award, and change control. The importance of recording communications and understanding the risks associated with different contract types for both buyers and sellers is highlighted. Contract performance management is also discussed, with techniques such as performance reporting, inspections, and audits to ensure contractual obligations are met.
đ Conducting Procurement and Managing Payments & Claims
The second paragraph continues the discussion on procurement management by focusing on the conduct of procurement, commonly known as bidding. It explains the process of identifying selection criteria for sellers and the importance of bidder's conferences and negotiations before awarding a contract. The paragraph also covers the procurement requirements, emphasizing the need for a clear, complete, and concise procurement statement of work. Different types of procurement documents are mentioned, such as RFP, RFQ, IFB, and RFI, and the distinction between terms like bid, tender, and proposal based on whether the selection is price-based or technical capability-based. The final part of the paragraph addresses payments and claims administration, defining claims and the process for handling constructive and contested changes. It concludes with the importance of making payments according to the contract and the potential for incentives or penalties based on performance criteria. The video ends with a call to action to download the PMP Prep Coach app for more learning resources and wishes of good luck for the PMP exam.
Mindmap
Keywords
đĄProject Procurement Management
đĄContracts
đĄFixed Price Contracts
đĄCost Reimbursable Contracts
đĄTime and Material Contracts
đĄContract Life Cycle
đĄBidding
đĄProcurement Statement of Work (SOW)
đĄProcurement Documents
đĄPayments and Claims Administration
đĄContract Performance Management
Highlights
Introduction to PMC Mentor as a professional coaching and mentoring organization for project management professionals.
Explanation of mind map videos created to simplify knowledge areas in PMBoK.
Overview of the purpose of project procurement management for acquiring external products, services, or results.
Discussion on the inclusion of contract management within the procurement management knowledge area.
Identification of four key concepts in procurement management: contract management, bidding, procurement requirement management, and payments and claims administration.
Definition and explanation of contracts as legal documents between a buyer and a seller in project procurement.
Classification of contracts into fixed price, cost reimbursable, and time and material, with their respective use cases.
Importance of understanding the scope definition and cost estimation in choosing the type of contract.
Explanation of the contract life cycle consisting of requirement, requisition, solicitation, and award phases.
Necessity of a contract change control process to manage modifications throughout the contract's life cycle.
Emphasis on recording communications between buyer and seller for future reference as part of contract management.
Risk analysis associated with different types of contracts for both buyers and sellers.
Introduction to contract performance management and its monitoring throughout the contract life cycle.
Use of performance reporting techniques and inspections/audits to ensure seller performance meets contractual obligations.
Description of the conduct procurement process, including identifying seller selection criteria and the awarding of contracts.
Importance of a bidder's conference and negotiations in the complex procurement process.
Explanation of procurement requirements and the development of a procurement statement of work (SOW).
Clarification of procurement documents and the distinction between terms like RFP, RFQ, IFB, and RFI.
Differentiation between bid, tender, quotation, and proposal based on the selection criteria of price or technical capability.
Discussion on payments and claims administration, including the handling of claims and incentives for performance.
Conclusion of the video with an invitation to download the PMP Prep Coach app for further learning.
Transcripts
pmc mentor is a professional coaching
and mentoring organization providing new
learning opportunities for project
management professionals
we have created a series of mind map
videos to explain the knowledge areas in
pmbok in the most simplest way
watch listen and learn the key concepts
of project management from the
contributor of pmbok
this mind map video is about project
procurement management
the key objective of procurement
management knowledge area is the
purchase or acquisition of products
services or results needed from outside
the project
team project procurement management also
includes contract management four key
concepts in procurement management are
contract management
bidding procurement requirement
management and payments and claims
administration
so first key concept in procurement is
contracts
a contract is a legal document between a
buyer and a seller
contracts can be classified into three
types
that is fixed price cost reimbursable
and the third one
is time and material each type has
different variants
however this is important to understand
that we use fixed price types of
contracts in the situations
where project scope is well defined and
cost can be reliably estimated and
compared in the market
second type is cost reimbursable that
should be used in the situations where
project
is complex cost estimation is difficult
and there is very little information
available in the market to compare the
cost of the project
third type is time and material that
should be used in situations where scope
is clear
however duration of services and
quantities of material can't be
estimated at the time of award of
contract
this was about different types of
contracts
now let's understand contract life cycle
contract life cycle consists of four
phases that are requirement
requisition solicitation and award
requirement phase is similar to planned
procurement process while requisition
solicitation and award phase activities
are similar to conduct procurement
process
since every contract goes through
changes during its life cycle
therefore a contract change control
process should be used to manage
changes to the contract moreover
contracts are legal agreements so every
communication between buyer and seller
should be recorded
to be used as reference in future as
needed
it is also very important to understand
that each type of contract carry some
kind of risk for both buyer
and seller fixed price types of
contracts have highest risk for seller
while lowest risk for buyer
on the contrary cost reimbursable type
of contracts have more risks for a buyer
than seller
the next topic concept under contract
management is the contract performance
management
performance of the contract should be
monitored throughout the contract life
cycle to know if both buyers and seller
meet their contractual obligation
performance reporting technique is used
by buyer to monitor the performance of
sellers work
in addition to performance reporting
inspections and audits are carried out
by the buyer to ensure sellers
performance meets the contractual
obligation
second key concept is the conduct
procurement
commonly known as bidding it includes
identifying the selection criteria for
the sellers
this seller selection criteria will be
used in evaluating the seller's
proposals
bidding also includes award of the
contract to seller
before the contract award it is
important to understand that for some
kind of complex procurement
better conference is a good tool to
explain the procurement requirements to
all bidders
in addition to bidder's conference
negotiations are usually performed with
the shortlisted bidders and finally the
contract is awarded to one of the bidder
after negotiations
third key concept is the procurement
requirements procurement statement of
work is included in the procurement
requirements
procurement statement of work can be
designed based
function based or performance based
procurement statement of work should be
clear
complete and concise it can be revised
and refined as required until
incorporated into a signed document
between buyer and seller
now let's understand the procurement
documents
there are many different terms for
procurement documents
and may vary by industry and location of
procurement
rfp rfq ifb
rfi are some of the commonly used terms
for procurement documents
however it's important to know that
terms such as bid
tender or quotation are generally used
when sellers selection decision will be
based on price
while a term such as proposal is
generally used when technical capability
or technical approach are paramount
this brings us to fourth key concept in
procurement management and that is
payments and claims administration
claims is a request demand or assertion
of rights by a seller against the buyer
or vice versa for consideration
compensation or payment under the terms
of a contract
constructive changes and contested
changes are those requested changes
where the buyer and seller can't reach
an agreement
on compensation for the change or can't
agree that a change has occurred
payments should be made to sellers
agreed in the contract
any incentive for a good performance
should also pay to the sellers per
contract and buyer can penalize
seller if his performance doesn't meet a
contract performance criteria
this brings us to the end of this video
to watch more of such videos
download pmp prep coach app on your
tablet or smartphone
good luck for your pmp exam
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