hi i have attached some attachments regarding the assessment can u please follow them.thank you
someTitle Contract Management1 975 Related Case Studies (from Related Workbook Exercises PMBOK Guide, Kerzner/Project Management (from Kerzner/Project Management 5th Edition, Reference Case Studies, 4th Edition) Workbook and PMP/CAPM Exam Section for the PMP Study Guide, 11th Edition) Certification Exam • The Scheduling Dilemma* • Multiple Choice Exam • Procurement • To Bid or Not to Bid* • Crossword Puzzle on Procurement Management • The Management Reserved* Management 19.0 INTRODUCTION In general, companies provide services or products based on the require- ments set forth in invitations for competitive bids issued by the client or the results of direct contract negotiations with the client. One of the most important factors in preparing a proposal and estimating the cost and profit of a project is the type of contract expected. The confidence by which a bid is prepared is usually dependent on how much of a risk the contractor will incur through the PMBOK® Guide, 5th Edition Chapter 12 Procurement Management *Case Study also appears at end of chapter. 1. The title of this chapter has been changed from Procurement Management in the Ninth Edition to Contract Management in this edition. Contract management includes procurement management. Procurement manage- ment is the buyer’s side of contract management, and sales/proposal management is the seller’s side of contract management. All those sellers (contractors) managing project contracts may not find it necessary to use the PMBOK® Guide, Chapter 12, because they may not be procuring anything. 19 c19.qxd 1/3/13 5:16 PM Page 975 Kerzner, Harold, and Harold R. Kerzner.
Project Management : A Systems Approach to Planning, Scheduling, and Controlling, John Wiley & Sons, Incorporated, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apicollege/detail.action?docID=1113482. Created from apicollege on 2019-07-22 16:16:51. C op yr ig ht © 2 01 3. J oh n W ile y & S on s, In co rp or at ed . A ll rig ht s re se rv ed . contract. Certain types of contracts provide relief for the contractor since onerous risks2 exist. The cost must therefore consider how well the contract type covers certain high- and low-risk areas. Prospective clients are always concerned when, during a competitive bidding process, one bid is much lower than the others. The client may question the validity of the bid and whether the contract can be achieved for the low bid. In cases such as this, the client usu- ally imposes incentive and penalty clauses in the contract for self-protection. Because of the risk factor, competitors must negotiate not only for the target cost figures but also for the type of contract involved since risk protection is the predominant influential factor. The size and experience of the client’s own staff, urgency of completion, availability of qualified contractors, and other factors must be carefully evaluated. The advantages and disadvantages of all basic contractual arrangements must be recognized to select the optimum arrangement for a particular project. 19.1 PROCUREMENT Procurement can be defined as the acquisition of goods or services. Pro- curement (and contracting) is a process that involves two parties with different objectives who interact on a given market segment. Good pro- curement practices can increase corporate profitability by taking advantage of quantity discounts, minimizing cash flow problems, and seeking out quality suppliers. Because procurement contributes to profitability, procurement is often centralized, which results in standardized practices and lower paperwork costs. All procurement strategies are frameworks by which an organization attains its objectives. There are two basic procurement strategies: ● Corporate Procurement Strategy: The relationship of specific procurement actions to the corporate strategy. An example of this would be centralized procurement. ● Project Procurement Strategy: The relationship of specific procurement actions to the operating environment of the project. An example of this would be when the project manager is allowed to perform sole source procurement without necessar- ily involving the centralized procurement group, such as purchasing one ounce of a special chemical for an R&D project. Project procurement strategies can differ from corporate procurement strategies because of constraints, availability of critical resources, and specific customer requirements. Corporate strategies might promote purchasing small quantities from several qualified vendors, whereas project strategies may dictate sole source procurement. 976 CONTRACT MANAGEMENT PMBOK® Guide, 5th Edition Chapter 12 Introduction 12.1 Plan Procurement Management 2. Onerous risks are unfair risks that the contractor may have to bear. Quite often, the contract negotiations may not reach agreement on what is or is not an onerous risk. c19.qxd 1/3/13 5:16 PM Page 976 Kerzner, Harold, and Harold R. Kerzner.
Project Management : A Systems Approach to Planning, Scheduling, and Controlling, John Wiley & Sons, Incorporated, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apicollege/detail.action?docID=1113482. Created from apicollege on 2019-07-22 16:16:51. C op yr ig ht © 2 01 3. J oh n W ile y & S on s, In co rp or at ed . A ll rig ht s re se rv ed . Procurement planning usually involves the selection of one of the following as the pri- mary objective: ● Procure all goods/services from a single source. ● Procure all goods/services from multiple sources. ● Procure only a small portion of the goods/services. ● Procure none of the goods/services. Another critical factor is the environment in which procurement must take place. There are two environments: macro and micro. The macro environment includes the general external variables that can influence how and when we do procurement. The PMBOK® Guide refers to this as “Enterprise Environmental Factors.” These include recessions, inflation, cost of borrowing money, whether a buyer or seller’s market exists, and unemployment. As an example, a for- eign corporation had undertaken a large project that involved the hiring of several con- tractors. Because of the country’s high unemployment rate, the decision was made to use only domestic suppliers/contractors and to give first preference to contractors in cities where unemployment was the greatest, even though there were other more qualified suppliers/contractors. The microenvironment is the internal procurement processes of the firm, especially the policies and procedures imposed by the firm, project, or client in the way that procure- ment will take place. This includes the procurement/contracting system, which contains four processes according to the PMBOK® Guide, Fourth Edition: ● Plan Procurements ● Conduct Procurements ● Administer Procurements ● Close Procurements It is important to understand that, in certain environments such as major projects for the Department of Defense (DoD), the contracting process is used as the vehicle for tran- sitioning the project from one life-cycle phase to the next. For example, a contract can be awarded for the design, development, and testing of an advanced jet aircraft engine. The contract is completed when the aircraft engine testing is completed. If the decision is made at the phase gate review to proceed to aircraft engine production, the contracting process will be reinitiated for the new effort. Thus, the above four PMBOK® Guide processes would be repeated for each life-cycle phase. As the project progresses from one phase to the next, and additional project knowledge is acquired through each com- pleted phase, the level of uncertainty (and risk) is reduced. The reduction in project risk allows the use of lower-risk contracts throughout the project life cycle. During higher-risk project phases such as conceptual, development, and testing, cost-type contracts are tradi- tionally used. During the lower-risk project phases such as production and sustainment, fixed-priced contracts are typically used. It is also important to note that the above four PMBOK® Guide processes focus only on the buyer’s side of contract management. Procurement 977 PMBOK® Guide, 5th Edition 2.1.5 Enterprise Environmental Factors c19.qxd 1/3/13 5:16 PM Page 977 Kerzner, Harold, and Harold R. Kerzner.
Project Management : A Systems Approach to Planning, Scheduling, and Controlling, John Wiley & Sons, Incorporated, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apicollege/detail.action?docID=1113482. Created from apicollege on 2019-07-22 16:16:51. C op yr ig ht © 2 01 3. J oh n W ile y & S on s, In co rp or at ed . A ll rig ht s re se rv ed . Contract management is defined as “art and science of managing a contractual agree- ment throughout the contracting process.”3 Since contracts involve at least two parties— the buyer and the seller (contractor), contract management processes are performed by both the buyer and seller. The seller’s contract management processes, which correspond to the buyer’s processes, consist of the following activities4: ● Presales Activity: The process of identifying prospective and current cus- tomers, determining customer’s needs and plans, and evaluating the competitive environment. ● Bid/No Bid Decision-Making: The process of evaluating the buyer’s solicitation, assessing the competitive environment and risks against the opportunities of a potential business deal, and then deciding whether to proceed. ● Bid/Proposal Preparation: The process of developing offers in response to a buyer’s solicitation or based on perceived buyer needs, for the purpose of per- suading the buyer to enter into a contract. ● Contract Negotiation and Formation: The process of reaching a common understanding of the nature of the project and negotiating the contract terms and conditions for the purpose of developing a set of shared expectations and understandings. ● Contract Administration: The process of ensuring that each party’s performance meets contractual requirements. ● Contract Closeout: The process of verifying that all administrative matters are concluded on a contract that is otherwise physically complete. This involves com- pleting and settling the contract, including resolving any open items. As can be seen from the previous discussion, the last two phases of the seller’s contract management processes are identical to the buyer’s contract management processes. This is because the buyer and seller are both performing the same contract management activities and working off of the same contract document. 19.2 PLAN PROCUREMENTS The first step in the procurement process is the planning for purchases and acquisitions, specifically the development of a procurement plan that states what to procure, when, and how. This process includes the following: ● Defining the need for the project ● Development of the procurement statement of work, specifications, and work breakdown structure 978 CONTRACT MANAGEMENT PMBOK® Guide, 5th Edition 12.1 Plan Procurements 3. Gregory A. Garrett and Rene G. Rendon, Contract Management: Organizational Assessment Tools (Ashburn, VA: National Contract Management Association, 2005), p. 270. 4. See note 3. c19.qxd 1/3/13 5:16 PM Page 978 Kerzner, Harold, and Harold