ce4221 lecture 4 - procurement.pdf

8/18/2019 CE4221 Lecture 4 - Procurement.pdf

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Civil Engineering Practices, Quality and Legislation

Civil Engineering Practices, Quality

and LegislationLecture 4

Procurement of Construction Works

Asoka Perera

Professor of Civil Engineering


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ObjectiveTo learn on methods and tools for

management of procurement in projects.Content

Theory related procurement management,

Lecture objective and content


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Project Procurement Managementincludes the processes to purchase oracquire the products, services, orresults needed from outside theproject team to perform the work.

Overview of lecture


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Two perspectives of procurement.The organization can be either the buyer

or seller of the product, service, orresults under a contract.

Project Procurement Managementincludes the contract managementand change control processesrequired to administer contracts orpurchase orders issued by authorizedproject team members.

Overview of lecture


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Project Procurement Management alsoincludes administering any contract

issued by an outside organization (thebuyer) that is acquiring the projectfrom the performing organization (theseller), and administering contractualobligations placed on the project teamby the contract.

Overview of lecture


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Project Procurement Management alsoincludes administering any contract

issued by an outside organization (thebuyer) that is acquiring the projectfrom the performing organization (theseller), and administering contractualobligations placed on the project teamby the contract.

Overview of lecture


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Overview of lecture


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The Plan Purchases and Acquisitions processalso includes consideration of potentialsellers, particularly if the buyer wishes toexercise some degree of influence or controlover contracting decisions.Consideration should also be given to who is

responsible for obtaining or holding anyrelevant permits and professional licenses thatmay be required by legislation, regulation, ororganizational policy

1. Plan Purchases and Acquisitions




Tools and TechniquesMake-or-Buy Analysis

• a general management technique• The analysis includes both indirect as well as

direct costs.• In a make-or-buy analysis, if a buy decision is to

be made, it also reflects the perspective of theproject team’s organization as well as theimmediate needs of the project.

Expert Judgment





Tools and TechniquesExpert Judgment

• To assess the inputs to and outputs from thisprocess.

• To develop or modify the criteria that will be usedto evaluate offers or proposals made by sellers.

• Expert legal judgment may involve the services ofa lawyer to assist with nonstandard procurementterms and conditions.





Tools and TechniquesContract Types

• Fixed-price or lump-sum contracts.• Cost-reimbursable contracts - This category of

contract involves payment (reimbursement) to theseller for seller’s actual costs, plus a fee typicallyseller profit.

– Cost-Plus-Fee (CPF) or Cost-Plus-Percentage of Cost(CPPC).

– Cost-Plus-Fixed-Fee (CPFF). – Cost-Plus-Incentive-Fee (CPIF).

•

Time and Material (T&M) contracts.





OutputsProcurement Management Plan

• The procurement management plan describeshow the procurement processes will be managedfrom developing procurement documentationthrough contract closure. Several items

Contract Statement of Work• Each contract statement of work defines, for

those items being purchased or acquired, just theportion of the project scope that is includedwithin the related contract.





OutputsMake-or-Buy Decisions

• The documented decisions of what projectproducts, services, or results will be either beacquired or will be developed by the project team.

Requested Changes





2. Plan Contracting




Inputs – as given in the FigureTools and Techniques

Standard Forms• Standard forms include standard contracts,standard descriptions of procurement terms, non-disclosure agreements, proposal evaluationcriteria checklists, or standardized versions of allparts of the needed bid documents.

Expert Judgment

2. Plan Contracting




OutputsProcurement Documents

• Can use ICTAD, FIDIC – Covered in detail form inthe Procurement and law module

Evaluation CriteriaContract Statement of Work (Updates)

2. Plan Contracting


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InputsOrganizational Process Assets

• Organizational process assets, maintain lists orfiles with information on prospective andpreviously qualified sellers, sometimes calledbidders, who can be asked to bid, propose, orquote on work.

Procurement Management PlanProcurement Documents

3. Request Seller Responses




Tools and TechniquesBidder Conference

• Know and bid meeting, pre-bid meeting

Advertising• Very common any news paper

Develop qualified seller list• Registered suppliers list, etc.





OutputsQualified Sellers List

Procurement Document PackageProposals





The Select Sellers process receives bids orproposals and applies evaluation criteria, asapplicable, to select one or more sellers whoare both qualified and acceptable as a seller.Many decisions

Price or cost can be the primary determinant

Proposals – Technical and FinancialMultiple sources could be required for criticalproducts, servicesSelect a single seller

Establish a negotiating sequence

4. Select Sellers


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4. Select Sellers


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InputsAs indicated in the Figure

Tools and techniquesWeighting System

• A weighting system is a method for quantifyingqualitative data to minimize the effect of personalprejudice on seller selection. Most such systemsinvolve assigning a numerical weight to each ofthe evaluation criteria,

Independent Estimates• Prepare its own independent estimates –

Generally know as “Engineer’s Estimate”

4. Select Sellers


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Tools and techniques Screening System

• Involves establishing minimum requirements ofperformance for one or more of the evaluationcriteria, and can employ a weighting system andindependent estimates.

Contract negotiation• Contract negotiation clarifies the structure and

requirements of the contract so that mutualagreement can be reached prior to signing thecontract.

4. Select Sellers

http://e/Videos/VTC%20-%20PMI%20PMBOK/VTC.PMBOK.Part.4/19.Select%20Sellers/19.02.Tools%20&%20Techniques.movhttp://e/Videos/VTC%20-%20PMI%20PMBOK/VTC.PMBOK.Part.4/19.Select%20Sellers/19.02.Tools%20&%20Techniques.mov


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Tools and techniquesSeller Rating Systems

• Seller rating systems are developed by manyorganizations and use information such as theseller’s past performance, quality ratings,delivery performance, and contractualcompliance.

Expert JudgmentProposal Evaluation Techniques

4. Select Sellers


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OutputsSelected SellersContractContract Management PlanResource AvailabilityProcurement Management Plan (Updates)

Requested Changes

4. Select Sellers


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Both the buyer and the seller administer the contractfor similar purposes.The Contract Administration process ensures that the

seller’s performance meets contractual requirementsand that the buyer performs according to the terms ofthe contract.The legal nature of the contractual relationship makes

it imperative that the project management team isacutely aware of the legal implications of actions takenwhen administering any contract.

5. Contract Administration


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Direct and Manage Project Execution to authorize thecontractor’s work at the appropriate time Performance Reporting to monitor contractor cost,

schedule, and technical performancePerform Quality Control to inspect and verify theadequacy of the contractor’s product Integrated Change Control to assure that changes are

properly approved, and that all those with a need toknow are aware of such changesRisk Monitoring and Control to ensure that risks aremitigated.



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The Contract Administration process reviews anddocuments how well a seller is performing or hasperformed based on the contract and established

corrective actions.Contracts can be amended any time prior to contractclosure by mutual consent, in accordance with thechange control terms of the contract.



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InputsContractContract Management Plan

Selected SellersPerformance ReportsApproved Change RequestsWork Performance Information



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Tools and TechniquesContract Change Control System

• A contract change control system defines the

process by which the contract can be modified.Buyer-Conducted Performance Review

• A procurement performance review is astructured review of the seller’s progress to

deliver project scope and quality, within cost andon schedule, as compared to the contract.



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Tools and TechniquesInspections and AuditsPerformance Reporting

Payment SystemClaims Administration

• Contested changes and constructive changes are thoserequested changes where the buyer and seller cannot agree

on compensation for the change, or cannot agree that achange has even occurred.

Records Management SystemInformation Technology



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OutputsContract Documentation

• Contract documentation includes, but is not

limited to, the contract, along with all supportingschedules, requested unapproved contractChanges, and approved change requests.

Requested Changes• Requested changes to the project management

plan and its subsidiary plans and othercomponents, such as the project schedule andprocurement management plan, may result from

the Contract Administration process.



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OutputsRecommended Corrective ActionsOrganizational Process Assets (Updates)

• Correspondence• Payment schedules and requests• Seller performance evaluation documentation.

Project Management Plan (Updates)



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The Contract Closure process supports the CloseProject process, since it involves verification that allwork and deliverables were acceptable.

The Contract Closure process also involvesadministrative activities, such as updating records toreflect final results and archiving such information forfuture use.Early termination of a contract is a special case ofcontract closure, and can result from a mutualagreement of the parties or from the default of one ofthe parties.

6. Contract Closure


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InputsAs indicated

Tools and Techniques Procurement Audits

• A procurement audit is a structured review of theprocurement process from the Plan Purchasesand Acquisitions process through ContractAdministration.

Records Management System

6. Contract Closure

http://e/Videos/VTC%20-%20PMI%20PMBOK/VTC.PMBOK.Part.4/21.Contract%20Closure/21.02.Tools%20&%20Techniques%20-%20Outputs.movhttp://e/Videos/VTC%20-%20PMI%20PMBOK/VTC.PMBOK.Part.4/21.Contract%20Closure/21.02.Tools%20&%20Techniques%20-%20Outputs.mov


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OutputsClosed Contracts

• The buyer, usually through its authorizedcontract administrator, provides the seller withformal written notice that the contract has beencompleted.

Organizational Process Assets (Updates)• Contract file.• Deliverable acceptance.• Lessons learned documentation.

6. Contract Closure


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7.1 IntroductionInstructions to Bidders

Contract and Conditions of Contracts

7 Procurement of Works using ICTAD Standard Contracts


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A. GeneralB. Bidding

Documents

C. Preparation ofbidsD. Submissions of

bids

E. Bid opening andEvaluations

F. Award ofContract

Ci il E i i P ti Q lit d L i l ti


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