Conducting procurements is where you make sure your potential customers have an opportunity to bid in fairness. For the PMP Certification Exam, make sure you know the three aspects to conducting procurements:
Sending out the bid documents to qualified sellers
Applying the source selection criteria to the bids
Selecting a seller
Conduct Procurements. Obtaining seller responses, selecting a seller, and awarding a contract.
Conduct Procurements: Inputs
Your make-or-buy decisions as well as information from select project documents — such as the risk register that contains risk-related contract decisions — are a starting point for conducting procurements.
The procurement management plan provides information that guides the bid and award process. For the bid process, it identifies the various roles and responsibilities as well as the procurement documents that will be used. Roles and responsibilities can include
Who manages the bidder conferences
Who sits on the selection committee
Who negotiates with sellers
Who has authority to sign contracts
Request for Quote (RFQ)
Invitation for Bid (IFB)
Request for Information (RFI)
Request for Proposal (RFP)
The procurement statement of work describes the goods or services required in enough detail so that prospective bidders can decide whether to bid.
Many times, the contracting department or procurement department will have lists of qualified sellers or sellers who have worked with the organization. This information can cut down the time you spend looking for qualified sellers, and it can also steer you clear from sellers who performed poorly in the past.
There are some instances when you don’t need to compete for a bid:
Sole source: There is only one provider in the market. This may be because of high entry costs (such as a utility company) or because a certain company owns a patent.
Single source: You decide you want to work with a particular contractor. You may have had a good relationship in the past, he may be familiar with your business, or you held a similar competition in the near term past. If the seller has specific, unique qualifications, you may choose him without competition as well.
Sole source. A condition that can exist when there is only one source for a given product, and the buyer is thus forced to procure from only that source.
Single source. A condition that occurs when there are multiple qualified sources for a given product, but the buyer or project elects to place an order from only one seller, thus waiving the opportunity to hold a competition.
After bidders respond to the procurement documents, you will apply the source selection criteria that you developed in the planning process to the seller proposals.
Conduct Procurements: Outputs
After negotiations are finalized, the parties can sign an agreement. A simple purchase may be documented on a purchase order (PO) or a basic ordering agreement (BOA). More complex purchases will have contracts with multiple components and be quite complex and lengthy. The following are components that you could see in a contract:
Statement of work (SOW)
Roles and responsibilities
Cost, fee structure, and payment terms
Product acceptance criteria
Warranty, limitation of liability, and product support information
Insurance and performance bond requirements
Change request process
Termination and alternative dispute resolution mechanisms
The legal term used to indicate a legal relationship is privity. If you sign a contract with a seller, you have contract privity. However, if the seller signs a contract with a subcontractor, you have no legal privity with the subcontractor.
Based on the contract, there may be changes and updates to other documentation, such as
Resource calendars: You might have to add contractor resources and adjust the hours of inhouse resources.
Change requests: Changes to the work, approach, and elements of the project management plan might require changes.
Project management plan updates: The schedule baseline, cost baseline, scope baseline, staffing plan, and procurement management plan might require updates.
Project documents: Requirements documentation, the stakeholder register and stakeholder management strategy, and the risk register might require updates.