12.2 Conduct Procurements

"The process of obtaining seller responses, selecting a seller and awarding a contract"

The definition shown above in italics is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) – Fifth Edition, Project Management Institute Inc., 2013

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) – Fifth Edition, Project Management Institute Inc., 2013 Figure 12-4 Page 371

May need to develop a sellers short list for them to provide more information

Tools include:

Bidder Conferences and Q&A Sessions

• Assembling all prospective vendors in a single meeting, with information disseminated and individual bids later received
• Mandatory that all information must be equally distributed to all prospective sellers and the process must be fair and open
• If Q&A sessions are by email, answers must be given to all prospective bidders

Proposal Evaluation Techniques

• Comparison of alternative proposals against the evaluation criteria

Independent Estimates

• Use of outside professionals to provide a benchmark estimate of costs in advance of receiving proposals

Expert Judgement

Advertising

• Advertising in targeted newspapers, magazines, trade publications and on procurement websites.
• Government may require advertising of certain kinds of contract

Analytical Techniques

• Used for quick identification and location of potential vendors.
• Analysing submissions to ensure quality of detail, readiness of seller, ability to produce the product, service or result, avoid cost overruns from changes, etc…

Procurement Negotiations

• The project manager may not be the lead negotiator in many cases, but will provide technical and project clarification
• Negotiations must be ethical, with an honest approach without regard to expectations of future work

Exercise

Quick Group Exercise

Discuss and list what you would expect to see in an agreement (awarded contract)

Suggested Contents of an Agreement :

Contractual Terms and Conditions

• Need for procurement expertise
• Level of project management required, include meetings, reporting, consulting, negotiations, etc…
• Contract T&Cs / Service Level Agreements
• Customer's quality expectations
• Availability of contractor resources
  • All from one source
  • Multi sourcing
  • Sub contracting by prime contractor
• Configuration
• Control Project timescales
• Risk levels and policy

Contract Terminology and Meanings

For a contract to be a contract

• There must be a buyer with a need and a seller who can meet that need (provide the value) and that “consideration” must be exchanged
• Both parties must want to be legally bound and those entering into agreement must have the legal capacity to do so
• Oral contracts are legally binding (US - if witnessed or recorded)
• The providing activity must be legal

Standard or Boilerplate clauses

• Standard terminology in contract templates
• Apply in most situations but may need to be modified to suit

Contract has to have a control change procedure

Warranty – can be expressly stated or implied

• Implied terms are those which a court will decide may be read into the contract based on what the parties must have intended, or arise from a statute
• Express terms are those which the parties themselves have established and agreed to

Example Question

Peter Paris Peckham Partners llc awarded a contract to Devon Associates to:

• Assist in the design of a new management structure for Operations, Finance and HR
• Carry out a employee satisfaction survey and produce a report within 3 weeks of completion
• Carry out all internal and external communications in this change

It is now in the 4th week after the survey was completed and you, as the PM, realise the survey report has not been given to you. It appears that Devon Associates are claiming it is their intellectual property and are withholding it‟s release. What do you do?

A. Send Devon Associates a “please explain why” email and demand for the report straight away
B. Get advice from your Project Sponsor
C. Discuss this situation with your legal department to identify next steps
D. Just accept it and move on

Important Areas

One party may have been deemed to have waived their rights, when or if, they fail to enforce the contractual obligations of the other party

The PM needs to

• Be astute, politically aware and manage relationships
• Control all aspects including contractual obligations
• Chase up work outputs proactively
• Not rely on the sellers' good nature
• Understand whose fault it is when this happens, and the impact

Breach – a failure by either party to deliver against their contractual obligations

• Contract breach (where damages can be claimed for the loss incurred) is less serious than a material breach (where the other party is freed from any further contractual obligations)
• The loss incurred should form the basis for a claim for damages at law or liquidated damages and is a form of compensation, not an unfair or unilaterally decided punitive amount.

Who is the contract between?

The contract is between the buyer and the seller:

But what happens when the seller contracts out to subcontractors or second level sellers? (a prime contractor subcontracting to electricians, plumbers, bricklayers, etc…)

If the buyer bypasses the prime contractor and gives an order to the bricklayer, then

• The prime contractor could claim for damages for any delay to the schedule, caused by such actions taken by the bricklayer
• Could claim for loss of reputation
• Will deem the buyer to have relieved them of some or a lot of their responsibilities

The Buyer has to consider the impact on the project, if the Prime Contractor goes into liquidation, as there are no contracts between buyer and subcontractors

• May insist on having direct contracts with subcontractors, or at the very least, the subcontractors contact details.

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