Your are the project manager for a seller. A parking lot fencing project was bid at US $11 per foot. The parking lot has four equal sides of 125 feet and requires installing a culver on one side, in accordance with city code. Fencing should be installed at 100 feet per day, and the culvert installation will cost US $500 and take one day to complete. The culvert must be installe before work can begin on that side on the fence. After three days of work, one side is complete, another side has 75 feet installed, and the culvert is completely installed. At this point, the city inspector tells you the culvert needs to be increased to a seven-foot diameter. You determine this will cost US $1,000 and require two additional days. What should you do FIRST? Show A. Appeal the change to the city council, as the culvert is adequate for the needs of the customer. “Control Procurements is the process of managing procurement relationships; monitoring contract performance, and making changes and corrections as appropriate; and closing out contracts. The key benefit of this process is that it ensures that both the seller’s and buyer’s performance meet the project’s requirements according to the terms of the legal agreement. This process is performed throughout the project as needed.” (PMBOK Guide p492) When you think of controlling procurements -- even after reading the introduction to this chapter -- it’s very easy to think of just contracts and agreements, and of authorizing payments, and chasing after late or incorrect deliverables. But did you notice the very first sentence in the introduction? “Control Procurements is the process of managing procurement relationships” And so, in the exam you can expect questions related to contracts and agreements, and to authorizing payments and chasing after late or incorrect deliverables.But the underlying focus is largely concerned with managing the relationships between the buyer and the seller. Who is the buyer? And as I mentioned in previous lessons; in the exam, you will be considered to be on the buyer’s side of the contract relationship, unless the question clearly says otherwise. There are binding legal aspects to contracts and so everyone involved, both buyer and seller needs to be aware of this and make all reasonable efforts to ensure that they don’t unwittingly trigger a legal trap.However, although there are legal remedies built into contracts, using them is something to be done with fear and trepidation. There are two old sayings that spring to mind,“only a fool rushes into Court”, and “the only thing certain in law is that there is nothing certain in law.” Another important point to consider is that usually sellers are much more familiar with selling than buyers are with buying, because sellers are in the business of contracting, but buyers are involved in procurement contracts only when they need to be. And this means that sellers often have a lot more experience with contract law, than the buyers have. To illustrate this point; I was interviewing a lady once for a Project Management position. She had worked as a Project Manager with a major international software developer. She told me that Project Managers in her organization were instructed, that from day one of the contract they were to relentlessly document every possible contractual failure, or contractual impediment, made by the client. And then if things went badly wrong in the contract and it ended up in Court, the seller would be represented with barristers, pushing carts of incriminating documents, but the client would arrrive with a lawyer armed mainly with unsubstantiated rumour and innuendo. In Court; cases are won or lost on documentation.Your organization may have its own legal department, especially if the organization is large, but you have to make sure you provide them with the right ammunition. And this is another great reason for recording lessons learned as you find them. But even if your organization doesn’t have a legal department, it is recommended that the legal aspects of contract management are handled outside the project. Likewise, procurement management is usually managed by a department or function outside the project, otherwise trying to manage multiple interfaces at multiple levels within the project, would overburden the team. However, although contracts can be administered outside the project, the project management processes related to the contract work must occur within the project. When you are managing multiple sellers, you will spend a large amount of time communicating with them and trying to correct miscommunications.You may recall from Communications Management that a Project Manager spends 90% of their time communicating (this is a frequent exam question), but if you have multiple contracts and vendors, you are in danger on under-communicating in the other parts of the project, because there is just one Project Manager. So, what activities can be administered outside the project? They may include:
The PMBOK Guide says on page 494 “The quality of the controls, including the independence and credibility of procurement audits, is critical to the reliabilityof the procurement system. The organization’s code of ethics, its legal counsel, and external legal advisory arrangements,including any ongoing anti-corruption initiatives, can contribute to proper procurement controls. Control Procurements also involves monitoring payments to the seller. Thisensures that payment terms defined within the contract are met and that compensation is linked to the seller’s progressas defined in the contract. A principal concern when making payments is to ensure there is a close relationship ofpayments made to the work accomplished. A contract that requires payments linked to project output and deliverablesrather than inputs such as labor hours has better controls. Agreements can be amended at any time prior to contract closure by mutual consent, in accordance with the changecontrol terms of the agreement. Such amendments are typically captured in writing.” CONTROL PROCUREMENTS: INPUTS The Project management plan As I have mentioned before, the Project management plan (aka the Project plan) is not just a project schedule. The Project management plan is a collection of 18 components, made of up 12 sub-plans, 4 baselines (including the schedule baseline), the project life cycle, and the development approach. You will find a full description in Table 4-1, on page 89 of the PMBOK Guide TheProject management plan components of interest to the Control Procurements process include:
Normally the PMBOK Guide reminds you that the schedule baseline (or any baseline) can only be updated by raising a change request, and having the change request approving through Integrated Change Control. They forgot to remind you this time, so I did instead :) Stop for a moment! Why aren’t we using the project schedule as an input? Surely it would tell us when contracts start, wouldn’t it? If you are thinking that I might be right about the schedule, you have fallen into a common exam trap. As I have mentioned before in the course, PMI grew out of gigantic projects in the 1960’s, such Apollo and Polaris projects. And in the exam, unless it clearly says otherwise, that is the size of project being considered in the question. And so, a schedule would also be vast, which means that you wouldn’t “see the forest for the trees”. You would spend hours just searching for contracts. A much better way would be if you just had a chart of the just main touchpoints of the schedule, in any easy to find format. The good news is that we do! It’s called the Milestone list! I guess your next question might be, if the Milestone list is what we need, then why is it not shown as in input from the Project management plan? The simple answer is, the Milestone list is actually a Project Document. There are 33 Project Documents used in a project, but they are not included in the Project management plan. Please study Table 4-1, on page 89 of the PMBOK Guide, which shows the 18 components of the Project management plan and the 33 Project Documents. But for the exam -- especially when you are felling stressed -- be extremely careful not to confuse project business documents, with project documents. There are just two project business documents -- and no! I’m, not going to tell you them again, you are going to have to find them in the PMBOK Guide yourself this time, so you won’t forget them again. Hint: look on page 29. One of the main differences, which often appears in the exam, is that the Project Manager *can* change the Project Documents, but *can’t* change the Project Business Documents Just as an aside - did you know that the PMP exam existed before the first PMBOK Guide was written? Eleven people took the very first PMP exam, but only about 4 passed. And so the PMBOK Guide was developed as a study guide for the exam. PROJECT DOCUMENTS Project documents that can be considered as inputs to this process include:
There is an input missing from the Control Procurements. I don’t know why it is missing. And this is the Project Communications plan. The Control Procurement process is heavy on communications, and the Project Communications plan defines how it should be done. AGREEMENTS Agreements are understandings between parties, including understanding of theduties of each party The relevant agreements are reviewed to verify terms and conditions are met Agreements can *include* contracts, but not all agreement are contracts. For example, your project might have agreements with other departments of your organization, but it can’t have contracts with other departments. Because an organization is a single legal entity, and a contract must be between at least 2 separate entities, because it would be impossible for an entity to sue itself in Court. PROCUREMENT DOCUMENTATION This contains complete supporting records for administration of the procurement processes, and would include the statement of work, payment information, contractor work performanceinformation, plans, drawings, and other correspondence. APPROVED CHANGE REQUESTS These can include modifications to the terms and conditions ofthe contract, including the procurement statement of work (SOW), pricing, and descriptions of the products, services, orresults to be provided. All procurement-related changes are formally documented in writing and approved before beingimplemented through the Control Procurements process. The project should have the capability ofidentifying, communicating, and resolving changes that impact the work of multiple sellers. WORK PERFORMANCE Contains seller data on project status for e.g.:
ENTERPRISE ENVIRONMENTAL FACTORS The enterprise environmental factors that can influence the Control Procurements process include:
ORGANIZATIONAL PROCESS ASSETS The organizational process assets that can influence the Control Procurements process include are the procurement policies CONTROL PROCUREMENTS: TOOLS AND TECHNIQUES EXPERT JUDGMENT Expertise should be considered from individuals or groups with specialized knowledgeor training in the following topics:
Many organizations will have their own legal and procurement departments, or at least experts in these fields, and so they will provide much of the expert judgment. However, in that exam, watch out for contracts and procurements in areas where the organization has little experience, because then experts will be required from outside the organization. CLAIMS ADMINISTRATION A “claim” arises when the buyerrefuses to pay for constructive changes, because:
When they cannot be resolved, they become “disputes” and finally they become“appeals”, which may have to be handled in accordance with alternative dispute resolution (ADR) procedures established in the contract. Settlement of all claims and disputes through negotiation is the preferred method, but as a last resort, the appeal may be heard in Court. Claimsare documented, processed, monitored, and managed throughout the contract life cycle, usually in accordance with theterms of the contract. DATA ANALYSIS Techniques that can be used to monitor and control procurements include:
If you are confused by Earned Value Analysis, please revise the lesson on Control Costs. INSPECTION An inspection is a structured review of the work being performed by the contractor. This may involve a simple reviewof the deliverables or an actual physical review of the work itself. On a construction/engineering/infrastructure project,inspections involve walkthroughs of the site by both the buyer and the contractor to ensure a mutual understanding ofthe work in progress. Nowadays, some walkthroughs on remote or hazardous sites, can be successfully performed using drones with video streaming. AUDITS Please note for the exam that Audits are a structured reviews of the procurement *process*, not of individual procurements, following the rights andobligations related to audits, if described in the procurement contract. Resulting audit observations should bebrought to the attention of the buyer’s project manager and the seller’s project manager for adjustments to the project,when necessary. CONTROL PROCUREMENTS: OUTPUTS CLOSED PROCUREMENTS The PMBOK Guide says that the buyer, usually through its authorized procurement administrator, provides the seller with formal written noticethat the contract has been completed. Requirements for formal procurement closure are usually defined in the termsand conditions of the contract and are included in the procurement management plan. Typically, all deliverables shouldhave been provided on time and meet technical and quality requirements, there should be no outstanding claims orinvoices, and all final payments should have been made. The project management team should have approved alldeliverables prior to closure. WORK PERFORMANCE INFORMATION Includes information on how a seller is performing bycomparing the deliverables received, the technical performance achieved, and the costs incurred and accepted againstthe SOW budget for the work performed. PROCUREMENT DOCUMENTATION UPDATES Procurement documentation that may be updated includes the contract with all supporting schedules, requestedunapproved contract changes, and approved change requests. Procurement documentation also includes anyseller-developed technical documentation and other work performance information such as deliverables, sellerperformance reports and warranties, financial documents including invoices and payment records, and the results ofcontract-related inspections. CHANGE REQUESTS Change requests to the project management plan, its subsidiary plans, and othercomponents such as the cost baseline, schedule baseline, and procurement management plan, may result from theControl Procurements process. I find this to be slightly confusing, and you may do too, because the Project management plan is a collection of sub-plans, baselines, life cycle and management approach. And so they only way you can change the Project management plan is by changing one of its components. As always, change requests are processed for review and action through the Perform IntegratedChange Control process. Requested but unresolved changes can include direction provided by the buyer or actions taken by the seller, whichthe other party considers a constructive change to the contract. A constructive change is an informal change, i.e. is has been performed, but has not gone through the Integrated change control system. Since any of these constructive changes may be disputedby one party and can lead to a claim against the other party, such changes are uniquely identified and documented byproject correspondence. PROJECT MANAGEMENT PLAN UPDATES Any change to the project management plan goes through the organization’s change control process via a changerequest. Components that may require a change request for the project management plan include:
PROJECT DOCUMENTS UPDATES Project documents that may be updated as a result of carrying out this process include:
ORGANIZATIONAL PROCESS ASSETS UPDATES Organizational process assets that can be updated as a result of the Control Procurements process include:
That brings us to the end of Control Procurements, and also to the end of the Project Procurement Management module. The next module is “13 Project Stakeholder Management” Please read the corresponding chapter in the PMBOK Guide before watching the video. CLOSE PROCUREMENTS Procurements are closed when a contract is completed OR when a contract is terminated before the work is completed. The Close Procurements is a part of Closing Process Group. All procurements must be closed out, no matter the circumstances under which they stop, are terminated, or are completed. Work that must be performed during Close Procurement phase:
Administer Procurements Managing the relationship between the buyer and the seller and assuring both parties perform as required by the contract is termed as Administer procurements. The specific actions involved while Administering Procurements are reviewing invoices, completing integrated change control, documenting every record, managing changes, authorizing payments to the seller, interpreting what is and what is not in the contract, resolving disputes, procurement performance reviews, performance reports, monitor cost, schedule and technical performance against the contract, understanding the legal implications of the contract, controlling quality, among others. What are the 5 steps of procurement process?The Stages of Procurement. Stage 1: Identify a need for products and/or services. ... . Stage 2: Create and submit a purchase request. ... . Stage 3: Evaluate and select suppliers/vendors. ... . Stage 4: Negotiate the terms of a contract with the selected supplier. ... . Stage 5: Finalize a purchase order.. What is the most important step in the procurement process?Contracting is a crucial step for any organization for maximum value creation and stimulating buyer-supplier collaboration. This step of the procurement process involves assessing critical factors like pricing structure, the scope of work, terms and conditions, timelines of delivery, etc.
What are the 7 stages of procurement?These are the 7 important stages in the procurement process:. Step 0: Needs Recognition.. Step 1: Purchase Requisition.. Step 2: Requisition review.. Step 3: Solicitation process.. Step 4: Evaluation and contract.. Step 5: Order management.. Step 6: Invoice approvals and disputes.. Step 7: Record Keeping.. What is step 4 in the 5 step procurement process?Step 4: negotiate price and terms
After choosing a supplier, the procurement team will negotiate the best price and specific terms (e.g. delivery times) for the purchase. Then the purchasing process officially begins.
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