Project Planning
Read this chapter, which discusses the planning phase of the project lifecycle. What are some of the pain points in this part of the project management process? What tools do project management professionals typically use to plan projects?
Procurement planning
Procurement management follows a logical order. First, you plan what you
need to contract; then you plan how you'! do it. Next, you send out your
contract requirements to sellers. They bid for the chance to work with you.
You pick the best one, and then you sign the contract with them. Once the
work begins, you monitor it to make sure the contract is being followed.
When the work is done, you close out the contract and fill out all the
paperwork.
You will need to start with a plan for the whole project. You need to think about all of the work that you will contract out for your project before you do anything else. You will want to plan for any purchases and acquisitions. Here's where you take a close look at your needs, to be sure that you really need to create a contract. You figure out what kinds of contracts make sense for your project, and you try to define all of the parts of your project that will be contracted out
. Contract planning is where you plan out each individual contract for the
project work. You work out how you manage the contract, what metrics it
will need to meet to be considered successful, how you'lI pick a seller, and
how you'll administer the contract once the work is happening.
The procurement management plan details how the procurement process
will be managed. It includes the following information:
- The types of contracts you plan to use, and any metrics that will be
used to measure the contractor's performance.
- The planned delivery dates for the work or products you are
contracting.
- The company's standard documents you will use.
- How many vendors or contractors are involved and how they will be managed.
- How purchasing may impact the constraints and assumptions of the
project plan.
- Coordination of purchasing lead times with the development of the project schedule.
- Identification of prequalified sellers (if known).
Make or buy analysis
This means figuring out whether or not you should be contracting the work
or doing it yourself. It could also mean deciding whether to build a solution
to your problem or buy one that is already available. Most of the same
factors that help you make every other major project decision will help you
with this one. How much does it cost to build it as opposed to buy it? How
will this decision affect the scope of your project? How about project
schedule? Do you have time to do the work and still meet your
commitments? As you plan out what you will and won't contract, you need
to have thought through your reasoning pretty carefully.
There are some resources (like heavy equipment) that your company can
buy, rent, or lease depending on the situation. You'll need to examine
leasing versus buying costs and determine the best way to go forward.
Contract types
You should know a little bit about the major kinds of contracts available to
you so that you choose the one that creates the most fair and workable deal
for you and the contractor. Some contracts are fixed price: no matter how
much time or effort goes into them, you always pay the same (Figure 19). Some
are cost reimbursable also called cost plus (Figure 20). This is where the seller
charges you for the cost of doing the work plus some fee or rate. The third
major kind of contract is time and materials (Figure 21). That's where the buyer
pays a rate for the time spent working on the project and also pays for all
the materials used to do the work.
Figure 19: A fixed price contract the cost
(or revenue to the vendor) is
constant regardless of effort
applied or delivery date.
Figure 20:
In a cost reimbursable or cost
plus contract, the seller is
guaranteed a specific fee.
Figure 21: In a time and materials contract the cost (or revenue to the vendor) increases with increased effort.