Practical Project Management October 2006. 2 Overview Introduction to Project Management Project...

transcript

Practical Project Management

October 2006

Overview

Introduction to Project Management Project Management Context Integration Management Scope Management Time Management Cost Management Quality Management Human Resource Management Communications Management Risk Management Procurement Management

Module 1: Introduction to Project Management

Objectives Define what project is and describe project

management Understand the history of project

management Understand the growing need for better

project management Discuss key elements of the project

management framework Discuss recent trends in project management

research and software products

Project Management Defined

Project management is the application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements

A project is a temporary endeavor undertaken to achieve a particular aim. Project management knowledge and practices are best described in terms of their component processes

History of Project Management

Some people argue that building the Egyptian pyramids was a project, as was building the Great Wall of China

Most people consider the Manhattan Project to be the first project to use “modern” project management

This three-year, $2 billion (in 1946 dollars) project had a separate project manager and a technical manager

Project Management Framework

A set of processes, tools and templates, designed to be used together to manage a project through its lifecycle

Define your project

Select a real-life project Define the project Discuss within group Select spokesperson Share with the rest

Recent Trends in Research and Software

7 Actions for Success: broaden views, communicate in 3D, political operative, assert yourself, be flexible, & sharpen social skills

Five major challenges of today: global teams, moving parts, development, partners, and project portfolios

Five levels of excellence: Level 1 is ad-hoc, (2) planned, (3) managed, (4) integrated, and (5) sustained

Software: Microsoft Project

Develop a framework

Briefly outline your PM framework using the real-life project previously described.

Module 2: The Project Management Context

Objectives Understand the systems view of project management Explain the differences among functional, matrix, and

project organizational structures Explain why stakeholder management and top

management commitment are critical for a project’s success

Understand the initiation, planning, execution, and closure phases of the project life cycle

Understand effective project initiation, planning, execution, control, and closing

Distinguish between project development and product development

Discuss the unique attributes and diverse nature of information technology projects

List the skills and attributes of a good project manager

Systems View

Systems philosophy: View things as systems, interacting components working within an environment to fulfill some purpose

Systems analysis: problem-solving approach

Systems management: Address business, technological, and organizational issues before making changes to systems

Formal Organizational Frames

Structural frame: Focuses on roles and responsibilities, coordination, and control. Organization charts help define this frame.

Human resources frame: Focuses on providing harmony between needs of the organization and needs of people.

Political frame: Assumes organizations are coalitions composed of varied individuals and interest groups. Conflict and power are key issues.

Symbolic frame: Focuses on symbols and meanings related to events. Culture is important.

Organizational Structures

Stakeholder and Top Management Commitment

Top management can help project managers:

Secure adequate resources. Get approval for unique project needs in

a timely manner. Receive cooperation from people

throughout the organization. Learn how to be better leaders.

Project Life Cycle Phases

Project Development vs Product Development

Discuss the similarities and differences of project development versus product development within your specific career. 5 minutes. Share with your peers.

What makes a good project manager?

Discuss the skills and characteristics needed to be a good and successful project manager. 10 minutes. Share with the rest of your peers.

Module 3: Project Integration Management

Objectives Describe an overall framework for project integration

management as it relates to the other project management knowledge areas and the project life cycle

Understand the integrated change control process, planning for and managing changes, and using a change control system

Explain tools and techniques to assist in project plan execution of integrated projects such as Gantt Charts, S-Curves, and PERTs

Explain project plan execution, its relationship to project planning, the factors related to successful results

Use guidelines and templates for developing plans and perform a stakeholder analysis

Project Integration Management

Project Plan Development: taking the results of other planning processes and putting them into a consistent, coherent document—the project plan

Project Plan Execution: carrying out the project plan

Integrated Change Control: coordinating changes across the entire project

Integrated Change Control

Integrated change control involves identifying, evaluating, and managing changes throughout the project life cycle

Three main objectives of change control: Influence the factors that create

changes to ensure they are beneficialDetermine that a change has occurredManage actual changes when and as

they occur

Tools and Techniques

Importance of Project Planning the Execution

Discuss the reason and importance of preparing a plan before executing it using cases specific to your area of responsibility. 10 minutes. Share with your peers.

Stakeholder Analysis

Documents important (often sensitive) information about stakeholders such as stakeholders’ names and organizations roles on the project unique facts about stakeholders level of influence and interest in the project suggestions for managing relationships

Identify, Prioritize, Understand

Stakeholder Analysis

conduct a brief stakeholder analysis categorize their relation and advocating

of the project

Module 4: Project Scope Management

Objectives Describe the strategic planning process, apply

different project selection methods, such as a net present value analysis, a weighted scoring model, and a balanced scorecard, and understand the importance of creating a project charter

Explain the scope planning process and contents of a scope statement

Discuss the scope definition process and construct a work breakdown structure

Understand the importance of scope verification and scope change control

Strategic Planning Process

Scope Planning and Definition Processes

Scope planning: Deciding how the scope will be defined, verified, and controlled.

Scope definition: Reviewing the project charter and preliminary scope statement and adding more information as requirements are developed and change requests are approved.

Scope Statement

In your group, place the initial project to be managed in the Scope Statement format. 10 minutes. Share with the rest of your peers.

Work Breakdown Structure (WBS)

Using the same project as before and building on previous activities, develop a WBS chart with your group. 10 minutes. Share with the rest of your peers.

Basic Principles for Creating WBSs

1. A unit of work should appear at only one place in the WBS.2. The work content of a WBS item is the sum of the WBS items

below it.3. A WBS item is the responsibility of only one individual, even

though many people may be working on it.4. The WBS must be consistent with the way in which work is

actually going to be performed; it should serve the project team first and other purposes only if practical.

5. Project team members should be involved in developing the WBS to ensure consistency and buy-in.

6. Each WBS item must be documented to ensure accurate understanding of the scope of work included and not included in that item.

7. The WBS must be a flexible tool to accommodate inevitable changes while properly maintaining control of the work content in the project according to the scope statement.

Scope Verification and Scope Change Control

Suggestions for Reducing Incomplete and Changing Requirements

Develop and follow a requirements management process. Use techniques such as prototyping, use case modeling. Put requirements in writing and keep them current. Create a requirements management database for

documenting and controlling requirements. Conduct adequate testing throughout the project life

cycle. Review changes from a systems perspective. Emphasize completion dates to help focus on what’s most

important. Allocate resources specifically for handling change

requests and enhancements

Module 5: Project Time Management

Objectives Understand the importance of project schedules and good

project time management Define activities as the basis for developing project

schedules Explain how various tools and techniques help project

managers perform activity duration estimating and schedule development

Understand and use critical path analysis and critical chain scheduling

Describe how to use several techniques for shortening project schedules

Use a Gantt chart for schedule planning and tracking schedule information

Discuss how reality checks and people issues are involved in controlling and managing changes to the project schedule

Schedules and Time Management

Activity definition: Identifying the specific activities that the project team members and stakeholders must perform to produce the project deliverables.

Activity sequencing: Identifying and documenting the relationships between project activities.

Activity resource estimating: Estimating how many resources a project team should use to perform project activities.

Activity duration estimating: Estimating the number of work periods that are needed to complete individual activities.

Schedule development: Analyzing activity sequences, activity resource estimates, and activity duration estimates to create the project schedule.

Schedule control: Controlling and managing changes to the project schedule.

Scheduling and Time Management

Why are project schedules important? What sort of schedule conflicts could with expect in your specific project? 10 minutes. Share with the rest of your peers.

Activity Duration Estimating

After defining activities and determining their sequence, the next step in time management is duration estimating

Duration includes the actual amount of time worked on an activity plus elapsed time

Effort is the number of workdays or work hours required to complete a task. Effort does not equal duration

People doing the work should help create estimates, and an expert should review them

Schedule Development

Schedule development uses results of the other time management processes to determine the start and end date of the project and its activities

Ultimate goal is to create a realistic project schedule that provides a basis for monitoring project progress for the time dimension of the project

Important tools and techniques include Gantt charts, PERT analysis, critical path analysis, and critical chain scheduling

Critical Path Method

CPM is a project network analysis technique used to predict total project duration

A critical path for a project is the series of activities that determines the earliest time by which the project can be completed

The critical path is the longest path through the network diagram and has the least amount of slack or float

Finding the Critical Path

First develop a good project network diagram

Add the durations for all activities on each path through the project network diagram

The longest path is the critical path

Schedule Trade-offs

Shorten a Project Schedule

OverlappedTasks or fasttracking

Shortenedduration thrucrashing

Original schedule

Critical Chain Scheduling

Critical chain scheduling is a method of scheduling that takes limited resources into account when creating a project schedule and includes buffers to protect the project completion date

Critical chain scheduling assumes resources do not multitask because it often delays task completions and increases total durations

Example of Critical Chain Scheduling

Scheduling using PERT

PERT weighted average formula: optimistic time + 4X most likely time + pessimistic time

6 Example:PERT weighted average = 8 workdays + 4 X 10 workdays + 24 workdays = 12 days

6where 8 = optimistic time, 10 = most likely time, and 24 =

pessimistic time

Scheduling

Develop a schedule for your project using some of the tools presented thus far. There is no rule against combining techniques. If fact, pulling the best from each may be advantageous. 15 minutes. Share with the rest of your peers.

Controlling and Managing Change

Review the draft schedule or estimated completion date in the project charter.

Prepare a more detailed schedule with the project team.

Make sure the schedule is realistic and followed.

Alert top management well in advance if there are schedule problems.

Managing Change

Using the recently created schedules, assess their reality. What things have been adjusted to the schedule to help manage change? 10 minutes. Share with peers.

Module 6: Project Cost Management

Objectives Explain basic project cost management

principles, concepts, and terms Understand the importance of good project cost

management Explain cost estimating using definitive,

budgetary, and rough order of magnitude (ROM) estimates

Understand the processes involved in cost budgeting and preparing a cost estimate

Understand the benefits of earned value management and project portfolio management

Cost management

Resource planning: determining what resources and quantities of them should be used

Cost estimating: developing an estimate of the costs and resources needed to complete a project

Cost budgeting: allocating the overall cost estimate to individual work items to establish a baseline for measuring performance

Cost control: controlling changes to the project budget

Cost Management

Why is good cost management important? Why bother with it?

Methods of Cost Estimating

Earned Value Management

Earned Value - Planned Costs = Schedule Variance (SV)

Earned Value - Actual Costs = Cost Variance (CV)

Cost Control

Project cost control includes monitoring cost performance ensuring that only appropriate project

changes are included in a revised cost baseline

informing project stakeholders of authorized changes to the project that will affect costs

Earned value management is an important tool for cost control

Project Portfolio Management

Five levels for project portfolio management Put all your projects in one database Prioritize the projects in your database Divide your projects into two or three

budgets based on type of investment Automate the repository Apply modern portfolio theory, including

risk-return tools that map project risk on a curve

Cost Plan View

Module 7: Project Quality Management

Objectives Define project quality management Describe quality planning and its relationship to

project scope management Discuss the importance of quality assurance Understand the importance of project quality

management List the three outputs of the quality control

process Understand the tools and techniques for quality

control, such as Pareto analysis, statistical sampling, Six Sigma, quality control charts, and testing

Quality Management Program

Quality management planning and implementing policies, procedures, and requirements.

Quality control ensuring that work is being performed and that work is being checked prior to its acceptance.

Quality assurance verifying that quality control tasks are being performed.

Continuous quality improvement continually pursuing improvement in the quality of the project process.

Quality costs redoing a project item even when this increases the item's cost.

Quality Planning and Quality Assurance

Quality Definitions Quality Materials Quality Events

Importance of Quality Management Discuss the importance of quality

management and assurance. How may they vary from project to project?

Tools and Techniques for Quality Control

Pareto Analysis Steps to identify the important causes using Pareto

analysis Step 1: Form a table listing the causes and their

frequency as a percentage. Step 2: Arrange the rows in the decreasing order of

importance of the causes i.e. the most important cause first

Step 3: Add a cumulative percentage column to the table Step 4: Plot with causes on x- and cumulative percentage

on y-axis Step 5: Join the above points to form a curve Step 6: Draw line at 80% on y-axis parallel to x-axis.

Then drop the line at the point of intersection with the curve on x-axis. This point on the x-axis separates the important causes and trivial causes.

Pareto Analysis Sample

Six Sigma

It requires an organization-wide commitment

Six Sigma organizations have the ability and willingness to adopt contrary objectives, like reducing errors and getting things done faster

It is an operating philosophy that is customer-focused and strives to drive out waste, raise levels of quality, and improve financial performance at breakthrough levels

Six Sigma

Quality Control Chart

Testing

Unit test Integration testing System testing

A test plan is simply a high-level summary of the areas (functionality, elements, regions, etc.)

Quality Control Plan

What sort of tools would you use and what will you be looking for when assessing quality in a project?

Module 8: Project Human Resource Management

Objectives Discuss the importance of good human resource management

on projects Summarize key concepts for managing people by understanding

the theories of Abraham Maslow, Frederick Herzberg, David McClelland, and Douglas McGregor on motivation, H. J. Thamhain and D. L. Wilemon on influencing workers, and Stephen Covey on how people and teams can become more effective

Discuss organizational planning and be able to create a project organizational chart, responsibility assignment matrix, and resource histogram

Understand important issues involved in project staff acquisition and explain the concepts of resource assignments, resource loading, and resource leveling

Assist in team development with training, team-building activities, and reward systems

Project Human Resources

Human resource planning: Identifying and documenting project roles, responsibilities, and reporting relationships.

Acquiring the project team: Getting the needed personnel assigned to and working on the project.

Developing the project team: Building individual and group skills to enhance project performance.

Managing the project team: Tracking team member performance, motivating team members, providing timely feedback, resolving issues and conflicts, and coordinating changes to help enhance project performance.

Keys to Managing People

Psychologists and management theorists have devoted much research and thought to the field of managing people at work

Important areas related to project management include motivation (intrinsic and extrinsic) influence and power effectiveness

Abraham Maslow on Motivation

Herzberg’s Motivational and Hygiene Factors

McClelland’s Acquired-Needs

Achievement: People with a high need for achievement seek to excel and thus tend to avoid both low-risk and high-risk situations.

Affiliation: Those with a high need for affiliation need harmonious relationships with other people and need to feel accepted by other people.

Power: A person's need for power can be one of two types - personal and institutional.

McGregor’s Theory X and Theory Y

Thamhain and Wilemon’s Ways to Have Influence on Projects

1. Authority: the legitimate hierarchical right to issue orders2. Assignment: the project manager's perceived ability to

influence a worker's later work assignments3. Budget: the project manager's perceived ability to

authorize others' use of discretionary funds4. Promotion: the ability to improve a worker's position5. Money: the ability to increase a worker's pay and benefits6. Penalty: the project manager's ability to cause

punishment7. Work challenge: the ability to assign work that capitalizes

on a worker's enjoyment of doing a particular task8. Expertise: the project manager's perceived special

knowledge that others deem important9. Friendship: the ability to establish friendly personal

relationships between the project manager and others

Improving Effectiveness - Covey’s 7 Habits

Project managers can apply Covey’s 7 habits to improve effectiveness on projects Be proactive Begin with the end in mind Put first things first Think win/win Seek first to understand, then to be understood Synergize Sharpen the saw

Creating a Motivating Environment

Discuss various instances where you have been motivated and where you have motivated others. Try to associate it to one or more of the principles discussed in this module.

Organizational Planning

Organizational planning involves identifying, documenting, and assigning project roles, responsibilities, and reporting relationships

Outputs and processes includeproject organizational chartswork definition and assignment process responsibility assignment matrixes resource histograms

Project Organizational Charts

Work Definition and Assignment Process

Responsibility Assignment Matrix

Resource Histogram

Project Staff Acquisition

Staffing plans and good hiring procedures are important in staff acquisition, as are incentives for recruiting and retention

Research shows that people leave their jobs because they don’t make a difference, don’t get proper recognition, aren’t learning anything new, don’t like their coworkers, and want to earn more money

Resource Loading and Leveling

Resource loading refers to the amount of individual resources an existing project schedule requires during specific time periods

Resource leveling is a technique for resolving resource conflicts by delaying tasks. The main purpose of resource leveling is to create a smoother distribution of resource usage and reduce overallocation

Team Development Activities

Different types of people

Meyers-Briggs Type Indicator (MBTI) Extrovert/Introvert (E/I) Sensation/Intuition (S/N) Thinking/Feeling (T/F) Judgment/Perception (J/P)

Social Styles Profile Drivers Expressives Analyticals Amiables

General Advice on Teams

Be patient and kind with your team. Fix the problem instead of blaming people. Establish regular, effective meetings. Allow time for teams to go through the basic team-

building stages. Limit the size of work teams to three to seven members. Plan some social activities to help project team members

and other stakeholders get to know each other better. Stress team identity. Nurture team members and encourage them to help

each other. Take additional actions to work with virtual team

members.

Module 9: Project Communications Mgmt

Objectives Understand the importance of good communication on

projects and describe the major components of a communications management plan

Discuss the elements of project communications planning, including information distribution, performance reporting, and administrative closure

Discuss various methods for project information distribution and the advantages and disadvantages of each

List various methods for improving project communications, such as managing conflicts, running effective meetings, using e-mail effectively, and using templates

Understand individual communication needs and how to determine the number of communications channels needed for a project

Communications Management Plan

A description of a collection and filing structure for gathering and storing various types of information

A distribution structure describing what information goes to whom, when, and how

A format for communicating key project information

A project schedule for producing the information Access methods for obtaining the information A method for updating the communications

management plans as the project progresses and develops

A stakeholder communications analysis

Project Communications Management Processes

Communications planning: determining the information and communications needs of the stakeholders

Information distribution: making needed information available in a timely manner

Performance reporting: collecting and disseminating performance information

Administrative closure: generating, gathering, and disseminating information to formalize phase or project completion

Communications Planning

Information Distribution

Getting the right information to the right people at the right time and in a useful format is just as important as developing the information in the first place

Important considerations include using technology to enhance information

distribution formal and informal methods for

distributing information

Information Distribution

Discuss various methods for project information distribution and the advantages and disadvantages of each.

Media Choice Table

Performance Reporting

Performance reporting keeps stakeholders informed about how resources are being used to achieve project objectives Status reports describe where the project stands at

a specific point in time Progress reports describe what the project team

has accomplished during a certain period of time Project forecasting predicts future project status

and progress based on past information and trends Status review meetings often include performance

reporting

Administrative Closure

A project or phase of a project requires closure

Administrative closure produces project archives formal acceptance lessons learned

Suggestions for Improving Project Communications

Manage conflicts effectively Develop better communication skills Run effective meetings Use e-mail effectively Use templates for project

communications

Conflict Handling Modes, in Preference Order

Confrontation or problem-solving: directly face a conflict

Compromise: use a give-and-take approach

Smoothing: de-emphasize areas of differences and emphasize areas of agreement

Forcing: the win-lose approach Withdrawal: retreat or withdraw from an

actual or potential disagreement

Running Effective Meetings

Determine if a meeting can be avoided Define the purpose and intended outcome

of the meeting Determine who should attend the meeting Provide an agenda to participants before

the meeting Prepare handouts, visual aids, and make

logistical arrangements ahead of time Run the meeting professionally Build relationships

Using E-Mail Effectively Tips

Ensure it is an appropriate medium for what you want to communicate

Be sure to send the e-mail to the right people Use meaningful subjects Limit the content to one main subject, and be

as clear and concise as possible Limit the number and size of attachments Delete e-mail you don’t need, and don’t open

it if you question the source Make sure your virus software is up to date Respond to and file e-mails quickly Learn how to use important features

Using Templates for Project Communications

Many people are afraid to ask for help Providing examples and templates for

project communications saves time and money

Organizations can develop their own templates, use some provided by outside organizations, or use samples from textbooks

Recall that research shows that companies that excel in project management make effective use of templates

Communication Channels

Discuss various individual communication needs and how to determine the number of communications channels.

Module 10: Project Risk Management

Objectives Understand what risk is and the importance of good

project risk management Discuss the elements involved in risk management

planning Describe the risk identification process and tools and

techniques to help identify project risks Discuss the qualitative risk analysis process and

explain how to calculate risk factors, use probability/impact matrixes, the Top Ten Risk Item Tracking technique, and expert judgment to rank risks

Explain the quantify risk analysis process and how to use decision trees and simulation to quantitative risks

Discuss what is involved in risk monitoring and control Explain the results of good project risk management

The Importance of Project Risk Management

Project risk management is the art and science of identifying, assigning, and responding to risk throughout the life of a project and in the best interests of meeting project objectives

Risk management is often overlooked on projects, but it can help improve project success by helping select good projects, determining project scope, and developing realistic estimates

Risk Management Planning

The main output of risk management planning is a risk management plan

The project team should review project documents and understand the organization’s and the sponsor’s approach to risk

The level of detail will vary with the needs of the project

Risk Management Planning

Risk Identification

Risk identification is the process of understanding what potential unsatisfactory outcomes are associated with a particular project

Several risk identification tools and techniques include Brainstorming The Delphi technique Interviewing SWOT analysis

Risk Identification

Activity – Identify Risks

Identify the risks using the project you have been working on for each area of project management covered thus far.

Qualitative Risk Analysis

A risk analysis assesses the likelihood and impact of identified risks to determine their magnitude and priority. Risk quantification tools and techniques include: Probability/Impact matrixes The Top 10 Risk Item Tracking technique Expert judgment

Probability/Impact Matrices

Top 10 Risk Item Tracking

Quantitative Risk Analysis

Often follows qualitative risk analysis, but both can be done together or separately

Large, complex projects involving leading edge technologies often require extensive quantitative risk analysis

Main techniques include Simulation Decision tree analysis

Decision Trees and Expected Monetary Value (EMV)

A decision tree is a diagramming method used to help you select the best course of action in situations in which future outcomes are uncertain

EMV is a type of decision tree where you calculate the expected monetary value of a decision based on its risk event probability and monetary value

Decision Trees and Expected Monetary Value (EMV)

Risk Response Planning

Risk avoidance: eliminating a specific threat or risk, usually by eliminating its causes

Risk acceptance: accepting the consequences should a risk occur

Risk transference: shifting the consequence of a risk and responsibility for its management to a third party

Risk mitigation: reducing the impact of a risk event by reducing the probability of its occurrence

Risk Monitoring and Control

Monitoring risks involves knowing their status

Controlling risks involves carrying out the risk management plans as risks occur

Workarounds are unplanned responses to risk events that must be done when there are no contingency plans

The main outputs of risk monitoring and control are corrective action, project change requests, and updates to other plans

Good Project Risk Management

Unlike crisis management, good project risk management often goes unnoticed

Well-run projects appear to be almost effortless, but a lot of work goes into running a project well

Project managers should strive to make their jobs look easy to reflect the results of well-run projects

Module 11: Project Procurement Management

Objectives Understand the importance of project procurement

management and the increasing use of outsourcing for information technology projects

Describe the procurement planning process, procurement planning tools and techniques, types of contracts, and statements of work

Discuss what is involved in solicitation planning and the difference between a request for proposal and a request for quote

Explain what occurs during the solicitation process Describe the source selection process and different

approaches for evaluating proposals or selecting suppliers

Discuss the importance of good contract administration Describe the contract close-out process

Procurement Management

Procurement means acquiring goods and/or services from an outside source.

We outsource for the following reasons: To reduce both fixed and recurrent costs To allow the client organization to focus on

its core business To access skills and technologies To provide flexibility To increase accountability

Project Procurement Management Processes

Procurement planning: determining what to procure and when

Solicitation planning: documenting product requirements and identifying potential sources

Solicitation: obtaining quotations, bids, offers, or proposals as appropriate

Source selection: choosing from among potential vendors

Contract administration: managing the relationship with the vendor

Contract close-out: completion and settlement of the contract

Project Procurement Management Processes

Procurement Planning

Procurement planning involves identifying which project needs can be best met by using products or services outside the organization. It includes deciding whether to procure how to procure what to procure how much to procure when to procure

Make-or-buy analysis

Make or Buy Example: Assume you can lease an item you need for a project for $150/day. To purchase the item, the investment cost is $1,000, and the daily cost would be another $50/day. How long will it take for the lease cost to be the same as the purchase cost? If you need the item for 12 days, should you lease it or purchase it?

Set up an equation so the “make” is equal to the “buy.” In this example, use the following equation. Let d be the number of days to use the item.$150d = $1,000 + $50d

Solve for d as follows:Subtract $50d from the right side of the equation to get$100d = $1,000Divide both sides of the equation by $100d = 10 days

The lease cost is the same as the purchase cost at 10 days. If you need the item for 12 days, it would be more economical to purchase it

Types of Contracts

Fixed-price or lump-sum: involve a fixed total price for a well-defined product or service

Cost-reimbursable: involve payment to the seller for direct and indirect costs

Time and material contracts: hybrid of both fixed-price and cost-reimbursable, often used by consultants

Unit price contracts: require the buyer to pay the seller a predetermined amount per unit of service

Cost Reimbursable Contracts

Cost plus incentive fee (CPIF): the buyer pays the seller for allowable performance costs plus a predetermined fee and an incentive bonus

Cost plus fixed fee (CPFF): the buyer pays the seller for allowable performance costs plus a fixed fee payment usually based on a percentage of estimated costs

Cost plus percentage of costs (CPPC): the buyer pays the seller for allowable performance costs plus a predetermined percentage based on total costs

Contract Types Versus Risk

Statement of Work

A statement of work is a description of the work required for the procurement

Many contracts, or mutually binding agreements, include SOWs

A good SOW gives bidders a better understanding of the buyer’s expectations

Statement of Work

Solicitation planning

Solicitation planning involves preparing several documents:

Request for Proposals: used to solicit proposals from prospective sellers

Requests for Quotes: used to solicit quotes for well-defined procurements

Invitations for bid or negotiation and initial contractor responses are also part of solicitation planning

Solicitation planning

Outline for a Request for Proposal:I. Purpose of RFPII. Organization’s BackgroundIII. Basic RequirementsIV. Hardware and Software EnvironmentV. Description of RFP ProcessVI. Statement of Work and Schedule InformationVII. Possible Appendices

A. Current System OverviewB. System RequirementsC. Volume and Size DataD. Required Contents of Vendor’s Response

to RFPE. Sample Contract

Solicitation

Solicitation involves obtaining proposals or bids from prospective sellers

Organizations can advertise to procure goods and services in several ways approaching the preferred vendor approaching several potential vendors advertising to anyone interested

A bidders’ conference can help clarify the buyer’s expectations

Source selection

Source selection involves: evaluating bidders’ proposals choosing the best one negotiating the contract awarding the contract

It is helpful to prepare formal evaluation procedures for selecting vendors. Buyers often create a “short list.”

Sample Proposal Evaluation Sheet

Detailed Criteria for Selecting Suppliers

Contract Administration

Contract administration ensures that the seller’s performance meets contractual requirements

Contracts are legal relationships, so it is important that legal and contracting professionals be involved in writing and administering contracts

Many project managers ignore contractual issues, which can result in serious problems

Suggestions on Change Control for Contracts

Changes to any part of the project need to be reviewed, approved, and documented by the same people in the same way that the original part of the plan was approved

Evaluation of any change should include an impact analysis. How will the change affect the scope, time, cost, and quality of the goods or services being provided?

Changes must be documented in writing. Project team members should also document all important meetings and telephone calls

Contract Close-out

Contract close-out includes product verification to determine if all work

was completed correctly and satisfactorily administrative activities to update records

to reflect final results archiving information for future use

Procurement audits identify lessons learned in the procurement process

Review / Summary