Tổng hợp các khái niệm cần nắm về Project Procurement management  (Chapter 12) trong kỳ thi PMP

Chapter 12: Project Procurement management

Có 4 quy trình trong Project procurement management:

  1. Plan procurement management (Output: Procurement management plan + Procurement statements of works + Make or buy Decision + Source Selection criteria + change requests)
  2. Conduct procurements (Output: Selected sellers + Agreements + Resources calendars + change requests + Project Management Plan updates + Project docs updates)
  3. Control procurements (Output: WPI (Work Performance Information) + change requests + OPA (Organizational Process Assets) updates + Project Management Plan updates + Project docs updates)
  4. Close procurements (Output: closed procurements + OPA (Organizational Process Assets) updates)


>> Thi thử PMP Chuyên đề Project Procurement Management 


  1. Project procurement management? includes the processes to purchase or acquire the products, services, or results needed from outside the Project team to perform the work.
  2. What is a Contract? is mutually binding agreement which obligates the seller to provide  the specified products, services or results and obligates the buyer to provide monetary or other valuable consideration.
    • Mutual business agreement
    • Recognized by law
    • One party provides the service
    • The other party pays for service
  3. Forms of contract:
    • The complexity of the contract should reflect the complexity of the deliverables
    • A contract can also be called:
      • An agreement
      • A subcontract
      • A purchase order
  4. 2 Types of contracting:
    • In a centralized contracting, there is one procurement department, and a procurement manager may handle procurements on projects.
      • Advantages of Centralized contracting:
        • Procurement managers with higher levels of expertise.
        • A procurement department will provide its employees with continuous improvement, training and shared Lessons Learned.
      • Disadvantages of Centralized contracting:
        • One procurement manager may work on many projects, so this individual must divide his or her attention among many projects.
        • It may be more difficult for the Project Manager to obtain contracting help when needed.
    • In a decentralized contracting, a procurement manager is assigned to one Project full-time and reports directly to the Project Manager.
      • Advantages of De-centralized contracting:
        • Project Manager has easier access to contracting expertise because the procurement managers a member of the team.
        • Procurement manager has more loyalty to the Project.
      • Disadvantages of De-centralized contracting:
        • There is no “home” department for the procurement manager to return to after the Project is completed.
        • It is more difficult to maintain a high level of contracting expertise in the company.
        • There may not be a career path as a procurement manager in the company.
  5. Role Clarification
    1. Procurement manager:
      • Manage procurement processes to obtain goods / services required by Project.
      • Make sure organizational policies on purchasing and followed
      • Determine type of contracts, procurement document
      • Negotiate terms, contracts…
    2. Project manager:
      • Involve in procurement process to make sure contract contains the Project need.
      • Integrate contract’s work into his Project.
      • Manage risks that come along with the contract.
      • Work with procurement manager to manage changes to the contract.
  6. Plan procurement management (P)Documenting project purchasing decisions, specifying the approach, and identifying potential sellers. Output: Procurement management plan + Procurement statements of work + Procurement documents + Source selection criteria + Make or Buy decision + change requests + Project doc updates.
  7. Requirements documentation (I): requirements with special contractual and legal implications, which may involve health,safety, security, environment, impact, licenses, and permits…
  8. Risk register (I): Results of risk analysis, and risk response planning – Contracting adds an extra dimension of risk to your Project.
  9. Activity resource requirements ( I): resource requirements for completing activities such as people, equipment, or location.
  10. Project schedule (I): timelines or mandated deliverables dates.
  11. Activity cost estimate (I): Used to evaluate the reasonableness of the bid or proposals received from potential sellers.
  12. Stakeholder register (I): Detail of Project participants and their interests in the Project.
  13. 3 Contract types:
    • To select the contract types that best supports the Project, ask:
      • How much risk is acceptable?
      • What kinds of incentives can be contract include to ensure that quality products or services are provided at the right price?
      • Which contract types will be most suitable for the Project?
    • Contract types:
      1. FP (Fixed Price Contract) or Lump-sum
        • FFP (Firm Fixed Price Contract): the most commonly used contract type is the FFP (Firm Fixed Price Contract). it is favored by most buying organizations because the price of goods is set at the outset and not subject to change unless the scope if work changes.
        • FPIF (Fixed Price Incentive Fee Contract): seller commits to a fixed price for delivering the product/service; buyer agrees to pay a bonus if seller meets certain goals.
        • FP-EPA (Fixed Price with Economic Price Adjusment Contract): provision for adjustment if there is significant change in the cost of labor/materials.
      2. CR (Cost-Reimbursable): Seller’s cost are reimbursed + Additional amount
        • CPFF (Cost Plus Fixed Fee): reimburses seller for costs and adds a fixed fee (profit)
          • If scope is changed, the fixed fee may be changed
          • Cost risk was borne by buyer
          • Limited motivation for seller to effectively manage costs
        • CPIF (Cost Plus Incentive Fee)
          • Buyer pays the costs that are incurred
          • Seller’s profit depends on how well costs are managed
          • Objective incentives are used: Incentives may be positive / rewards or negative / penalties.
        • CPPC (Cost Plus a Percentage of Costs):  Reimburses the seller for its costs and adds a fee (profit) equal to some specified percentage of the costs.
          • The bigger the cost grow, the bigger fee
          • Seldom used, illegal for government procurement
        • CPAF (Cost Plus Award Fee): Reimburses seller for costs and a base profit and provides an award for criteria met
          • Used in services or in cases where long relationship between buyer and seller is expected.
          • Used by government agencies
          • Subjective incentives are used.
        • Cost based (CR): Reimbursement for allowable costs only. Used in government contracts with research organizations.
        • Cost sharing (CS): Buyer and seller share the costs of the Project, generally with no provision for profit.
          • The ratio for splitting the costs is negotiated.
          • Used in research based projects or development partnerships.
      3. Time & Material Contract (T&M): Are hybrid type of contractual arrangement that contain aspects of both CR (Cost-Reimbursable) and FP (Fixed Price Contract).
    • Advantages and Disadvantages of contract types:
      1. FP (Fixed Price Contract) 
        • Advantages:
          • Less work for buyer to manage
          • Seller has a strong incentive to control
          • Companies have experience with this type
          • Buyer knows the total price at Project start
        • Disadvantages:
          • Seller may under price the work and try to make up profit on change orders
          • Seller may not complete some of the contract statement of work if they begin to lose money.
          • More work for buyer to write the contract statement of work.
          • Can be more expensive than CR (Cost-Reimbursable) if the contract statement of work is incomplete. The seller will need to add to the price for their increased risk.
      2. CR (Cost-Reimbursable):
        • Advantages:
          • Simple contract statement of work
          • Usually require less work to write the scope than FP (Fixed Price Contract).
          • Generally lower cost than FP (Fixed Price Contract) because the seller does not have to add as much for risk.
        • Disadvantages:
          • Requires auditing seller’s invoices.
          • Requires more work for buyer to manage
          • Sellers has only a moderate incentive to control cost.
          • Total price is unknown
      3. Time & Material Contract (T&M) 
        • Advantages:
          • Quick to create
          • Contract duration is brief
          • Good choice when You are hiring “bodies” or people to augment your staffs.
        • Disadvantages:
          • Profit is in every hour billed
          • Seller has no incentive to control costs
          • Appropriate only for small projects.
          • Requires the most day to day oversight from buyer.
  14. Buyer Risk Ordering: FFP < FP-EPA < FPIF  < T&M < CS < CR < CPIF  < CPAF < CPFF  < CPPC
  15. Seller Risk Ordering: FFP > FP-EPA > FPIF  > T&M > CS > CR > CPIF  > CPAF > CPFF  > CPPC
  16. Make-or-Buy analysis (TT): Evaluates which products, services, or results should be sourced from within and which from outside the organization.
    • Review direct and indirect costs of either alternative
    • Consider schedule, Project staffing, budget, company policy
    • Best alternative balance cost with risk, quality and strategic fit with company
  17. Expert judgment / Marketing research / Meeting (TT):
    • Asking someone who’s made the same kind of decision before to help Project Manager look at all the information for his or her Project and make the right decision.
    • Experts can be really helpful in evaluating technology, or providing insight into how your work might be done in different sourcing scenarios.
  18. Incentives contracts:
  19. Incentive calculation formula:
    • Under / Overrun = target cost – actual cost
    • Incentive fee = (Under/Overrun)* Seller’s share ratio
    • Fee (profit) = Incentive fee + target fee (For CPIF (Cost Plus Incentive Fee), compare Fee to any Floor or Ceiling Fee)
    • Final price = Actual cost + Fee (For FPIF (Fixed Price Incentive Fee Contract), compare Final Price to Ceiling price).
    • Xem thêm ví dụ tính Incentive fee: Incentive fee dạng bài toán.
  20. Procurement management plan (O): how the procurement processes will be managed from developing procurement docs through contract closure.
  21. Procurement statements of work (O): 3 types
    1. Performance: conveys what the final product should be able accomplish, rather than how it should be built or what its design characteristics should be. Eg: I want a car that will go 0 to 120 km / hour in 4.2s.
    2. Functional: conveys the end purpose or result rather than specific procedures. Eg: I want a car with 23 cup holders.
    3. Design: conveys precisely what work is to be done, build it exactly as show on these drawings.
  22. Procurement documents (Bid documents) (O):
    • RFP (Request for Proposal): sometime called Request for Tender, a detailed proposal on how the work will be accomplished, who will do it, resume, company experience, price… => Apply for CR (Cost-Reimbursable) contracts
    • IFB (Invitation for Bid): sometime called Request for Bid (RFB), usually just request a total price to do all the work => Apply for FP (Fixed Price Contract)
    • RFQ (Request for Quotation): request a price quote per item, hour, meter, or other measures => Apply for Time & Material Contract (T&M) contracts.
  23. Make-Buy decision (O): are conclusions of regarding what Project products / services / results will be acquired from outside the Project organization / or will be performed internally by Project team. Also require insurance policies / performance…
  24. Source selection criteria (O): are included in the procurement docs to give the seller an understanding of the buyer’s needs and to help the seller decide whether to bid or make a proposal on the work. Source selection criteria may include:
    • Number of years in business or financial stability
    • Understanding of need
    • Price or life cycle cost
    • Technical ability
    • References
    • Quality of pass performance
    • Ability to complete the work on time
    • Project management ability
  25. Conduct procurements (P)Obtaining seller responses, selecting a seller and awarding a contract. Output: Selected sellers + Agreements + Resource calendars + change requests + Project Management Plan updates + Project docs updates.
  26. Seller proposal (I):
    • Proposals (also called as bids, tenders, or quotations) are prepared by the seller in response to the procurement doc package.
    • Proposals describe the work that the seller will perform, including its cost.
  27. Bidder conferences (TT): Formal session during which the sellers can ask questions about the required work or other aspects of the request.
    • Questions may be submitted and answered in writing (and provided to all attendees)
    • Goal: all prospective venders should have same understanding of the request.
  28. Proposal evaluation techniques (TT):
    • Screening system: eliminating sellers that do not meet minimum requirements of the evaluation criteria.
    • Past performance history: look at the seller’s past history with the buyer.
    • Weighting system: this allow the buyer’s evaluation committee to select a seller buy weighting the source selection criteria according to the evaluation criteria.
  29. Independent estimates (TT): the buying organization can benchmark seller’s responses by using its own estimates of costs for procurement items.
  30. Advertising / Internet search (TT): many organizations use internet search in Project procurement and supply chain acquisitions.
  31. Analytical techniques (TT):
    • Identify the readiness of a vendor to provide the goods, service…
    • Determine the cost expected to support budgeting, and avoid cost overruns due to changes.
    • Identify areas that may have more risk and need to be monitor closely.
    • Checking past performance information.
  32. Procurement negotiations (TT):
    • Obtain a phải & reasonable price
    • Develop a good relationship with the seller.
  33. Selected seller (O):
    • Judged as competitive through bid or proposal evaluation. They have negotiated a draft contract that awaits formal award.
    • Complex projects can require final approval from organizational senior management before being awarded.
  34. Agreements (O):
    • Awarded to a selected seller.
    • Whether a purchase order or a complex document, a contract is a mutually bidding legal agreement subject to remedy in courts.
  35. Resource calendars (O): the quantity and availability of contracted resources and availability dates for each resources are documented.
  36. Control Procurements (P): Managing procurement relationships, monitoring contract performance, and making changes and corrections as needed. Output: WPI (Work Performance Information) + change requests + Project Management Plan updates + Project docs updates + OPA (Organizational Process Assets) updates
  37. Procurement documents (I): procurement contract awards and statement of work (SoW) that support procurement administration
  38. Agreements (Contracts) (I):
    • Contract areas that affect administration activities include the following:
      • Inspection and acceptance
      • Delivery
      • Payment term
      • Reporting requirements
      • Specification (scope and SoW)
    • Contract summary can help Project Manager focus on the key aspects of the contract.
  39. Work performance reports (I):
    • The seller reports performance concerning deliverables completed.
    • Seller developed technical documentation and other deliverable information, as specified in the contract are also relevant to performance.
  40. Approved change requests (I):
    • A formal process specifies how to handle change request affecting either the contract or the product / service.
    • A decision by the buyer to terminate a contract due to non-performance by the seller is handled as a change request.
  41. WPD (Work Performance Data) (I):
    • Indicates how well schedule, quality and cost targets are being met
    • WPI (Work Performance Information) also includes invoice payment history.
  42. Contract change control system (TT):
    • Defines the process for changing a contract
    • Changes to contracts may impact scope, schedule, or costs
    • An effective change control system specifies the documentation required to request a change; who need to evaluate and approve changes; dispute resolution procedures; and how changes are tracked to ensure completion (if approved).
  43. Procurement performance reviews (TT):
    • A structured review of the seller’s progress in meeting scope, quality, schedule, and budget goals under the contract.
    • Can include review of seller reports and buyer inspections of work performed.
    • May occur as part of Project status reviews where vendors are included.
  44. Inspections and Audits (TT)
    • The buyer can audit and inspect the seller’s work in progress, with seller support for this activity defined in the contract.
    • The purpose of inspections and audits is to verify the seller’s compliance in processes or deliverables.
  45. Performance report (TT):
    • Provides management with information about how contract work is progressing
    • The focus is to communicate how well the seller is progressing in fulfillment of contract terms.
  46. Payment systems (TT):
    • Payments to seller are usually handled by the buying accounts payable system after an authorized Project member certifies that satisfactory work has been performed.
    • Requirement for seller invoicing, such as timing and documentation, are specified in the contract.
  47. Claims Administration (TT): also known as disputes or appeals, are potential constructive changes where the parties do not agree on compensation for the change or even whether an item is considered a change:
    • If parties cannot resolve claims, procedures for alternative dispute resolution may be required by the contract.
    • Negotiated settlement is always preferred.
  48. Record management system (TT):
    • There are a lot of records produced by a typical contract: invoices, receipts, communications, memos, emails, instructions, clarifications…
    • Project team need to put a system in place to manage them.
  49. Contract Dispute Resolution:
    • Contract cannot completely address every potential issue
    • The Project Manager’s job is to ensure that contract disputes to not affect Project performance.
    • Methods:
      • Discussion: many disputes can be considered in open and usually informal debate between the parties without going to a more formal progress.
      • Negotiation / Compromise: Many disputes are relatively minor and are settled by negotiation or compromise.
      • Mediation: Most disputes are settled out of court. Mediation uses a third party (Mediator) to help settle a case. The mediator typically meets with each party separately and makes recommendations to reach a compromise. Mediators cannot impose a settlement and are often used in labor and consumer disputes.
      • Arbitration: When the parties are unable to come to agreement on a dispute but do not want to spent the time or money on litigation, arbitration may be appropriate. Arbitration uses a third party  (arbitrator) and is similar to a court trial with evidence and arguments. The decision may be binding or non-binding on the parties, and grounds for appeal are limited.
  50. WPI (Work Performance Information) (O): Provides a basic for identification of current or potential problems to support later claims or new procurements… Reporting compliance of contracts…
  51. Change requests (O): the relationship of the contract administrator and the Project Manager will determine who follow up to ensure that the change is implemented.
  52. OPA (Organizational Process Assets) updates (O):
    • Correspondence includes a complete record of written communication between the buyer and seller, such as the need for warnings of unsatisfactory performance, requests for contract changes or clarification.
    • Payment schedules and requests are sent to the account payable group.
    • Seller performance evaluation documentation.
  53. Close Procurement (P): Completing each procurement includes verification to make sure all work & deliverables are acceptable. Will be closed before close Project/Phase process. Output: Closed procurements + OPA (Organizational Process Assets) updates.
  54. Procurement documentations (I): Procurement performance, contract change, inspection results, payment records and all necessary documentation that support procurement closure.
  55. Procurement audits (TT)
    • Structured reviews of the procurement process from plan purchases and acquisitions through contract administration.
    • Buyer must verify that all terms and conditions of the contract have been met.
    • The objective of audits is to identify successes and failures that should be documented as Lessons Learned for current Project or other Project in the future.
  56. Procurement Negotiation (TT):
    • Settle all outstanding issues, claims and disputes by negotiation whenever possible.
    • When attempts to negotiate resolution fail, there may be alternative dispute resolution such as mediation or arbitration. A last resort is litigation in court.
  57. Records management system (TT): closeout should be documented in the records management system.
  58. Closed procurements (O):
    • The buyer formally accepts the deliverables and indicates the contract is complete.
    • A checklist is often useful for documenting all of the issues that were reviewed.
    • A decision about authorizing the final payment to the seller is also required.
  59. OPA (Organizational Process Assets) updates (O):
    • Procurement files
    • Deliverables acceptance
    • Lessons Learned documentation
  60. Terms:
    • Letter of intent: not a contract, simply a letter, without legal binding, that says the buyer intends to hire the seller.
    • NDA (Non-Disclosure Agreement): agreement between the buyer and any prospective sellers on confidential information.
    • Standard contract: preauthorized for purchase of goods / services.
    • Privity: A hire B, B hire C => A and C no contractual relationship.
    • Non-competitive procurements:
      • Single source: contract directly with your preferred seller without going through procurement process.
      • Sole source: only on seller, no other choices. This may be a company that owns a patent.
    • Contractual interpretation:
      • Word > number
      • Industrial terms > common terms
      • Special provisions > general provisions


>> Thi thử PMP Chuyên đề Project Procurement Management 

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