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CHAPTER 15

CHAPTER 15. Project Procurement Management. Procurement and Project Management. Procurement and Project Management (cont.). Long lead-time items Large capital items Make or Buy decision. Procurement Management Plan. Governance

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CHAPTER 15

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  1. CHAPTER 15 Project Procurement Management

  2. Procurement and Project Management

  3. Procurement and Project Management (cont.) • Long lead-time items • Large capital items • Make or Buy decision

  4. Procurement Management Plan • Governance • Organisational policy and procedures in relation to procurement, contracting and legal processes • Requirements of long lead-time items and large capital-purchase items • Purchasing assumptions • Risk analysis of procurement decision • Review of procurement lessons learned from previous projects

  5. Common Tender Types

  6. Outsourcing Project Work If the decision is to ‘buy’ into the project, one of the most frequently used phases is to outsource.

  7. Outsourcing Project Work (cont.) Advantages • Cost reduction • Faster project completion • High level of expertise • Flexibility Disadvantages • Coordination breakdowns • Loss of control • Conflict • Security issues

  8. Outsourcing Project Work (cont.) Best practices • Well-defined requirements and procedures • Extensive training and team-building activities • Well-established conflict management processes in place • Frequent review and status updates • Co-location when needed • Fair and incentive-laden contracts • Long-term outsourcing relationships

  9. Contracting and Contract Types • Infrastructure ‘type’ contracts • Build, Own, Operate, Transfer (BOOT) • Build, Own, Operate (BOO) • Build, Operate, Transfer (BOT) • Partnerships • Time and material contracts

  10. Contracting and Contract Types (cont.) • Fixed Price Contracts • Firm fixed price (FFP) • Fixed price incentive fee (FPIF) • Fixed price with economic price adjustment (FP-EPA) • Cost Reimbursable Contracts • Cost plus fixed fee (CPFF) • Cost plus incentive fee (CPIF) • Cost plus award fee (CPAF)

  11. Summary of Contract Types

  12. Essential Elements of a Contract 1. Offer and acceptance (agreement). 2. Intention to create legal relations. 3. Consideration. 4. Legal capacity. 5. Consent. 6. Illegal and void contracts.

  13. The Art of Negotiating

  14. Project Procurement Integration continued

  15. Project Procurement Integration (cont)

  16. Key Terms • BATNA • closed tender • contract law • contract types • large capital items • long lead-time items • make or buy (decision) • open tender • Outsourcing • partnering charter • principled negotiation • procurement • six essential elements of a contract • tender process

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