Conduct Procurements

00:01 Hello and welcome.

00:03 This module will focus on the conduct procurements process in the PMBOK guide.

00:10 The difficulty, memorization and exam importance is all rated as medium. However, if you regularly do procurements and go through a formal tender or request for proposal process, you can count these all as green and low.

00:28 If, however, you've never gone through a formal procurement process and involved such things as an expression of interest, request for proposal or form a formal tender negotiations, then you may want to rank these all as read and pay greater attention to them.

00:47 The conduct procurement process is one of four processes in total and the procurement management knowledge area.

00:55 It's the only executing process.

00:59 And keep in mind that up to 30 per cent of questions and the PMP exam will come from executing processes, so pay particular attention to this process.

01:10 The particular domain task.

01:13 That the conduct procurement process helps us understand better as the executing task one, which says acquire and manage project resources by following the human resource and procurement management plans in order to meet project requirements.

01:30 Obviously, our focus is the procurement management plan here.

01:35 But you can see, given that many of our project resources may be procured externally, the human resource management plan, particularly in relation to the personnel we need externally, will be important for this domain task as well. The key theme of the conduct procurement process. Well, it's where we carry out the procurement management plan, particularly in relation to advertising for and negotiating with potential contractors, vendors or sellers on our project.

02:08 And ultimately, as a result of this process, we want to sign contracts with these people. The particular inputs that may be useful to us are our project management plan, particularly and quite obviously, our procurement management plan.

02:26 But other aspects of the project management plan may be useful to us as well, including our scope, time and cost management plans, because they'll all be impacted by the procurement decisions we make during this process.

02:41 We'll also want our requirement documents because this outlines the project requirements we're trying to satisfy with our procurement activities.

02:52 We'll also want source selection criteria, which was one of those outputs from planning procurement management.

02:59 The source selection criteria are those criteria by which we're going to choose the successful seller, and they could, of course, simply be the lowest price. But often they're more than that, and they'll include things like past experience, financial stability, innovation, health and safety or environmental record.

03:21 And you can give each of those awaiting so you may not necessarily choose the cheapest seller, depending on the weightings that you give.

03:31 You'll need the seller proposals, and these are the responses to your procurement documents that you've put out to the marketplace.

03:42 You may have put a request for proposal out there, and you'll seller proposals are coming back and you need to be able to go through all of these.

03:50 Choose the seller and negotiate with them and sign a contract.

03:57 You need your project documents.

03:59 These are all the types of contracts you have, your expressions of interest, your request for proposal or tender documents as well.

04:08 You'll need your make or buy decisions to give you that list of goods or services that you've chosen to procure externally, rather than do yourself internally. Each of the procurement documents that you released to the marketplace will need to have in it a concise procurement statement of work.

04:29 Now, don't make the mistake of going to the market with a loose statement of work, because it's not uncommon for some unscrupulous vendors to spot this and come back with a low bid knowing that they'll get their profit on the variations you're forced to approve.

04:46 So take extra time with your procurement statements of work to make them as robust and as detailed as possible.

04:54 The more detailed they are, the more accurate the pricing will be.

05:00 But if they're not detailed at all, you may have to accept things like a cost reimbursable or time and materials form of contract, because very few sellers will give you a fixed price form of contract on a loose and badly defined statement of work.

05:17 You may also want some organizational processes parts of your project management methodology relating to how you carry out your procurement, advertising, negotiation and signing of contracts.

05:33 The range of tools and techniques that are available to you include bidder conferences now, better conferences used to happen actually in person. But increasingly they are happening virtually.

05:46 It doesn't matter how they happen.

05:48 There's a couple of rules about them that you need to know for the exam.

05:51 First up, you must always create a level playing field for all bidders. You can show no favoritism to any bidder in this process. Now, if you're holding bidder conferences in person, it means you must let everybody speak, and if somebody asks a question, you must supply the answer to all bidders.

06:12 You can't favor one bidder over another by providing them with information without providing it to other bidders.

06:21 And this is where virtual bidder conferences are great because during them, while they're open for several weeks, all prospective bidders can ask questions and the answers are immediately distributed to everybody.

06:34 So if a question in the exam puts forward a scenario that says a potential vendor has taken you aside at a bi dder conference and asked you. For information that nobody else will have the correct answer is.

06:52 Tell them that you'll give the information to all bidders.

06:56 Remember that level playing field for all bidders.

07:02 You'll have some proposal evaluation techniques generally using those source selection criteria that you've already developed.

07:10 Now your particular proposal evaluation techniques may have several filters.

07:16 You may ask first for people to prove their experience or their health and safety record, and then if they pass that stage, you'll look at their pricing. But it's absolutely essential that you document what your proposal evaluation techniques are before you need to use them.

07:35 There are some unscrupulous companies that will tweak these after they get the responses, but that's highly unethical.

07:44 You may also want some independent estimates prepared.

07:47 This is where you may get your team members or bring in some consultants like quantity surveyors, to prepare estimates of what you should expect the pricing to be. And in this way, you will know if sellers have understood the scope of work properly or if they are deliberately bidding too low or bidding too high.

08:09 So having your independent estimates helps you understand if the responses you're getting are accurate.

08:17 You may also want to use expert judgment here.

08:20 Remember, you're an expert at procurement.

08:23 Your project team members, particularly those who've been through this process before, are all experts.

08:29 You may want to bring in members of your organization's legal team at this point as well because contractual negotiations are legal negotiations. And if you don't have members of your own legal team that you can draw on at this point, you may want to bring in external consultants as part of your expert judgment.

08:53 Another total technique that you may wish to use is advertising.

08:57 The advertising is simply telling all sellers that you've got some work that you'd like done and you've got a contract that you'd like them to look at.

09:08 Advertising can be in local newspapers, but increasingly it's online and you'll see many sellers wait or have flags ready to go that when their particular work gets put up, they know about it immediately. Remember, try to make your advertising as broad as possible.

09:27 Making it narrow could bring accusations of favoritism and whatever else happens in your procurement process.

09:34 You must always be fair and transparent.

09:38 You use a range of analytical techniques on the responses that you get to help you make your procurement decisions.

09:45 These can be careful review of the documents, supplied, extra analysis of the company's financial position or asking to see all of their staff curriculum veto. Then.

10:00 You go into procurement negotiations, and this is the part where you actually have chosen a preferred seller and you're trying to negotiate a contract. Now I do recommend very strongly at this point that you bring in legal expertise.

10:16 Don't try and do this on your own.

10:19 Some contracts can be very lengthy and very wordy and very hard to understand. So for procurement negotiations, think about bringing in legal expertise.

10:30 But the goal of procurement negotiations is obviously an agreed and signed contract. Let's go over some of those in a bit more depth, remember better conferences is where all interested potential sellers are given the procurement documents usually well in advance, they're invited to the bidder conference.

10:53 If it's face to face, they're invited to a particular room.

10:56 If it's virtual, they're given a login and the time period in which it's open, everybody is allowed to ask questions.

11:04 And of course, as I've already mentioned, the bidder conferences are designed to ensure a level playing field where nobody has more information than anyone else.

11:15 For the purposes of the exam, this is the default position, complete transparency and fairness in your procurement decisions.

11:27 If you are familiar with the formal tender process used globally, this will all be very familiar to you.

11:35 The particular outputs that you may produce as a result of advertising your needs, choosing your or negotiating with the selected sellers and selling those signing those contracts include obviously the selected sellers.

11:51 These are the sellers with whom you've negotiated a contract and you've agreed and you've signed that contract.

11:58 And you'll have your signed agreements or contracts as part of it.

12:02 Make sure they're all stored where in an easy to retrieve place because you're going to need to refer to these throughout the life of the project and as a tip, make sure you always read any signed agreements throughout the life of the project.

12:18 Many project managers, I know, simply give any contract a cursory glance without fully understanding all of the clauses in it.

12:28 So make sure you read all of the clauses regularly in a contract to understand your obligations and the obligations of the other party or parties to that contract. You'll also have some resource calendars here.

12:42 These will be the constraints around when the resources that you have procured externally are available.

12:49 If they relate to personnel, the default default resource calendar will be the Monday to Friday work week, including public holidays, and may also go on to include part time work.

13:03 Maybe there are only available on Mondays and Tuesdays, not Wednesdays, Thursdays, Fridays, but as part of your procurement negotiations, you'll sort all of that out. You may also issue some change requests here because as a result of your procurement negotiations, perhaps you need to go back and change aspects of your scope, time, cost, approach to quality or your human resource requirements as well.

13:30 As a result, you will have some project management plan updates to any of those areas, including the Procurement Management Plan, and you will probably produce some project document updates, including your lessons learned. So in summary, the conduct procurements process uses the procurement management plan to carry out the selection of sellers to work on your project.

13:56 You will use advertising and bidder conferences to get sellers to respond.

14:00 And once you've got your sellers and you've used your source selection criteria to select your preferred seller, you then go on to negotiate fairly.

14:09 Now this is another key point in the exam when it comes to negotiation of contracts. You must always negotiate fairly.

14:17 You should never seek to put the other party at a disadvantage.

14:21 This may be different from some of the experiences you've had in your career, but for the purposes of the exam, negotiate fairly.

14:31 Thank you very much.

14:33 This has been an introduction and overview of the conduct procurements process in the PMBOK guide.