Project managers often purchase goods or services on contract. Many organizations have departments that handle contract negotiation and fulfillment, but this doesn't mean that you can sit back on your heels and let someone else do the work. As the project manager, you should have an understanding of the contracting process. You're the one who will be communicating with the vendor regarding the work of the project, and you are also the one who will report the status of the work to the procurement department or the contract manager so that payment can be made to the vendor. Many times, contracts are paid incrementally according to the milestones or deliverables listed in the contract. Payment is authorized when the milestones are reached and sign-off is obtained. The project manager is the one who notifies the procurement department when the milestones have been reached.
The contract manager is not the project manager, so they'll be looking to you to make certain the items outlined in the contract are completed satisfactorily. That means you'll monitor the vendor's performance to make sure it measures up to the terms of the contract. When it doesn't, you'll have to work with your procurement department to document the problems, notify the vendor, and then take corrective action or terminate the contract. If you're administering the contract, these duties will fall to you.
Note:Contracts are a way to ensure that the parties who have agreed to exchange goods and services for money (technically this is called consideration, but it's almost always money) fulfill their end of the bargain. The contract is enforceable in a court of law and ensures that the goods are delivered and that the money is paid.
As the buyer of the goods or services, you'll want to create the SOW to make certain the requirements are defined accurately and that no important deliverables are missing. The vendor or supplier will use the SOW to determine whether they can fulfill the terms of the contract (they'll do this during the next cycle, which we'll get to in a moment). The WBS is developed at this time as well, cost estimates are determined, and make-or-buy analysis is performed.
contract life cycle
Contracts progress through specific phases similar to a project life cycle. The phases of a contract life cycle include requirement, requisition, solicitation, and award.
Contracts have a life cycle of their own, just as projects do. The four contract lifecycles are requirement, requisition, solicitation, and award. We've already covered the things that occur in the requirements cycle. This is where the SOW is created and both parties agree to the requirements and deliverables of the project. If you follow the guidelines for writing the scope statement, you'll end up with a clear and concise SOW that accurately describes the work of the project.
Request for Proposal and More
Requisition is the next contract life cycle. In this process, you'll reconfirm that the project objectives are accurate and make any necessary corrections. The primary purpose of this process is to prepare requests for information regarding your project objectives and deliverables for the vendors who will be bidding on the project work. You'll actually distribute this information to the potential vendors in the next cycle, the solicitation process.
request for proposal (RFP)
Procurement document used to solicit input from vendors when purchasing goods or services or outsourcing project work.
You'll use the project objectives and the SOW to help you prepare requests for information from vendors. These requests are called requests for proposals (RFP), requests for information (RFI), and requests for quotations (RFQ). The idea here is to outline the project objectives in a way that allows the vendors to determine whether they can perform the work accurately and satisfactorily. Again, check your organization's policies regarding RFPs and such. They may require you to use predesigned forms and follow specific steps in order to complete and post the RFP.
Here's another controversy you'll likely find yourself in the midst of during the RFP process. Some project managers believe that the RFP should outline every detail of the project. For example, if you're contracting a new software program, the RFP would dictate the programming language to use, the operating system, the database to use, etc. Other project managers might say that this boxes the vendor in and doesn't give them any flexibility to offer creative solutions. And, the organization doesn't have the chance to approach the project from a new or different perspective because the project specifics have already been dictated.
Still other project managers use both of these approaches depending on the project—I think this is the best approach. If you have a solid idea of the way the project should go, and you do have specific requirements regarding operating systems or other details, then put that in the RFP. If you're not certain how the project should come together and prefer to rely on the vendor for input or want to examine alternative approaches, go heavy on the requirements and objectives of the project and let the vendor detail their alternative solutions in the response to the RFP.
Tip:If your project dictates that you spell out detailed requirements or specifications in the RFP, make certain that these get included in the final contract.
One thing to keep in mind regarding RFPs, particularly for technology-type projects, is that technology changes so quickly in some areas (like telephony, for example) that you might require certain equipment or software in the RFP that is actually outdated by the time the vendor completes the project. Be choosey about the types of requirements that must meet certain specifications, and give the vendor a little room to come up with some interesting alternatives.
This contract life-cycle process is where the vendors respond to the RFP, RFI, and so on. Essentially, vendors are competing for your business in this process and are putting their best foot forward by addressing all the requirements you outlined in the RFP. Most of the work in this process falls on the vendors.
Some organizations require vendors to register with them on a vendor's list before they can participate in the RFP process. The vendor is required to provide information regarding their experience, the services or goods their company offers, prices for standard offerings where appropriate, a list of the officers in the company, and so on. The procurement department then reviews the vendor's qualifications and determines whether to put that vendor's name on the organization's qualified vendors list. These vendors lists are usually updated on a yearly basis, and typically only vendors on the qualified vendors list are allowed to participate in the bidding process.
The RFP is posted or released, and a deadline for responding is announced at the same time. Vendors obtain copies of the RFP, read over your requirements, and set about writing their responses. Before they submit their responses, however, they'll want to ask some clarifying questions.
Sometime after the RFP has been released, you should hold a bidders conference or meeting that allows the vendors to ask questions about the RFP in an open forum. Depending on your organizational policies, you and others on your team might be restricted from speaking with the potential bidders until after the RFP process has been closed. The exception to this is the bidders conference where all participants have a chance to ask questions and hear your responses all at the same time, so no favoritism is shown.
Warning:Check the organizational or procurement policies regarding your contact with vendors during the RFP process. You could jeopardize or disqualify a vendor if you violate the policy.
Make certain to use a method of advertising that gives every bidder the opportunity to know about the conference ahead of time. The bidders conference could be announced on your company's website, in professional journals, or in newspapers, depending on your procurement policies. Another alternative is to advertise the bidders conference at the same time you release the RFP. If you don't have the bidders conference scheduled yet, let them know where and when you'll be advertising that information.
Choosing a Supplier
The last life-cycle process is the award cycle. This is where you'll review the responses to the RFPs, choose a vendor, and award a contract.
There are several methods you can use to help you choose among the RFP responses and make a final award. Usually a selection committee is assembled for this purpose, and together the committee reviews and ranks the responses using one of the following methods.
weighted scoring models
Used in the procurement process and the project-selection process to weight and rank various criteria and make a final selection.
A weighted scoring model or weighting system is a great tool to use for scoring RFP responses. It's an objective tool and assures that all the selection committee members are using the same criteria to evaluate the responses.
Typically, the project selection committee decides on the criteria they'll use for the scoring model prior to receiving the RFP responses and often this is provided in the RFP itself so the vendors understand what they will be judged on. Suppose our example wireless project is going to be outsourced. In the RFP we've specified certain development environments that the vendor must work within because of compatibility issues with other programs. Because of the importance of the new program's compatibility with existing systems and programs, the selection committee has determined that this should be one of the criteria that's weighed in the decision process. Other criteria are determined based on their importance to the project and the selection committee.
Table Weighted scoring model
Each of the criteria is assigned a weight, depending on the importance of the criteria to the committee—the higher the importance, the higher the weight. Each vendor's response is then read and scored according to the criteria detailed on the scoring system. Here, individual judgment comes into play as each selection committee member scores the vendor response to each criterion based on their own perception of how well the RFP addressed that particular issue.
Used in the procurement process to outline criteria that must be met in order for a proposal to make it to the next level in the selection process.
Screening systems are used to screen out proposals that don't meet predetermined criteria. For example, our wireless software project requires a specific platform because of compatibility issues with existing hardware and software. The platform requirement could be used as a screening criterion. If Vendor A submits a proposal that outlines a different platform than what we specified in the RFP, they are immediately disqualified from the selection process.
The selection committee determines the screening criteria before the proposals are received. Screening systems are often used in conjunction with weighted scoring systems to make an award. For instance, the screening system criteria must be met before the proposal can proceed to the weighted scoring system process.
Awarding the Contract
The last step in this process is actually awarding the contract. Your procurement department will likely draw up the contract, but you should be a part of this process. Make certain that the requirements listed in the RFP make it into the contract. Review the timelines, deliverables, requirements, etc., and request a copy for your records when it's signed.
You'll use the contract and the SOW to monitor the vendor's performance and assure that the agreed-upon deliverables are met. If they're not, you'll have to document the violations and assist the procurement department with enforcing the terms of the contract or terminating the contract when the vendor is in violation or refuses to correct their errors.
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Project Management Tutorial
Building The Foundation
Developing Project Management Skills
Initiating The Project
Defining The Project Goals
Breaking Down The Project Activities
Planning And Acquiring Resources
Developing The Project Plan
Executing The Project
Controlling The Project Outcome
Closing The Books
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