12.3 Administer Procurement Process

The activities in the Administer Procurements process are intended to make sure that all parties fulfill their contractual obligations.

Because these activities have legal implications, in many organizations these activities will be approached as a separate administrative function outside the project, so the project manager and project management team may be only participatory members in contract administration activities.

The contract and procurement management plan, provide the requirements that will need to be followed for administering the contract.

Performance reports are also necessary, and the seller's progress will need to be monitored.

Since most management activities will be led by administrative personnel, during contract administration the project manager is mainly concerned with:

  • Making sure that contractual elements are well integrated throughout the project management processes.
  • Reporting on the seller's progress status for the contracted work to those in charge of contract administration.
  • Monitoring and reporting on the seller's cost, schedule, quality, and technical performance.
  • Making sure that contract records are maintained.
  • Monitoring project risks that could be affected by seller performance.
  • Seeing that contractors are authorized to work at the appropriate time, especially when multiple contracts are involved and the work needs to be coordinated.
  • Educating the project team on the contract, their obligations, and the legal ramifications of any actions team members might take.
  • Ensuring that the contract change control system is rigorously followed and that approved contract change orders are integrated into the project management plan.
Administer Procurements Process Decomposition

Administer Procurements Process Decomposition

Administer Procurements Process: Inputs

  • Procurement documents
    Procurement documents include the supporting information for the statement of work and the contract.
  • Project management plan
    The procurement management plan, a component of the project management plan, describes how procurements will be administered.
  • Contract
    The contract is the legally binding agreement that establishes the buyer and seller relationship. It explicitly defines the requirements and obligations each party must meet.
  • Performance reports
    Performance reports identify the progress of the seller towards objectives.
  • Approved change requests
    Approved change requests may include modifications to the terms or conditions of the contract.
  • Work performance information
    Work performance information is any data that can be considered related to the work which produces the contract deliverables. Examples are schedule and progress status information, budget and cost status, quality status, and estimates to complete.

Administer Procurements Process: Tools and Techniques

  • Contract change control system
    The contract change control system is part of integrated change control. The system ensures that paperwork, tracking, communication, and approval processes are fully followed and integrated with the project change control system.
  • Procurement performance reviews
    Procurement performance reviews are structured reviews of the seller's progress thus far compared to the contract statement of work.
    These can include a broad range of evaluations like quality, cost, schedule, process effectiveness, and contract compliance.
    The purpose of a buyer conducted performance review is to gauge the seller's overall ability in performing the work required under the contractual obligations.
  • Inspections and audits
    The contract may include inspections and audits, which will be performed during the contract period to verify compliance.
  • Performance reporting
    Performance reporting gathers, analyzes, and presents information about how the seller is performing.
  • Payment systems
    The buyer processes payments in accordance with the contract through a payment system, which is usually its accounts payables system.
  • Claims administration
    A claim is a demand by one of the contract parties for adjustments (usually financial) in contract terms as a method of relief.
    Unforeseen events, misunderstandings, and even approved contract changes can have unexpected financial impacts to the buyer or seller which can result in claims.
    Claims have legal ramifications, so there are prescribed methods for managing them.
  • Records management system
    Records are important documents that must be cataloged and maintained. Contract records include change requests, correspondence, performance reports, inspections, and audits.
    The project information system is integrated with the organizational records management system.

Administer Procurements Process: Outputs

  • Procurement documentation
    Any supporting information to the procurement document, including contract records, is collected during procurement administration in the records management system.
  • Organizational process assets updates
    Organizational process assets that may be updated as part of procurement administration include payment schedules, seller performance information, and internal or external correspondence related to the procurement.
  • Change requests
    Administering procurements can result in cost, schedule, or contract change requests.
  • Project management plan updates
    Approved change requests are likely to impact the project management plan or any of its components, such as cost or schedule baselines.

Records Management System

Properly maintained and organized records are essential should disagreements, claims, or litigation arise between the buyer and seller.

Each party should maintain a log of all correspondence, the correspondence itself, and all actions taken.

While normally thought of as documents, records are any evidence of any transaction between the buyer and seller, and in addition to written correspondence can include e-mail, voice mail, photographs, conversation logs, databases, inspections, audits, payment requests, payments, invoices, and expense vouchers.

A Records Management System (RMS) is a tool that collects, organizes, and retains organizational assets that need to be preserved in accordance with organizational, legal, or governmental retention policies.

The project records management system is part of the PMIS, and will likely be a component or subset of the organizational records management system.

Payment Systems

Payments to sellers must be made in accordance with the contract, and payment systems ensure proper accounting controls are followed.

This is usually done through the buyer's accounting system, but extremely large projects could need their own payment system with the necessary accounting controls established.

Payment to vendors will require organizational procedures to be followed, but it's extremely important that these payments be made on time and in accordance with the contract.

Disputed invoices or questions should be referred to experienced contract administration personnel for direction who are best able to determine what should be done.

Monitoring Seller Performance

The project manager and project management team will regularly monitor, evaluate, and report on the seller's performance to the contract administration personnel.

Some of this performance information will make its way into the organization's seller rating system if one exists. Inspections and audits as specified in the contract will review the quality of the seller's deliverables or services.

Procurement performance reviews are structured reviews of the seller's progress thus far compared to the contract statement of work.

These can include a broad range of evaluations like quality, cost, schedule, process effectiveness, and contract compliance.

The purpose of a buyer-conducted performance review is to gauge the seller's overall ability in performing the work required under the contractual obligations.

If inspections, audit, or work performance information suggests that the seller is not meeting its obligations then buyer-conducted performance reviews are usually taken as a step towards early termination procedures, recommended corrective actions to bring the seller's performance back to contractual requirements or to identify changes that will be requested to the terms of the contract.

Contract Change Control System

The contract will include the procedures agreed upon by the buyer and seller for introducing, reviewing, and approving or denying contract change requests.

The project contract change control system is part of integrated change control, and it ensures that paperwork, tracking, communication, and approval processes are fully followed and integrated with the overall project change control system.

Requested contract changes can be related to anything in the contract, including scope, technical or quality requirements, payments, financial terms, schedule, delivery dates, personnel changes, or service changes.

Even early termination is first treated as a requested change.

Before any action is taken on a contract change request, it should be logged onto a change register, supporting documentation collected, and the change analyzed for its impact.

Contract change control protects both the buyer and seller. Rigid contract change control is needed to make sure that requested changes from either the buyer or seller are not approached ad-hoc.

Requested contract changes should be viewed as "mini contracts," meaning the change needs to adhere to the same strict requirements as the original contract --unambiguous, detailed, and clearly understood by both parties.

Claims Administration

A claim is a demand by one of the contract parties for adjustments (usually financial) in contract terms as a method of relief. Unforeseen events, misunderstandings, and even approved contract changes can have unexpected financial impacts to the buyer or seller.

For example, a historic district may require substantial construction modifications that were not anticipated in the original contract, resulting in sizable costs to the seller.

Claims arise when there's a dispute between the buyer and seller on what constitutes fair compensation.

Claims are most likely to occur in fixed-price contracts, but they can be encountered in any contract, especially those where a large amount of risk is born too heavily by the seller.

Tips for Avoiding Claims:

  • Make sure the statement of work is detailed, clear, and that everything is fully disclosed to the seller. If applicable, highlight potential trouble spots or risks so that the seller can incorporate them into its approach for the procured products, service, or result and into its price.
  • Include partnership agreements between the buyer and seller as part of the contract. This can include a cost-savings sharing agreement.
  • Include alternative dispute resolution techniques into the contract, such as arbitration, mediation, or a dispute resolution board.
  • Maintain regular, open, honest, and direct communication with the seller.
  • Make sure all parties fully understand what the impact of a requested contract change order will be.
  • As soon as it's evident, applicable, and the situation calls for it, discuss and renegotiate cost or time elements of the contract. It will ultimately be cheaper to fairly address the situation up front.

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