Contract Procurement Management in Project Management: PPMP20007

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Contract procure
management
PPMP20007 PROJECT
MANAGEMENT
CONCEPTS

Introduction
• It refers to the process of acquiring or purchasing of products and
service for the business purposes.
• It refers to change the control process management as well as
contract management that are necessary to establish and
administrate purchased orders and contracts.
• Basically the contract procurement management develops the
lifecycle of any contract or project that is instituted as a significant
part of that process.
• The management also involves multiple contracts procurement or
sub-contacts in order to maintain complex projects.
• The interaction with large organizations & government departments
in order to acquire or purchase of products & services often dictates
formal procurement policies and procedures.

Outsour
cing
Advantages
• Swiftness and expertise: The time
consuming tasks are outsourced
to other party who is expertise of
that field. Other parties use
special equipments and
techniques to perform tasks.
• Significance core process rather
than supporting: outsource to
supportive process make the
performance more strong and
strengthen for core business.
Disadvantages
• Risk of exposing data: It involves
risk in exposing the data while
outsourcing for HR, payroll &
recruitment services, etc mainly
to third party.
• Hidden cost: Though outsourcing
is cost-effective but sometimes it
surprises the management by
involving hidden costs in contract
mainly signing contacts across
international boundaries.
The term outsourcing refers to the business practice that an
organization acquires or purchase another company or its tools
and equipments. This practice helps to perform tasks in the
organization, handling the operation & process and undertaking
management that executed by organization’s own workforce.

Request for
proposal
• The methods used in selection of contactor takes less time as
compared to the process of RFP. It include the improvement in
scheduling & costing, and ensures quality for the projects.
• The methods reviewed by directors of capital projects that are
compatible with proceeding methods. The selection of contractor
is similar to the time that requires to evaluate responses.
• The determination can be done very soon after receiving the bids
released by resource management.
• Various practice are required to administrate in order to force
outsourcing project work in an efficient manner such as distinct
procedures, widespread training, frequent reviews, Co-locations,
incentive-laden contracts, long-term relations etc.

Negotiation
• There are several business rules that need to identify while
negotiating with the other party like firstly listen them, analyze
things from customer’s perspective, be credible, never blink first,
prepared to walk away and fight another day.
• There are mainly three types of contracts where the organization
deals with customers.
• First is fixed price contract where the prices are fixed in contract
and no risk of including any hidden cost. Buyer has a low cost
uncertainty.
• Second is cost plus contract that may include the risk of hidden
cost while signing the contract with international partners. But the
risk is low for the contractor and high for the buyer.
• Time & material: It is middling type contract that includes where if
there is any change so the contractors and sellers share the risk.

Types of contracts
• There are three types of contracts for the agile projects. Target cost
contracts, incremental delivery and time & material contracts are the way
to handle the agile projects.
• These projects obtains predetermined reviewed points that allows longer
projects, time & material contracts signifies the values and priority of
projects like they are precious as the contractor is paying for deliver a
service. Another factor is that both the parties agree on a final price which
is realistic include supplier’s cost.
• PTA is a cost line of profit-cost curve signified by the elements of contract
incorporated with the fix price and incentive-firm target projects. Point of
total assumption is a point where the seller bear cost of overrun.
• In order to understand the analysis of PTA, the sufficient knowledge of
fixed price incentive fees contact is must. According to this contact buyer
are more likely to pay a fix price and lowest price for cost overrun. If the
cost rises than due to any miss-management, the seller has to abide extra
cost.

References
• Hong, P. and Kwon, H.B., 2012. Emerging
issues of procurement management: a
review and prospect. International Journal
of Procurement Management 4, 5(4),
pp.452-469.
• Lok, K., Opoku, A. and Baldry, D., 2018.
Design of sustainable outsourcing services
for facilities management: critical success
factors. Sustainability, 10(7), p.2292.