PROCUMENT FOR SUCCESSFULL CONTRACT

1.0 INTRODUCTION
One of the challenges faced by the private and public sector including our JKR organization is the ability to make Project Procurement decisions. Often failures to project are caused by lack of adequate Project Procurement standards and frameworks.

Procurement Management is one of the nine fields of project management expertise that PMBOK® classifies as knowledge areas. Procurement Management involve in our daily routines without realizing it in day to day processes. In construction process, the procurement is one of the phases in the life-cycle of the project. It is imperative to understand and appreciate the significant of this phase and what are the impacts to the project.
These procurement processes interact with the processes in the other Knowledge Areas as well. Each process can involve effort from one or more persons or groups of persons, based on the requirements of the project. Each process occurs at least once in every project and occurs in one or more project phases, if the project is divided into phases.

2.0 DEFINITION AND KEYWORDS
PROCUREMENT
We often come across this terminology in our daily works without really know what exactly does it mean. Procurement is the sourcing and purchasing of goods and services for business use.
PROCUREMENT MANAGEMENT
Project Procurement Management on the other hand is the processes to purchase or acquire the products, services, or results needed from outside the project team to perform the work.

BUYER
The acquirer of products, services, or results for an organization.

SELLER
A provider or supplier of products, services, or results to an organization.
Depending on the application area, the seller can be called a contractor,
subcontractor, vendor, service provider, or supplier.

CONTRACT
A contract is a mutually binding agreement that obligates the seller
to provide the specified product or service or result and obligates the buyer to pay for it.

CONTRACT ADMINISTRATION
The process of managing the contract and the relationship between the buyer and seller, reviewing and documenting how a seller is performing or has performed to establish required corrective actions and provide a basis for future relationships with the seller, managing contract related changes and, when appropriate, managing the contractual relationship with the outside buyer of the project.

3.0 OBJECTIVES
 To understand how we come to the final product and what are the processes involve in arriving to the product.
 Do we made the correct decision in getting the product
 How much the product will cost us and do we have any other price option?
 What actually happen between the process before we obtain the product or goods.
 How do we establish the relationship to the individual that produce the product, services or goods.




3.1 WHO ARE INVOLVED IN PROCUREMENT PROCESS

 BUYER – The individual, parties or any organization that has the interest of obtaining a service, product or goods.
Buyer can become the customer at the same time. In Public Works construction, JKR is the buyer who has the interest in possessing infrastructure facilities.
 SELLER - A provider or supplier of products, services, or results to an organization. Depending on the application area, the seller can be called a contractor, subcontractor, vendor, service provider, or supplier. The seller can be viewed during the contract life cycle first as a bidder, then as the selected source, and then as the contracted supplier or vendor.


4.0 PROCUREMENT MANAGEMENT PROCESS
The Project Procurement Management processes include the following:

1. Plan Purchases and Acquisitions – determining what to purchase or acquire. Involves knowing whether to procure, how to procure, what to procure, how much to procure, and when to procure.

2. Plan Contracting – documenting products, services, and results requirements and identifying potential sellers.

3. Request Seller Responses – The process of obtaining information (bids, quotation and proposals) from prospective sellers on how project needs can be met.

4. Select Sellers – reviewing offers, choosing among potential sellers, and negotiating a written contract with each seller.

5. Contract Administration – managing the contract and relationship between the buyer and seller, reviewing and documenting how a seller is performing or has performed to establish required corrective actions and provide a basis for future relationships with the seller, managing contract-related changes and, when appropriate, managing the contractual relationship with the outside buyer of the project.


6. Contract Closure – completing and settling each contract, including the resolution of any open items, and closing each contract applicable to the project or a project phase.

Fig. 1: Diagram shows the processes involve in Procurement Management























Fig. 1: Diagram shows the input, tools and techniques involve in Procurement Management



4.1 PURCHASES AND ACQUISITIONS PLANNING

The Plan Purchases and Acquisitions process identifies which project needs can
best be met by purchasing or acquiring products, services, or results outside the
project organization, and which project needs can be accomplished by the project team during project execution. This process involves consideration of whether, how, what, how much, and when to acquire.
The Plan Purchases and Acquisitions process also includes consideration of potential sellers, particularly if the buyer wishes to exercise some degree of influence or control over contracting decisions. Consideration should also be given to who is responsible for obtaining or holding any relevant permits and professional licenses that may be required by legislation, regulation, or organizational policy in executing the project.
The Plan Purchases and Acquisitions process includes reviewing the risks
involved in each make-or-buy decision; it also includes reviewing the type of contract planned to be used with respect to mitigating risks and transferring risks to the seller.


Fig. 2 Purchases and Acquisitions Planning: Inputs, Tools & Techniques, and
Outputs





4.1.1 Inputs for Purchases and Acquisitions Planning:

 Enterprise Environmental Factors
Enterprise environmental factors that are considered include the conditions of the marketplace and what products, services, and results are available in the marketplace, from whom and under what terms and conditions.

 Organizational Process Assets
Organizational process assets provide the existing formal and informal procurement-related policies, procedures, guidelines, and management systems that are considered in developing the procurement management plan and selecting the contract types to be used.

 Project Scope Statement
The project scope statement describes the project boundaries, requirements, constraints, and assumptions related to the project scope. Constraints are specific factors that can limit both the buyer’s and seller’s options.

 Work Breakdown Structure
The Work Breakdown Structure provides the relationship among all the components of the project and the project deliverables.

 WBS Dictionary
The WBS dictionary provides detailed statements of work that provides an identification of the deliverables and a description of the work within each WBS component required to produce each deliverable.


 Project Management Plan
The project management plan provides the overall plan for
managing the project and includes subsidiary plans such as a scope management plan, procurement management plan,
quality management plan, and contract management plans,
which provide guidance and direction for procurement
management planning.

4.1.2 Tools and techniques for Purchases and Acquisitions Planning:

 Make-or-Buy Analysis
The make-or-buy analysis is a general management technique and a part of the project Plan Purchases and Acquisition process that can be used to determine whether a particular product or service can be produced by the project team or can be purchased.

 Expert Judgement
Expert technical judgment will often be required to assess the inputs to and outputs from this process. Expert purchasing judgment can also be used to develop or modify the criteria that will be used to evaluate offers or proposals made by sellers.

 Contract Types
Different types of contracts are more or less appropriate for
different types of purchases. The type of contract used and the specific contract terms and conditions set the degree of risk being assumed by both the buyer and seller. Contracts
generally fall into one of three broad categories:
I. Fixed-price or lump-sum contracts.
II. Cost-reimbursable contracts.
III. Time and Material (T&M) contracts.

4.1.3 Outputs for Purchases and Acquisitions Planning:

 Procurement Management Plan
The procurement management plan describes how the
procurement processes will be managed from developing
procurement documentation through contract closure.
The plan comprises of the following:
 Types of contracts to be used
 Who will prepare independent estimates and if they are needed as evaluation criteria.
 Those actions the project management team can take on its own, if the performing organization has a procurement, contracting, or purchasing department.
 Coordinating procurement with other project aspects, such as scheduling and performance reporting.
 Setting the scheduled dates in each contract for the contract deliverables and coordinating with the schedule development and control processes
 Identifying performance bonds or insurance contracts to mitigate some forms of project risk
 Establishing the form and format to be used for the contract statement of work

 Contract Statement of Work
The contract SOW describes the procurement items in sufficient detail to allow prospective sellers to determine if they are capable of providing the item.





 Make-or-Buy Decisions
The documented decisions of what project products, services, or results will be either be acquired or will be developed by the project team. This may include decisions to buy insurance policies or performance bonds contracts to address some of the identified risks.

 Requested Changes
Requested changes to the project management plan and its
Subsidiary plans and other components may result from the
Plan Purchases and Acquisition process.

4.2 PLAN CONTRACTING

The Plan Contracting process prepares the documents needed to support the
Request Seller Responses process and Select Sellers process.



Fig. 3 Plan Contracting: Inputs, Tools & Techniques, and Outputs


4.2.1 Inputs for Plan Contracting:

 Procurement Management Plan
Similar to output for purchasing and acquisition planning.



 Contract Statement of Work
Similar to output for purchasing and acquisition planning.

 Make-or-Buy Decisions
The make-or-buy decisions are documented in the issued list of items to be purchased or acquired and those items to be
produced by the project team.

 Project Management Plan
The project management plan provides other planning output
documents, which may have been modified and may need to be reviewed again as part of the procurement documentation development.

4.2.2 Tools and techniques for Plan Contracting:

 Standard Forms
 Expert Judgment

4.2.3 Outputs for Plan Contracting:

 Procurement Documents
Procurement documents are used to seek proposals from prospective sellers.

 Evaluation Criteria
Evaluation criteria are developed and used to rate or score proposals. Evaluation criteria can be limited to purchase price if the procurement item is readily available from a number of acceptable sellers.




 Contract Statement of Work (Updates)
Modifications to one or more contract statements of work can be identified during procurement documentation development


4.3 REQUEST SELLER RESPONSE

The Request Seller Responses process obtains responses, such as bids and
proposals, from prospective sellers on how project requirements can be met. The
prospective sellers, normally at no direct cost to the project or buyer, expend most of the actual effort in this process.



Fig 4: Request Seller Response: Inputs, Tools & Techniques, and Outputs


4.3.1 Inputs for Request Seller Response:

 Organizational Process Assets
Some organizations, as part of their organizational process assets, maintain lists or files with information on prospective and previously qualified sellers, sometimes called bidders, who can be asked to bid, propose, or quote on work.

 Procurement Management Plan
Similar to output for purchasing and acquisition planning.

 Procurement Documents
Similar to output for purchasing and acquisition planning.
4.3.2 Tools and Techniques for Request Seller Response:

 Bidder Conferences
Bidder conferences (also called contractor conferences, vendor conferences, and pre-bid conferences) are meetings with prospective sellers prior to preparation of a bid or proposal.

 Advertising
Existing lists of potential sellers can often be expanded by
placing advertisements in general circulation publications such as newspapers or in specialty publications such as professional journals.

 Develop Qualified Sellers/Contractors List
Qualified sellers lists can be developed from the organizational assets if such lists or information are readily available. Whether or not that data is available, the project team can also develop its own sources.

4.3.3 Outputs for Request Seller Response:

 Qualified Sellers List
The qualified sellers list are those sellers who are asked to submit a proposal or quotation.





 Procurement Document Package
The procurement document package is a buyer-prepared formal request sent to each seller and is the basis upon which a seller prepares a bid for the requested products, services, or results that are defined and described in the procurement documentation.

 Proposals
Proposals are seller-prepared documents that describe the seller’s ability and willingness to provide the requested products, services, or results described in the procurement documentation. Proposals are prepared in accordance with the requirements of the relevant procurement documents and reflect the application of applicable contract principles.

4.4 SELECT SELLER / CONTRACTOR

The Select Sellers or Contractor process receives bids or proposals and applies evaluation criteria, as applicable, to select one or more sellers who are both qualified and acceptable as a seller or contractor.


Fig 5: Select Seller: Inputs, Tools & Techniques, and Outputs





4.4.1 Inputs for Select Seller:

 Organizational Process Assets
The organizational process assets of the organizations involved in project procurement typically have formal policies that affect the evaluation of proposals.

 Procurement Management Plan

 Evaluation Criteria
Evaluation criteria can include samples of the supplier’s previously produced products, services, or results for the purpose of providing a way to evaluate the supplier’s capabilities and quality of products. Evaluation criteria also can include a review of the supplier’s history with the contracting organization and others.

 Procurement Document Package

 Proposals
Seller proposals prepared in response to a procurement document package form the basic set of information that will be used by an evaluation body to select one or more successful bidders (sellers).

 Qualified Sellers List
 Project Management Plan
The project management plan provides the overall plan for managing the project and includes subsidiary plans and other components.

4.4.2 Tools and Techniques for Select Seller:

 Weighting System
A weighting system is a method for quantifying qualitative data to minimize the effect of personal prejudice on seller selection. Most such systems involve assigning a numerical weight to each of the evaluation criteria, rating the prospective sellers on each criterion, multiplying the weight by the rating, and totalling the resultant products to compute an overall score.

 Independent Estimates
This independent estimate is sometimes referred to as a “should-cost” estimate. For many procurement items, the procuring organization can either prepare its own independent estimates or have prepared an independent estimate of the costs as a check on proposed pricing.

 Screening System
A screening system involves establishing minimum requirements of performance for one or more of the evaluation criteria, and can employ a weighting system and independent estimates. For example, a prospective seller might be required to propose a project manager who has specific qualifications before the remainder of the proposal would be considered.

 Contract Negotiation
Contract negotiation clarifies the structure and requirements of the contract so that mutual agreement can be reached prior to signing the contract. For complex procurement items, contract negotiation can be an independent process with inputs (e.g., an issues or open items list) and outputs (e.g., documented decisions) of its own.



 Seller Rating Systems
Seller rating systems are developed by many organizations and use information such as the seller’s past performance, quality ratings, delivery performance, and contractual compliance.

 Expert Judgment
Expert judgment is used in evaluating seller proposals. The evaluation of proposals is accomplished by a multi-discipline review team with expertise in each of the areas covered by the procurement documents and proposed contract.

 Proposal Evaluation Techniques
Evaluation criteria, when used for a formalized proposal evaluation, are usually assigned predefined weightings with respect to each other. The proposal evaluation then uses inputs from multiple reviewers that are obtained during the Select Sellers process, and any significant differences in scoring are resolved.

4.4.3 Output for Select Seller:

 Selected Sellers / Contractors
The sellers selected are those sellers who have been judged to be in a competitive range based upon the outcome of the proposal or bid evaluation, and who have negotiated a draft contract, which will be the actual contract when an award is made.

 Contract
A contract is awarded to each selected seller. The contract can be in the form of a complex document or a simple purchase order. Regardless of the document’s complexity, a contract is a mutually binding legal agreement that obligates the seller to provide the specified products, services, or results, and obligates the buyer to pay the seller. A contract is a legal relationship subject to remedy in the courts.

 Contract Management Plan
For significant purchases or acquisitions, a plan to administer the contract is prepared based upon the specific buyer-specified items within the contract such as documentation, and delivery and performance requirements that the buyer and seller must meet. The plan covers the contract administration activities throughout the life of the contact.

 Resource Availability
The quantity and availability of resources and those dates on which each specific resource can be active or idle are documented.

 Procurement Management Plan (Updates)
The procurement management plan is updated to reflect any approved change requests that affect procurement management.

 Requested Changes
Requested changes to the project management plan and its subsidiary plans and other components, such as the project schedule and procurement management plan, may result from the Select Sellers process. Requested changes are processes for review and disposition through the Integrated Change Control process.

4.5 CONTRACT ADMINISTRATION

Both the buyer and the seller administer the contract for similar purposes. Each
party ensures that both it and the other party meet their contractual obligations and that their own legal rights are protected. The Contract Administration process ensures that the seller’s performance meets contractual requirements and that the buyer performs according to the terms of the contract.


Fig 6: Contract Administration: Inputs, Tools & Techniques, and Outputs


3.5.1 Inputs for Contract Administration:

 Contract
 Contract Management Plan
 Selected Sellers
 Performance Reports
 Approved Change Requests
 Work Performance Information


4.5.2 Tools and Techniques for Contract Administration:

 Contract Change Control System
A contract change control system defines the process by which the contract can be modified. It includes the paperwork, tracking systems, dispute resolution procedures, and approval levels necessary for authorizing changes.

 Buyer-Conducted Performance Review
A procurement performance review is a structured review of the seller’s progress to deliver project scope and quality, within cost and on schedule, as compared to the contract. It can include a review of seller-prepared documentation and buyer inspections, as well as quality audits conducted during seller’s execution of the work.

 Inspections and Audits
Inspections and audits required by the buyer and supported by the seller as specified in the contract documentation, can be conducted during execution of the project to identify any weaknesses in the seller’s work processes or deliverables.

 Performance Reporting
Performance reporting provides management with information about how effectively the seller is achieving the contractual objectives.

 Payment System
Payments to the seller are usually handled by the accounts payable system of the buyer. On larger projects with many or complex procurement requirements, the project can develop its own payment system.

 Claims Administration
Contested changes and constructive changes are those requested changes where the buyer and seller cannot agree on compensation for the change, or cannot agree that a change has even occurred.



 Records Management System
A records management system is a specific set of processes, related control functions, and automation tools that are consolidated and combined into a whole, as part of the project management information system. A records management system is used by the project manager to manage contract documentation and records.

 Information Technology
The use of information and communication technologies can enhance the efficiency and effectiveness of contract administration by automating portions of the records management system, payment system, claims administration, or performance reporting and providing electronic data interchange between the buyer and seller.

4.5.3 Outputs for Contract Administration:

 Contract Documentation
Contract documentation includes, but is not limited to, the contract along with all supporting schedules, requested unapproved contract changes, and approved change requests. Contract documentation also includes any seller-developed technical documentation and other work performance information, such as deliverables, seller performance reports, and warranties, financial documents including invoices and payment records, and the results of contract-related inspections.

 Requested Changes
Requested changes to the project management plan and its subsidiary plans and other components, such as the project schedule and procurement management plan may result from the Contract Administration process. Requested changes are processed for review and approval through the Integrated Change Control process.

 Recommended Corrective Actions
A recommended corrective action is anything that needs to be done to bring the seller in compliance with the terms of the contract.

 Organizational Process Assets (Updates)
I. Correspondence.
II. Payment schedules and requests.
III. Seller performance evaluation documentation.

 Project Management Plan (Updates)
I. Procurement management plan.
II. Contract management plan.







4.6 CONTRACT CLOSURE

The Contract Closure process supports the Close Project process since it involves verification that all work and deliverables were acceptable. The Contract Closure process also involves administrative activities, such as updating records to reflect final results and archiving such information for future use. Contract closure addresses each contract applicable to the project or a project phase. In multi-phase projects, the term of a contract may only be applicable to a given phase of the project. Early termination of a contract is a special case of contract closure, and can result from a mutual agreement of the parties or from the default of one of the parties.


Fig 7: Contract Closure: Inputs, Tools & Techniques, and Outputs

3.6.1 Inputs for Contract Closure:

 Procurement Management Plan
 Contract Management Plan
 Contract Documentation
 Contract Closure Procedure



4.6.2 Tools and techniques for Contract Closure:

 Procurement Audits
A procurement audit is a structured review of the procurement process from the Plan Purchases and Acquisitions process through Contract Administration. The objective of a procurement audit is to identify successes and failures that warrant recognition in the preparation or administration of other procurement contracts on the project, or on other projects within the performing organization.

 Records Management System

4.6.3 Outputs for Contract Closure:

 Closed Contracts
The buyer, usually through its authorized contract administrator, provides the seller with formal written notice that the contract has been completed. Requirements for normal contract closure are usually defined in the terms of the contract, and would be included in the contract management plan, if one was prepared.

 Organizational Process Assets (Updates)
I. Contract file.
A complete set of indexed contract documentation, including the closed contract, is prepared for inclusion with the final project files.


II. Deliverable acceptance.
The buyer, usually through its authorized contract
administrator, provides the seller with formal written notice that the deliverables have been accepted or rejected. Requirements for formal deliverable acceptance, and how to address non conforming deliverables, are usually defined in the contract.

III. Lessons learned documentation.
Lessons learned analysis and process improvement recommendations are developed for future purchasing and acquisition planning and implementation.

Extra Knowledge Related to Security Information

WHAT IS INFORMATION

Information is an asset which, like other important business assets, has value to an organization and consequently needs to be suitably protected

Information exist in many forms

- Paper

- Electronic

- Spoken

OUR RESPONSE

Understand the threats & Mitigate the risks.

Establish security requirements:

- Risk assessment

- Legal, statutory, regulatory and contractual requirements

- Set of principles, objectives and business requirements for information processing that an organization has developed to support its operations

INFORMATION SECURITY MANAGEMENT SYSTEM

ISMS is that part of the overall management system, based on a business risk approach, to establish, implement, operate, monitor, review, maintain and improve information security

The management system includes organizational structure, policies, planning activities, responsibilities, practices, procedures, processes and resources.

Reference: ISO/IEC 27001:2005