Understanding and Managing Systemic Innovation on Project Based Industries

In order to understand this, we need first to differentiate what are the innovations that happen in the construction industry. There are two type major of innovation which is the incremental innovation and the systemic innovation. Incremental innovation can be defined as those innovations that reinforce the existing product or process and provide a measurable impact on productivity.

And on the other hand, we have systemic innovation where productivity for individual components can increase while overall productivity may increase, decline, or remain unchanged. Systemic innovations also refer to innovations that reinforce the existing product but necessitate a change in the process that requires multiple firms to change their practice. Systemic innovations typically enable significant increases in overall productivity over the long term. But these may create switching or start-up costs for some participants and reduce or eliminate the role of others.

From the paper we can see that there are several factors that affected the successes of systemic innovations to be implemented in a company. Listed below are the factors that should be looked into when systemic innovations are the case:

1. Organizational Variety

Most of the time, the parties involved from project to project is different even though the main company of handling the project is the same. This is just one of the unique characteristics of construction industry. The sub-contractor will change based on the type of project that is done by the main contractor. This will diffuse the parties of the project and when this happen a recreation of the team is needed. The rate of social reconstruction refers to the rate at which groups are required to form and reform into a cohesive unit from time to time. If the group’s constituents change from one project to the next, the rate of social reconstruction is considered high.

Organizational variety is high if the main contractor shows a tendency to use a different set of subcontractors for each trade classification from project to project. A long-term relationship with a particular set of subcontractors across projects would constitute a low organizational variety.

2. Degree of Interdependence

As tasks become more interdependent, the rate of diffusion for a systemic innovation will decrease. The least interdependent form is termed pooled interdependence to describe activities in which work does not flow between units. Sequentially interdependent activities are defined as those in which the output of one group is the input of another. Reciprocal interdependence is the most interdependent classification. It describes work in which the output of two groups must be negotiated to address sub-goal conflict.

Typically we expect the building industry to exhibit a high degree of interdependence as differing trade labor groups depend on the work output of others because the input of their own work is a non-linear process.

3. Boundary Strength

Construction project is full of specialists such as plumber, electrician and others. The more rigid the boundary that separates the impacted trades for a given systemic innovation, the more the rate of diffusion will decrease. The rigidity of these boundaries arises from the existence of separate distribution channels, different labor training requirements, jurisdictions of labor unions, scope of services of specialty subcontractors and path dependence.

4. Span

Innovation will not only affect one trade. It will affect other trades in the project as well. The span of the innovation need to be identified, so that steps can be taken to control the span. This can be done by integrating the trade labor groups into the innovating organization. When this is carried out, the systemic innovation can happen without bringing a lot problem to the parties involved in the project.

In order to make it possible for the systemic innovation to produce a great result, the project manager has a very vital roles in ensuring that the following aspects is given attention in handling the project.

1. Reduce organizational variety in their selection of specialist contractors.

If the systemic innovation impacts the process of multiple specialists on the project, project managers should choose one contractor from each specialist group and work with them on several projects. Over time, as inter-organizational routines are able to form, project managers can then begin to introduce new contractors to the bidding shortlist for each specialist firm type. However, project managers must handle this process carefully so as not to lose the productivity gains the firm has already achieved in adopting the systemic innovation.

2. Monitor degree of interdependence of the work on the project.

Project managers must know where interdependencies lay in the project in order to understand how a systemic innovation can be adopted over the course of multiple projects. If interdependence is significant, project managers must pay careful attention to managing the other constructs identified in this research. If interdependence is not significant, its impact on diffusion will be less.

3. Reduce boundary strength between specialists impacted by the innovation.

For the innovation to work well, the environment for the project should be built based on mutual trust. This will allow for the parties involved in the project to work well with each other. This can be done by having meetings and discussion between the parties impacted from the innovation.

4. Monitor the span of the systemic innovation.

Innovation need to be monitored so that how much impacts do this systemic innovation can be calculated and use to the benefit of the company which at the end will bring a lot of profits to the company. The wider the span of the innovation, the harder it will be for the project manager to control productivity of the works of his project. This happens a lot in a high specialist projects. The project manager should try to integrate those specialist works so that the span of systemic innovation can be decreased.

Posted by:

AHMAD FIRDAUS BIN ZAMRI (2008261138)

Dispute Resolution System

Disputes are one of the many things that cannot be avoided in the construction industry. This happens due to the facts that there are many parties involve in a single construction project, no matter how small or big the project is. There are many ways to resolve conflicts in the construction industry. The method of resolving these conflicts is called Alternative Dispute Resolution. Listed below are the commonly used ADR methods:

1. Step Negotiation

2. Dispute Review Boards

3. Mediation

4. Arbitration.

But findings have shown that these methods are not effective enough to resolve conflicts. This happens when most of the time, the ADR methods that are going to be used for the project is justified in the standard form of contract. So it will be quite hard to settle the disputes when it happens. Certain ADR methods are only suitable for certain type of disputes only. Secondly, ADR methods are seen as standalone systems which only come into action when disputes happen.

In order to make ADR methods to work more effectively, a dispute resolution system is introduced. There are many ideas to this system. Slaikeau and Hassaon (1998) said that methods to resolve conflicts can be done through conflict avoidance, collaboration among the parties involve, resorting to higher authority and power plays. Their system main components include site based resolution, internal support, convening of external ADR methods and appealing to higher authority such as the government.

On the other hand, Groton (1997) suggested that there are four consideration that can be taken to design a dispute resolution system. They are:

1. Consider the unique nature of the construction process.

2. Even when problems turn into disputes, litigation should not be the method used to resolve them.

3. If participants commit in advance to use dispute resolution techniques when problems arise, they create an atmosphere conducive to solve the problem.

4. Many problems prevention and litigation avoidance approaches exist. These techniques are most effective when applied in the early stage of construction.

Other than that, what can be done in handling dispute is to create a layer of defenses. The first layer is carried out to prevent dispute from event happening. As a saying goes, prevention is better than curing. This goes as well with the disputes that happen in the construction industry. Some of the steps that can be taken to prevent disputes are as the following:

1. Risk assessment and allocation including detailed project scope definition.

2. Partnering that includes a set of common project goals.

3. Contract clauses that outline a flexible framework for dispute resolution.

The contract on ADR’s clause should be an approach that will reinforce the relationships of the parties when the problem arises. The goal of this layer of defense is to resolve a large percentage of disputes within the project organization thus it will reduce the cost, time and disruptive impacts of the project disputes.

The second layer of defense is done by allowing for flexible dispute resolution. According to this paper, most of the disputes that happen on a project can be negotiated and resolved by the project parties without any outside intervention. This layer is needed because no matter how good the first layer of defense is carried out, problems are always bound to happen in a construction project. This is where this layer starts to play its roles. In this second layer of defense, there is the introduction of the used of the convenor. The convenor is the person who is responsible to conduct informal meetings as needed to assist the parties to resolve any disputes that have arise. He will try to do it in a timely and efficient manner before the problem becomes worse.

The convenor is responsible in a number of ways. He will act as the dispute prevention advisor, mediator, early neutral evaluator and dispute resolution arbitrator. So, he should a person who is trusted by all the parties involved in the project. In order to have greatest effect on the project, the convenor should be a trained mediator who is an experienced with construction disputes and familiar with various ADR methods. He might not be a lawyer but a construction personnel with lots of construction related experience.

In conclusion, the dispute resolution system should allow the following to happen in a construction project:

1. Limits the cost and time required to resolve the conflicts

2. Allow targeted research, analysis, discovery and depositions

3. Provides continuity through the convenor

4. Emphasizes on ealy intervention

Posted by:

AHMAD FIRDAUS BIN ZAMRI (2008261138)

An Overview of Project Management Knowledge in Construction Industry

The management of construction projects requires knowledge of modern management as well as an understanding of the design and construction process. Construction projects have a specific set of objectives and constraints such as a required time frame for completion. While the relevant technology, institutional arrangements or processes will differ, the management of such projects has much in common with the management of similar types of projects in other specialty or technology domains such as aerospace, pharmaceutical and energy developments.

Generally, project management is distinguished from the general management of corporations by the mission-oriented nature of a project. A project organization will generally be terminated when the mission is accomplished. According to the Project Management Institute, the discipline of project management can be defined as follows:

• Project management is the art of directing and coordinating human and material resources throughout the life of a project by using modern management techniques to achieve predetermined objectives of scope, cost, time, quality and participation satisfaction.

By contrast, the general management of business and industrial corporations assumes a broader outlook with greater continuity of operations. Nevertheless, there are sufficient similarities as well as differences between the two so that modern management techniques developed for general management may be adapted for project management.

The basic ingredients for a project management framework may be represented schematically in the above figure. A working knowledge of general management and familiarity with the special knowledge domain related to the project are indispensable. Supporting disciplines such as computer science and decision science may also play an important role. In fact, modern management practices and various special knowledge domains have absorbed various techniques or tools which were once identified only with the supporting disciplines. For example, computer-based information systems and decision support systems are now common-place tools for general management. Similarly, many operations research techniques such as linear programming and network analysis are now widely used in many knowledge or application domains. Hence, the representation in the above figure reflects only the sources from which the project management framework evolves.

Specifically, project management in construction encompasses a set of objectives which may be accomplished by implementing a series of operations subject to resource constraints. There are potential conflicts between the stated objectives with regard to scope, cost, time and quality, and the constraints imposed on human material and financial resources. These conflicts should be resolved at the onset of a project by making the necessary tradeoffs or creating new alternatives. Subsequently, the functions of project management for construction generally include the following:

· Specification of project objectives and plans including delineation of scope, budgeting, scheduling, setting performance requirements, and selecting project participants.

· Maximization of efficient resource utilization through procurement of labor, materials and equipment according to the prescribed schedule and plan.

· Implementation of various operations through proper coordination and control of planning, design, estimating, contracting and construction in the entire process.

· Development of effective communications and mechanisms for resolving conflicts among the various participants.

The Project Management Institute focuses on nine distinct areas requiring project manager knowledge and attention:

· Project integration management to ensure that the various project elements are effectively coordinated.

· Project scope management to ensure that all the work required (and only the required work) is included.

· Project time management to provide an effective project schedule.

· Project cost management to identify needed resources and maintain budget control.

· Project quality management to ensure functional requirements are met.

·Project human resource management to development and effectively employ project personnel.

·Project communications management to ensure effective internal and external communications.

· Project risk management to analyze and mitigate potential risks.

· Project procurement management to obtain necessary resources from external sources.

POSTED BY:

FAREEZAN SALHA BT MOHAMED AZAHAR

2007130915

ICT in Construction

‘This is a sharing space and Networking forum for peoples who keen and interest to discuss and discourse topics and knowledge of leveraging construction using IT. The growth of IT application of Cyber-world synonymous with the globalization seeking construction players to be innovative explore or develop new approach to simplify the processes and tools for construction activities.’

Quoting Mansor’s word on the purpose of this blog, I’ve would like to share some info on how important this ICT in construction industry and what makes it very important?..

There are numerous weaknesses in the construction industry delivery system which often result in excessive cost overrun and quality deficiency in the final output, the construction industry stakeholders have agreed that a long-term construction industry development plan is needed. Construction Industry Development Board (CIDB), in conjunction with the Works Ministry, the relevant government departments and agencies, industry-players and organisations representing industry stakeholders, have sat together and collectively addressed the issues and successfully developed the first Construction Industry Master Plan (CIMP). It is hoped that we shall together be able to mould our construction industry into a world-class, innovative and knowledgeable solution provider.

In order to ensure that these moulds can be used widely in our construction industry, ICT is the vital player. It is the mechanism that promotes knowledge sharing among its diverse industry players. To set up a knowledge database for the construction industry would require a huge amount of resources especially in the application of information and communication technology or ICT. The construction sector is also not making full use of the potential of collaborative systems for information sharing and coordination with external partners while construction companies do not take advantage of ICT solutions for digital information exchange and sharing documents on-line. As for example, E-Procurement has not matured in the construction sector at this point and will take longer do be developed than originally anticipated.
The same also applies to the area of materials procurement. The Customer Relationship Management is not supported to any considerable extent by ICT systems. Online sales and marketing activities are not widespread and surprisingly few construction companies have a website. Because of the characteristics of construction services, ecommerce might be of limited relevance to many construction enterprises. Earlier this year, Economic Planning Unit published a two-year research effort on "IT Strategy
Plan for the Construction Sector".

The study led by SIRIM, formulated a strategic plan for the holistic adoption of ICT to enhance productivity and competitiveness of the sector. The study encompasses the sector's supply chain partners and current IT usage in the sector, the landscape of which is similar to the state of affairs described earlier.
The Construction Industry Master Plan, which is heavily promoting the standardisation and integration of administrative practices and procedures in the local authorities had relied almost entirely on intelligent application of ICT to achieve its objectives.

The digitalisation of planning submission and building plan approval process, the online submission by consultants and provision of common digital links between the local authorities and the respective technical agencies all require substantial investment and careful planning on usage of ICT.

The National E-tendering Initiatives (NeTI) which allow all works tenders to be advertised, submitted, evaluated and subsequently awarded through online processes will require minimal human intervention in the major parts of government project procurement procedure . The construction industry portal, the specification of which is being drafted by CIDB will provide one-stop centre for intelligent information gathering and dissemination. Construction players along the supply chain will benefit from its endless repository of information, including best practices in construction from all over the world. The portal, which also serves as an online education tool is primarily aimed at educating the end users and consumers and empowering them to benefit from their construction investment.

Other than that, ICT can assist to enhance productivity and efficiency of the construction industry players in other ways. Use of 3D Computer Aided Design (CAD) during design and the use of the Internet to improve team productivity is a clear area for improvement. It is now possible to link everyone involved in a project, the owner, contractor, consultant and even material supplier to all of the information required for a project.

The architects, for instance, can start by creating an intelligent 3D CAD models that can be viewed and shared with the rest of the design team members.
Working from the same base model, the engineers can rapidly develop their respective engineering and detail designs allowing the quantity surveyors to quickly quantify preliminary cost estimates of the project.

When these CAD capabilities are well exploited, owners will find that very significant savings in costs and time can be achieved. And best of all, whatever designs, drawings and other documents created during project design stage will more accurately reflect "as-built" conditions so that they can be used for facility management functions after the project is completed.

But, there are some sat backs for the ICT capabilities in enhancing the construction industry such as not enough infrastructure fro the usage of ICT itself as well as few specialist in particular department with regards to ICT infrastructure and hardware. My case for example, in our office, we have the ICT assistance through CAD, which is our design softwares to be specific and have been used for quite along time. Gratefully being, we’ve given the opportunity to upgrade our PC, but unfortunately, the specifications of the new PC don’t comply with our design softwares. In addition to that, we cannot downgrade our PC’s specification due to its warranty issues. This is when; ICT sometimes can be a burden to us, stakeholders in construction industry. But, steps need to be taken in order to ensure ICT can be fully utilized and improve the efficiency of construction industry.

As for example, engaging qualified ICT specialists and expert on short - term basis could prove invaluable and so is getting external assistance to provide the necessary support in specifying the benefits of different ICT solutions, selecting the right mix of application and implementing ICT projects.

Similarly, the government could encourage ICT adoption by promoting ICT skill and competencies in the construction sector via national initiatives, something CIDB is pursuing, albeit on a limited scale. And as a last resort perhaps, the government can collaborate with the industry to create some kind of push factors to get the industry players to adopt ICT. It could be in the form of incentives or even a "coerced adoption" perhaps.

By: RUMAIZAH MOHD NORDIN
2007130919

Quality Cost Consideration in Construction by Bumiputera Contractors

A Quality Project is defined as a project that meet the requirements or satisfaction of the customer as stated in the contract’s documents. A successful completion of project refers to project that is completed on time and meets the required quality as defined in the contract documents. Extension of Time (EOT) or delays in completing a project should be avoided as much as possible by a contractor.

Government projects involve taxpayers’ money. Delays normally involve extra cost that could have been used for other badly needed infrastructures. Certain measures must be taken by the government, the custodian and manager of taxpayers’ money, to avoid the delays so that it will not jeorpadize the successful completion of a project.

Some common causes of delay in a project are the lack of commitment by the contractor, poor management and ineffective project planning and lack of manpower, equipment and materials on the project.

Contractor’s ability to complete government’s projects within time, cost and quality as stipulated in the contract documents is a challenging issue that requires immediate rectification plan by all parties involved in the construction industries, including local government authorities. Quality projects come from quality contractors.

Delays or late deliveries, sub-standard workmanship and materials, poor safety management on sites and cost over-run of government’s projects are some the issues that have been seriously discussed by the government. Several actions can be taken by the government in ensuring a quality project such as improving the contractors selection process whereby only competent contractors should be allowed to participate in government projects, all design calculations and construction plan must be approved by professional engineers and subject to audit process by the Public Works Department and lastly more training in design, monitoring and supervising skills should be given to all personnel involved in the process.

Failures to perform to the quality expectations is a common cause of problems among the contractors in government projects. The quality of contractors in implementing the government projects have often been subject to questions, criticisms and underating and completion of a project. Improving the contractors selection process is one of the preventive action plan to overcome the quality problems in government projects.

Project failures is not only about delays, cost over-run or shoddy workamanship but it also include, among innumerable others, environmental degradation and physical eyesores, lack of green fields or playgrounds, deforestation of all kind of pollution, pervasive soil erosion, flash floods, ozone depletion and mediocre building designs.

Projects failures create a lot problems directly or indirectly to all parties involved in the project such as the government or its agencies, the community where the project is implemented and the project’s contractor whose reputation and opportunity to secure future contracts will be at stake.

Project failures are due to variey of factors but what is more important is to search for the solutions and ways to prevent future occurance of the problems. The reasons for project failures especially among the bumiputera contractors should be looked as challenges that need to be highlighted especially when considering the fact that certain government projects are restricted for the bumiputra contractors. Therefore, to ensure a sucessful completion of a project, the procedures for award of contracts need to be evaluated and appraised to ensure that only the best contractor for the job will we selected .

The highest ranking of project quality cost parameters is the quality of raw material. Quality of raw material is important because it plays the important role int meeting the required quality of the project.

The second highest ranking is site management and organization. The site management and organization is significant towards the quality cost.

The lowest ranking of project factors is fraudulent practises and kickback. Fraudulent practises and kickback can occur at every phase of a construction project example during design, tender, construction and during project execution. These practices can involve giving and receiving bribes or kick-back money..

*posted by ameerul hafedz baharin (2007130923)

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