The Money Files

Regular readers will know I’ve been breaking down what’s new in the PMBOK Guide®-- Sixth Edition, around Plan Procurement Management (you can read the first part here, and the summary of  Conduct Procurements here). But who is actually involved in contract management?

That’s a difficult question to answer precisely, because the exact structure of your organisation makes a difference to who takes part in the contract management process. You may have different teams involved, depending on the structure of your business, or you might have some of the teams below totally missing, so others step in to fill the roles.

So please consider this article as high level guidance, and not a prescriptive account of how you must run contract management in your organisation.

Let’s look at the 5 groups involved in managing project contracts.

1. Legal Team

Your legal team may be internal, or you may hire in outside legal experts if you don’t have the need for a full-time staff of lawyers.

This group is important because they are typically involved in:

• Creating contracts
• Contract review
• Approving contracts and getting them signed off.

They are also involved in making sure that any regulations and laws are complied with, and that the right laws are referenced in contract clauses etc. An example in the UK at the moment would be to make sure that all contracts are updated with reference to GDPR regulations, and references to the ‘old’ Data Protection Act 1998 are removed when the new regulations come into force in May 2018.

2. Contracts Manager

The contracts management function might be carried out by a single person (perhaps with a different job title, like Procurement Manager) or there may be a team responsible for contracts management. The role involves:

• Negotiating and drafting contracts
• Working with vendors to get the best contractual arrangement for both parties
• Organising and executing non-disclosure agreements

They will probably also get involved before the vendor is selected, doing the work (along with others) to evaluate different proposals to establish which supplier is the best to partner with.

The contracts management function also acts as the main point of contact for suppliers (often the supplier project manager) for contract queries. That could be the schedule for milestones, preparing purchase orders and invoices or issuing the paperwork that triggers a payment and so on.

As you’d imagine, any changes to the contract are also run past the person carrying out this role.

In my experience, I’ve done some of this: issuing notification to trigger a payment, dealing with contract changes, facilitating getting the right person to sign off and handling the interface with the legal team. But if you have someone in your organisation who can take this role on, and who can ‘run’ the contract for you, then get delegating! Use their expertise.

3. Procurement Team

Procurement is a function that’s broader than contracts management, although your contracts manager may sit within that department.

The procurement team is responsible for managing the whole procurement activity, from preparing bid documents to dealing with queries from suppliers. They are often the team who prepare the shortlist of vendors, or who cross-check vendors against the company’s approved seller criteria. If your selected vendor is not currently on the approved list, they will make sure that the company is added for future reference.

From the role description you can probably see that they need a really detailed knowledge of your project’s requirements. It’s best to get the procurement person who will be working on your procurements involved in the project as early as you can. Then they can fully understand what’s required and the kind of services or products that will be best for the project.

4. Vendor Manager

Vendor management is different from contract management, because it’s a broader role. I’ll go into the details of the differences in another article, but for now, just know that if you have a vendor management team, it’s hugely valuable to you as a project manager.

The vendor manager might be part of the procurement team, or there might be a vendor management office – this is a function that large companies who work with lots of vendors might have. Think oil and gas, or construction, where you have many subcontractors or different relationships with a variety of suppliers.

Vendor managers look at the whole relationship with a supplier. They can manage requirements across several projects, and ensure the relationship overall works well for everyone concerned.

5. Project Manager

And finally… the project manager! You have a role to play in project contract management, because you’re key in executing the contract i.e. getting the work done.

Your role is to make sure that the contract deliverables are delivered, and that risk management, scheduling and everything else related to managing the project happens as planned. You are key to working with all the different groups, bringing everyone together at the right time and representing your organisation to the vendor.

You’ll probably be the first to see any potential conflict or defects in what should be delivered, and that gives you a great advantage to be able to keep the contract and the vendor relationship on track.

Whether you have these roles I have mentioned as distinct departments, or whether you have to wear multiple hats when managing your contracts, it’s important to know how vendor relationships are set up on your project. Think about who you can bring in so that your project team includes reliable experts in contract management, as that focus will make sure your supplier engagements run smoothly.

What involvement have you had with contract management? Let us know in the comments below!

It’s time for another instalment of What’s New In the PMBOK Guide®-- Sixth Edition. Following on from my look at the Plan Procurement Management process (which you can read here), we’ve reached the second of the Project Procurement Management Knowledge Area processes: Conduct Procurements.

Here are the headlines: there are quite a few changes, once again focusing I feel on ensuring professional judgement is applied, and making it easier to tailor the process. Overall, we’re seeing a process that is less prescriptive and more flexible, which is, I think, a good thing.

Having said that, fundamentally the old and new processes are the same. You won’t need to radically treat procurement any differently now than you have been doing in the past. There’s a lot of good stuff in the process, and that’s still there.

It’s also worth noting that the guidance is very much to get experts involved in procurement. Unless you are in a tiny company, chances are that there is someone on the project team who has more experience in buying stuff than you do. If you have a procurement team, buying division, vendor management group or whatever they might be called – use them. It’s far better to draw on the expertise of people who know their way round a procurement bid document than have to learn this stuff from scratch yourself, especially when you might not have to use it again for some time.

Of course, if you are taking the PMI exams, you need to know the material in order to get through the test. I feel that knowing isn’t the same as being experienced in doing. So, always, always involve expert buyers where you have them. You’ll get a better deal and your will most likely be better protected in contract terms too.

OK, now those messages are out of the way, let’s dive into the process and see how the new version of the PMBOK Guide®-- Sixth Edition has evolved.

Conduct Procurements Process

This is the second process in the Knowledge Area. We’re in the Executing process group.

Inputs

There are some changes to the inputs for this process. The procurement management plan has dropped out – somewhat surprisingly – but is replaced with the broader “procurement documentation”. This means other procurement-specific document has also been removed, namely make or buy decisions, source selection critiera and the procurement statement of work.

The project management plan is a new input, along with enterprise environmental factors (because we can’t get enough of those!).

Tools and Techniques

This section is the perfect example of where the process is becoming more vague and yet more helpful at the same time.

Data analysis is a new T&T, replacing proposal evaluation techniques, independent estimates and analytical techniques. In fact, proposal analysis is called out as a data analysis tool that you should/could be considering for use on the project. All of these are ways of looking at data analysis, but instead of mandating particular ways of analysing the data, the new version of the guidance lets you pick and choose what would be most useful for you.

Interpersonal and team skills replaces procurement negotiations. This reflects that you may have to do negotiation, but overall you need more than just good negotiating skills to close a deal.

I think this is reflective of the fact that you, as the project manager, might not actually be doing the negotiation yourself in many cases. What you want instead is the interpersonal skills to be able to make sure the discussions happen, conflict is addressed, the right people do the right things and you all get to agreement.

Outputs

There isn’t much change to the outputs for this process.

Resource calendars have been removed. Perhaps it was decided that you didn’t really need to create a resource calendar for your supplier, now that you know who they are.

Organisational process assets are included. It’s almost as if the first edit was: Where have we forgotten to mention enterprise environmental factors and organisational process assets? Let’s go and drop those into all the remaining processes now.

You will get very familiar with these terms and what they mean as you go through the PMBOK Guide®-- Sixth Edition.

In the case of this particular process, the organisational process assets covered here are things that you would possibly need to update as a result of successfully securing the services of your vendor. These could include:

• Your company’s list of suitable, pre-qualified sellers (updated to add the one you just chose)
• Your company’s list of prospective sellers (updated to include the unsuccessful vendors you didn’t choose but who came a close second and may be worth talking to again for another project – or perhaps to remove one that you found was close to liquidation or something similar)
• Your company’s seller database (to record how the process went, your thoughts on the vendor presentations etc. Basically, lessons learned for procurement).

Next time I’ll look at what’s new in the Control Procurements process. There is one major change in this process that you don’t want to miss! I’ll tell you more next time.

What should you include in the cost management plan for your project? If you have a template from your PMO, then it’s best to start there. But if you are designing something from scratch, here are some helpful pointers for the different sections that you should be considering.

Here’s a handy print-out-and-keep guide to what you should be including in project cost management plans. For more details on what each item relates to, check out this article.

What do you think – do you like this kind of graphic? Is it useful or would you prefer more text-based descriptive articles? I’m curious to know what works best for you, so I can make sure I’m writing and creating things that best serve you, so drop a comment below! Thank you!

In this video I share 3 tips with you to help you feel more organised for the coming week. These are quick(ish) things to do on a Friday afternoon, or the last day of your working week. I use these tips myself and they help me waste less time overall. I hope they help you too!

Read more here: http://www.projectmanagement.com/blog/The-Money-Files/7537/

I got so many positive comments about the summary guide to what’s new in Project Cost Management that I shared recently, that I thought I would do it again for another Knowledge Area.

This time, it’s the turn of procurement – another budget and financial management aspect of project management that has had an update in the PMBOK Guide®-- Sixth Edition.

As the date for the launch of the new exam is this month, a quick review of Project Procurement Management will be relevant for anyone who started studying for their PMP® or CAPM® but who hasn’t yet managed to take the exam.

Plus, it’s just generally interesting, if you are interested in things like this – like I am! I enjoy seeing how the discipline of project management is evolving over time and the procurement area has seen some significant updates.

As before, I have to thank the authors of a free pdf including Asad Naveed, Varun Anand and others, for their comprehensive guide to what is new in the latest version. I have my own electronic version and I’ve been scouring that too, but their 130-page guidance document is helpful for showcasing the headlines of where things have changed.

So, without further ado, let’s dive into how procurement management is different now.

Plan Procurement Management Process

The first process in this knowledge area is Plan Procurement Management. We are, of course, in the planning process group.

It feels like quite a lot is different, but I don’t think the changes are substantive. Let me explain what I mean.

Inputs

The inputs have changed around a lot. Requirements documentation, activity resource requirements, the schedule, cost estimates, the risk register and the stakeholder register are out.

In come the project charter, the generic “business documents” and project documents.

There is some sense to this. It speaks to what feels like more of a desire for project managers to make their own judgements, which is reflected throughout the PMBOK Guide®-- Sixth Edition. For example, project documents can include:

• Requirements documentation
• Risk register
• Stakeholder register
• Resource requirements

And so on.

The charter includes statements about finances, as you may have consideration given in that document to the total budget, or even information about possible suppliers. 

Tools and Techniques

The make or buy decision analysis has gone! So has market research, which I always thought was quite a helpful inclusion.

However, the nice and vague “data analysis” has been included, along with data gathering, and market research could justifiably fit in here.

The other new T&T is source selection analysis. This sounds a lot more complicated than it actually is. All it means is you plan for how you are going to select your vendors. The analysis part is looking at the options available to you and making the choice about which selection approach to use. For example:

• You can choose the cheapest
• You could base your decision on quality
• You could look at a range of technical criterial
• You could go with a preferred/mandated supplier so it doesn’t much matter what they cost or how good they are

Or a mixture, or something else.

Outputs

The new version has 10 outputs! We have some new ones: procurement strategy, bid documents, independent cost estimates and organisational process asset updates (those OPAs get everywhere, and have to be updated).

Where, in other areas, it feels like there is some streamlining and introduction of generic terms, here the “procurement documents” output has been dropped in favour of the more specific strategy document.

I can see why – this is the planning process, so the output should be something that is basically your plan for procurement. The strategy gives you that. It can cover how you are going to procure, the kind of deals you are prepared to go into, preferences for contract types and so on.

Bid documents might not be necessary for all projects (in fact, much of procurement management might not be relevant for your project – it depends on what, if anything, you are buying). Bid documents is a summary term for the paperwork you need to generate so that suppliers know what it is you want to buy from them. In other words, the Request for Information, Request for Quote or Request for Proposal.

I like that the update includes independent cost estimates, although I have never worked on a project that has used these. Basically someone skilled in this area tells you what the work should cost, so that you can benchmark the vendor proposals when they come in. Very sensible!

Next time I’ll look at what’s new in the Conduct Procurements process. A quick teaser: your new procurement strategy, produced as part of this process, is not directly an input! You’ll have to wait for the next instalment to see how that’s reflected in the process.