NSW Department of Education and Training (DET) 2005

©NSW Department of Education and Training (DET) 2005

Permission is given to trainers and teachers to make copies by photocopying or other duplicating processes for use within their own training organisations, or in a workplace where training is being conducted. This permission does not extend to the resale of this material to third parties, the making of copies for use outside the immediate training environment for which they are made, and the use of the materials for hire. Outside these guidelines, all material is subject to copyright under the Copyright Act. 1968 (Commonwealth) and permission must be obtained in writing from the NSW Department of Education and Training.

Disclaimer

The views expressed in this work do not necessarily represent the views of the NSW Department of Education and Training. The NSW Department of Education and Training does not give warranty nor accept any liability in relation to the content of this work.

This work has been produced initially with the assistance of funding provided by the NSW Department of Education and Training, Training Development Unit, through the Training Resources & Support Program with advice from the Product Advisory Committee.

Further copies of this resource are available from: Website:

For further information, contact:Email:

First published July 2005

Resource Development Team
Performance Development Solutions
Lorraine Wheeler & Assoc P/L
Precision Consultancy
RMIT
Training Plus Solutions P/L / Product Advisory Committee
Deborah Griffin NSW DET
Catherine Chaffey Financial Services Education Agency Aust ltd
Suellen Freeman SW Sydney Institute of TAFE Bankstown Campus
Paul Tweddell Dept Aging Disability and Home Care
David Makin/Neroli Sheldon AIM
Justine Mercer Moore NSW Chapter of the AIPM
Lorraine Wheeler/Stephen Auburn Project Team

Contents

1. Introduction

1.1 How the learning guide is organised

1.2 An overview of (BSBPM509A) Manage project procurement

1.3 Learning outcomes

1.3.1 Elements of competency

1.3.2 Knowledge and skills involved in managing project contracting and procurement

2. Managing project procurement: Topics and learning activities

2.1 About managing project procurement

2.1.1 Definitions and main activities involved in managing project procurement

2.1.2 The relationship between managing contracting and procurement and project phases

2.1.3 Responsibilities for managing procurement and contract management

2.1.4 Stakeholder involvement in project contracting and procurement

2.2 Determining procurement requirements

2.3 Establishing agreed procurement processes

2.4 Conducting contracting and procurement activities

2.5 Implementing the contract

2.6Finalising and reviewing contracting and procurement

3. Assessment and demonstration of competency

3.1 Developing an evidence portfolio

3.2 Products that can be used as evidence of competency

3.3 Processes that can be used as evidence of competency

3.4 Record of your work experiences relating to contracting and procurement

3.5 Assessment activities

4. Resources and reference materials

4.1 Procurement management proformas

4.2 Further references

4.2.1 General references

4.2.2 References specific to the project contract procurement

4.3 Key terms in project contracting and procurement

Appendix 1

Appendix 2 Assessment Recognition Template

Index of Learning and Assessment Activities

Reflection Make or Buy?

Reflection Policies and procedures

Reflection How much to procure?

Reflection Planning procurement

Reflection Market analysis

Reflection Risk management and procurement

Reflection Planning to procure

Reflection Contracting and procurement responsibilities

Reflection Contract administration planning

Reflection Planning for review

Reflection Develop a contracting and procurement plan

Reflection Establishing procurement processes

Reflection Sourcing suppliers

Reflection Evaluation criteria

ReflectionUsing the weighting system to evaluate suppliers

Reflection Selecting the best supplier

Reflection Contracts

Reflection Contract negotiation approaches

Reflection Contract management

Reflection Communication

Reflection Dispute resolution

Reflection Contract finalisation

Reflection Reviewing contracting and procurement

Assessment Activity Policies and procedures

Assessment Activity Planning procurement

Assessment Activity Market analysis

Assessment Activity Planning to procure

Assessment Activity Contract administration planning

Assessment Activity Develop a contracting and procurement plan

Assessment Activity Establishing procurement processes

Assessment Activity Evaluation criteria

Assessment Activity Selecting the best supplier

Assessment Activity Contracts

Assessment Activity Contract management

Assessment Activity Dispute resolution

Assessment Activity Reviewing contracting and procurement

Index of templates

Procurement plan proforma

Evaluation criteria and weighting system proforma

1. Introduction

Welcome to these materials, developed by the NSW Training Resources and Support Program (TRS) of the NSW Department of Education and Training to support delivery of the Diploma of Project Management (BSB51504)from the Business Services Training Package (BSB01).

These materials should be used in conjunction with the learning guides for theother units of competency in the qualification and the relevant assessment activities from the Assessment Guide including holistic and up front assessment activities.

The design of the materials is based on the assumption that project management is not an entry level qualification and learners are likely to have existing training and qualifications. This learner guide is aimed at learners who will be working as project managers in a single project or in one area of a large, complex project.

This is the learning guide that applies to the national unit of competency (BSBPM509A) Manage project procurement from the Diploma of Project Management (BSB51504) and is designed for use in conjunction with the other relevant components of the Kit. There are two other units of competency closely related to (BSBPM509A) Manage project procurement. These are:

(BSBPM408A) Apply contract and procurement techniques. This unit applies to functions normally carried out by project team members working under the supervision of the project manager. These functions include contributing to determining procurement requirements, assisting in the establishment of agreed procurement processes, conducting contracting and procurement activities, helping to complete project finalisation activities, contributing to a review contractor performance and helping with the evaluation of the effectiveness of contracting and procurement activities.

(BSBPM609A) Direct procurement and contacts of multiple projects/programs. This unit applies to the functions performed by the program manager to manage procurement and contracts across multiple projects and programs. It covers setting up the contracting process, directing the management of contract and procurement processes, and finalising contracts for projects across an organisation’s program.

The required units of competency to attain the Diploma of Project Management BSB51504 are:

(BSBPM502A) Manage project scope

(BSBPM503A) Manage project time

(BSBPM504A) Manage project costs

(BSBPM505A) Manage project quality

(BSBPM506A) Manage project human resources

(BSBPM507A) Manage project communications

(BSBPM508A) Manage project risk

(BSBPM509A) Manage project procurement

(BSBPM501A) Manage application of project integrative processes

1.1 How the learning guide is organised

This learner guide is divided into four sections:

Section One provides an overview of the unit of competency.

Section Two contains information and activities arranged around topic areas that reflect each of the elements in the unit of competency. The activities include reflective questions, problem solving exercises and activities involving workplace research. Many of the activities draw on the five case studies provided with these materials

Section Three provides information about assessment and demonstration of competency. It includes proformas for recording evidence of competency and assessment activities.

Section Four contains a number of relevant templates and proformas, a glossary of terms and a guide to electronic and print resources and reference materials.

1.2 An overview of (BSBPM509A) Manage project procurement

This unit specifies the outcomes required to manage contracting and procurement activities for a project. It covers the tasks associated with identifying contracting and procurement requirements, managing the planning process, contractor selection, and administering contracts. It also covers finalising and reviewing the contracting and procurement activities for a project.

A project manger usually performs this function under the overall direction of the program director and by supervising project team members carrying out contracting and procurement activities. The functions performed by project team members to assist the project manager with contracting and procurement activities are addressed in (BSBPM408A) Apply contract and procurement techniques.

A project manager responsible for the performance of a project team and under the supervision of a program director usually performs this function.

A full copy of the unit is included in this learning guide – see Appendix I.

1.3 Learning outcomes

The information and activities in this Learning Guide aim to assist you to achieve the following outcomes:

1.3.1 Elements of competency

The elements, which are the critical outcomes of the unit of competency, are:

1. Determine procurement requirements.

2. Establish agreed procurement processes.

3. Conduct contracting and procurement activities.

4. Implement the contract and/or procurement.

5. Manage contract and procurement finalisation procedures.

1.3.2 Knowledge and skills involved in managing project contracting and procurement

The unit of competency identifies the required knowledge and skills listed below. Learning and assessment activities in this guide aim have been developed to reflect all items on this list.

Required knowledge and understanding include broad knowledge and understanding of:

the principles of procurement management and their application

the principles of contracts and contractual legal requirements from the project management perspective

the selection of appropriate formal arrangements and the legal implications of such agreements

contract negotiation skills

procurement management processes and procedures

OHS legislative requirements.

Required skills and attributes include:

ability to relate to people from a range of social, cultural and ethnic backgrounds, and physical and mental abilities

project management

contract management

planning and organising

communication and negotiation

problem-solving

leadership and personnel management

negotiation

monitoring and review skills

attributes include attention to detail, ability to maintain an overview, thoroughness and positive leadership.

2. Managing project procurement: Topics and learning activities

In this section you will have the opportunity to learn more about the management of procurement in projects through activities and research.

2.1 About managing project procurement

Project procurement is a broad term to describe the processes to purchase and install the products and services necessary to see that project goals are met. Procurement may be a simple direct purchase, for example the one-off purchase of a piece of equipment, or it may require a contract for the provision of products and services across a period of time. Each project will require different products and services. The task of those responsible for procurement is to see that all products and services purchased are fit for their intended purpose and represent value for money.

Contracts guide the relationship between buyer and seller and must be managed by the project team. They are legal documents which are mutually binding, and set out the obligations of each party. Contracts can be simple or complex – generally more complex contracts are associated with higher payments and higher degrees of risk. Because of the legally binding nature of contracts, they will generally be subject to more extensive development and review processes either from within the project team or with assistance from legal experts.

Good procurement and contracting practice should deliver the following benefits:

value for money

increased client satisfaction

increased accountability

better strategic decision-making

savings in time and therefore costs.

2.1.1 Definitions and main activities involved in managing project procurement

Managing project procurement consists of five steps that are depicted in Figure 1 and explained below:

Figure 1 – Managing project procurement

Stage 1 / Determining procurement requirements
Stage 2 / Establishing agreed procurement processes
Stage 3 / Conducting contracting and procurement activities
Stage 4 / Implementing the contract and/or procurement
Stage 5 / Managing contracting and procurement finalisation activities

Determining procurement requirements. The project manager is responsible for identifying the procurement requirements for the project in consultation with stakeholders, higher authorities within their organisation and the input from the project team. The project manager also develops a procurement management plan as well as developing a communication strategy to ensure stakeholders clearly understand the project’s objectives.
Establishing agreed procurement processes. The project manager utilises information from a variety of sources to assist them in determining how project contracting and procurement requirements can be best met. Selection processes and criteria are established, adopted and communicated to stakeholders and prospective contractors or suppliers to ensure fair competition.
Conducting contracting and procurement activities. Proposals or specifications are communicated to prospective contractors or suppliers so that they have a clear understanding of project objectives. Responses are received, evaluated and prioritised before a preferred contractor is selected in accordance with legal requirements and previously agreed selection processes. Negotiations are then entered into with the preferred contractor or supplier to agree contract terms and conditions, establish common goals and eliminate uncertainty.
Implementing the contract and/or procurement. The activities established in the procurement management plan are implemented. Procurement activities are modified where necessary with higher project authority approval. Contractor progress is reviewed regularly against key performance indicators to ensure tasks are completed as scheduled, resolve conflicts and ensure all parties comply with any legal requirements contained in the contract’s terms and conditions.
Managing contracting and procurement finalisation activities. The project manager oversees finalisation activities to ensure project deliverables are met and contractual requirements have been fulfilled. Procurement records and documentation are reviewed to determine the effectiveness of contracting and procurement activities, policies and procedures used throughout the project. Any lessons learned from this review are reported to a higher project authority for application in future projects.

2.1.2 The relationship between managing contracting and procurement and project phases

Project contract procurement is important at all stages of project operations. Figure 2 shows how the contracting and procurement stages align with a project’s phases.

Figure 2 – The relationship between managing contracting and procurement and project phases

Proponent Phase / Determining procurement requirements
Approval Phase / Establishing agreed procurement processes
Implementation Phase / Conducting contracting and procurement activities
Implementation Phase / Implementing the contract and/or procurement
Completion Phase / Managing contracting and procurement finalisation activities

The summary below provides information on how contracting and procurement impacts on each stage of the project life cycle.

Proponent phase – before a project proposal is submitted (initiation/concept phase)

All projects consume resources and prior to embarking on a project it is necessary to determine what resources (products and services) will need to be purchased, and at what stages. This helps with establishing the feasibility of the project. Budgets need to be allocated for procurement and contracting. Criteria for requirements of products and services should be researched, and preliminary market analysis should be undertaken to see that suitable suppliers can be sourced for more obscure products or hard to source services. The project manager determines procurement requirements after consultation with stakeholders and the guidance of a higher project authority such as a program manager, as well as input form their project team.

Approval phase – once a project is approved (planning/development)

Once the project is approved, the project manager must ensure that information is gathered on how procurement requirements can be fulfilled so that project objectives are met. Processes, procedures and documentation needed to implement procurement activities need to be developed and approved.

Implementation phase – when the project is underway (delivery)

Prospective contractors are provided with specifications and information to facilitate a response to the procurement documents. Responses are collated, analysed, evaluated, and prioritised before a preferred contractor is selected. Negotiations are entered into at this point to finalise a contract. Once the project is underway the policies, procedures and documents developed in the approval phase need to be introduced and implemented. Staff with procurement responsibilities will need to check that products and services are delivered on time, that necessary quality requirements are met and that reporting, invoicing and payment is properly processed. Contract management is ongoing across the implementation phase and good relations with suppliers should be fostered.

Completion phase - review (finalisation)

At the completion phase there should be a review of the performance of suppliers and contractors as well as a thorough examination of the efficacy of internal procurement activities. Issues should be documented so that future projects will improve from lessons learned.

2.1.3 Responsibilities for managing procurement and contract management

Table 1 below shows the responsibilities for managing project contracting and procurement for each member of the project team. The shaded area represents the responsibilities of project managers, which is the focus of this Learning Guide.

Table 1 – Responsibilities in contracting and procurement

Personnel / Responsibility
Project manager / Has overall responsibility for project procurement and contracting
Supervises the work of others who assist with procurement and contracting
Leads the processes of planning, negotiating, managing and reviewing procurement and contracting
Authorising agent/agency / Takes responsibility for overseeing procurement and contracting across a range of projects
Manages project manager/s who supervise procurement and contracting
Directs organisational processes to improve procurement and contracting
Project team member(s) / Works with others to plan project procurement and contracting
Assists in developing tendering and contract documentation
Gathers information and participates in selection of suppliers and contractors
Participates in contract negotiation and contract management
Contributes to administering and managing the contract
Assists others to review contracts, contractor performance and procurement processes

2.1.4 Stakeholder involvement in project contracting and procurement

Consultation and communication with stakeholders are important processes when making purchasing decisions. Stakeholders may include those people who will use the products you purchase – they will have clear ideas about what will be required and will be able to assist you with developing your product specifications. Similarly when purchasing services, such as consultant reports, your project team will depend on you to seek their expertise for tender specifications and contract deliverables.