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Contracting and Procurement in Project Management

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Scenario:

American Property Development Corporation (APDC) a designer and developer of outdoor shopping malls and small office complexes has decided to standardize their project management practices and processes across the national organization. The goal is to standardize on one single project scheduling tool,and have the tool installed and to be operational within 90 days. To this end they are forming a central Project Management Office (PMO). Until now, project managers (there are 40 presently on staff distributed all over the USA and Canada) have been able to use whatever scheduling tool they liked, within their budget constraints. They have also been able to buy equipment and engage contractors at will. The PMO will be determining one scheduling tool that all PMs will be expected to use, exclusive of any other scheduling tools. The PMO will also develop and implement a standardized procurement process. Since the PMs are located across the USA and Canada, a web-based solution seems likely to be the most successful tool.

As the Project Manager, you have been charged with implementing the procurement process and you decide your first project will be purchasing the scheduling tool for ACME Development Corporation.

Deliverable Length: 2500-3500 words/student, 1500-1750 discuss. words

Create a Risk Template without risk responses by listing those risks that you think are appropriate for APDC. You may need to make assumptions about the project. Just be sure to document them in the description of the risk. Consider both project and product risks. Consider external as well as internal risks. Consider risks to the project budget, its schedule, its resources and the product's quality. Categorize and quantify them.

Create a Weighted Scorecard list of functional requirements for a scheduling tool you need to purchase for APDC. Place each of your requirement statements, one per row, in the Requirements column. Decide what weight you want to give to each requirement and place it in the Weight column. Document any assumptions you make in footnotes. When you are finished, the score and weighted score columns should not be blank.

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Discussion:

There are several project risks. The risks relate to the scheduling tool not being ready by the deadline and the project is delayed. The delay can take place because of several reasons including external reasons beyond the control of vendor or because of vendor related reasons. It is expected that an incentive bonus for finishing the contract on time is necessary kept the project on schedule.

There are risks related to the functioning and features of the scheduling tool. For instance the tool may not have all the features that have been negotiated with the vendor. If an important feature is not available then it may be counter productive to require all the employees of American Property Development Corporation to change over to the new scheduling tool. Further, it is necessary that every feature that has been included in the contract is actually tested before the scheduling tool is accepted for company wide deployment. There is a risk that the features that have been negotiated and included in the contact are missing when the scheduling tool is delivered. This risk can be managed by testing the scheduling tool very carefully and comparing the tool features with those included in the contract. American Property Development Corporation should insist that all the contracted features be included in the scheduling tool.

There is a risk that in spite of the fixed price contract, he may insist that there is cost overrun and that American Property Development Corporation should pay more than what had been contracted. This risk can be reduced by mentioning in the contract that no increasing in price is admissible. In addition, American Property Development Corporation will do well to keep a buffer budget of $75,000 for unexpected cost increases. Finally, there is the risk that scheduling tool may be rejected by several employees who may wish to continue with their old scheduling tools. This risk will be mitigated by making the new scheduling tool user friendly and allow easy access to training.

American Property Development Corporation should endeavor to manage each of these risks by identification of the risks. This has been done in the risk template, these risks are quantified especially when additional cost is incurred so that American Property Development Corporation knows the money it has to spend for mitigating these risks. Further, in the template the risk response has ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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