Procurement Management: Rick Auto Enterprises (RAE) is upgrading its billing system.

Scenario:

Your company, Rick Auto Enterprises (RAE), is upgrading its legacy billing system. The system was installed originally over ten years ago, and has been upgraded according to the vendor's schedule, each one taking 9-12 weeks in duration with a team of 2 full time employees (FTE's).

RAE will be doing a major upgrade now for the new web-based version of the system, in addition to the mainframe legacy system update. It is anticipated that this upgrade will take 16-20 weeks in duration; however, everyone has agreed that a more formal scheduling process should be completed which may change the duration estimate. The project will involve significant changes to existing business processes, changes to existing jobs, as well as the creation of several new positions. Customers as well as auto brokers will be able to view and pay their bills on-line, accessing a billing customer service agent when needed. This change, which will affect the billing, sales, and customer service departments, is expected to reduce costs, improve customer satisfaction, and reduce the number of days for outstanding accounts receivable. The existing customer service staff has some proficiency with web applications, but the billing and sales staff does not.

To date, the Billing Department has owned the applications, and the director of the department has been the sponsor for all upgrade projects. For this upgrade, however, the chief operations officer has indicated that the Customer Service Department also needs to play a major role. It will be up to you to determine the project sponsor and steering committee structure and participants. You will do this during the initiation phase.

Congratulations, you have been chosen to be the project manager; you will be on the project 30 hours a week and your rate is $150 per hour. You have significant experience with the system and have managed previous upgrade projects. You have acted as a business analyst, developer, and tester for projects on this package in the past. You will select your team, which will consist of several IT staff, supplemented by staff from the vendor. You have been told you can have up to 2.5 RAE FTEs, in addition to yourself, for the duration of the project. (The list of available people is described in the Phase Two task.)

The vendor's role is to be determined by you; their consultants cost $165 an hour for business analysts, $135 an hour for technical architects, $110 an hour for programmers or testers, and $100 an hour for instructional designers, trainers, or technical writers. You have a budget of $125000.00 for vendor resources. You may supplement your team with vendors based on the holes in your RAE team. For example, you may choose to have the vendor provide programmers if you choose not to have any of the internal staff provide programming resources, if your budget permits.

You will follow your organization's standard methodology for a package upgrade. Part of that process includes the development and delivery of documentation and training materials--a responsibility generally filled by the RAE IT training group. You have access to .5 FTE for the duration of the project to develop and deliver the materials. The person with the most experience on the package and current training/documentation will be unavailable to the project due to other projects; however, the vendor has adequate materials that can be purchased for an additional $8,500. You will need to determine the training needs, analyze the costs associated with each option, and determine the project's scope.

With this version, the vendor also has another software add-on that supports the integration of your existing customer service system with the billing system's customer service functions. There is not a decision yet as to which customer service system will be used, whether or not they will be integrated, and the extent to which customer databases will be integrated (if at all). According to the vendor, the installation of the add-on will cost $45,000 and take an additional four weeks.

Assignment:

Procurement management is a knowledge area that involves selecting vendors, negotiating their terms, and managing the ongoing relationships with them. Sometimes those activities are conducted by the project manager; other times they are completed by a purchasing department or higher-level manager. As a project manager, what procurement management activities have you performed in the past? If the PM has not completed those activities, who in the organization has? What procurement-related activities do you anticipate you will be expected to complete as the project manager for RAE? What activities do you need to do right now?

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