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The cost portion of the chapter aligns with chapter 7 of the PMBOK and 9% of the CAPM questions come from this knowledge area. The content connects to the Planning and Monitoring & Controlling category of the PMP questions. The procurement portion of the chapter deals with Chapter 12 of the PMBOK and 9% of the CAPM questions come from this knowledge area. The content connects to the Planning, Executing, Monitoring & Controlling and closure category of the PMP questions.
An important part of a project manager’s job is managing money. All types of organizations must manage their money well in order to fulfill their mission, including not-for-profit and government organizations. The tools and methods used to manage money on a project vary depending on the phase and complexity of the project. This chapter first describes the methods used to estimate the cost of a project, create a budget, and manage the cost of activities while the project is being executed. It then covers a major component of cost management—the procurement process.
To achieve the objectives of the project, the management team often needs to look outside the internal organization for additional help. The process of obtaining goods and services from providers who are outside of the organization is called procurement. We will discuss ways of selecting the work that will be procured and the different methods and processes for procuring the equipment, materials, and services for the project.
The procurement effort on projects varies widely and depends on the type of project. Often the client organization will provide procurement services on less complex projects. In this case, the project team identifies the materials, equipment, and supplies needed by the project and provides product specifications and a detailed delivery schedule. When the procurement department of the parent organization provides procurement services, a liaison from the project can help the procurement team better understand the unique requirements of the project and the time-sensitive or critical items of the project schedule.
On larger, more complex projects, personnel are dedicated to procuring and managing the equipment, supplies, and materials needed by the project. Because of the temporary nature of projects, equipment, supplies, and materials are procured as part of the product of the project or for the execution of the project. For example, workbook materials might be procured for the product of the project, and the computers and software might be equipment procured for the execution of the project work. At the end of the project, equipment bought or rented for the execution of the work of the project are sold, returned to rental organizations, or disposed of some other way.
More complex projects will typically procure through different procurement and management methods. Commodities are common products that are purchased based on the lowest bid. Commodities include items like concrete for building projects, office supplies, or even lab equipment for a research project. The second type of procurement includes products that are specified for the project. Vendorswho can produce these products bid for a contract. The awarding of a contract can include price, ability to meet the project schedule, the fit for purpose of the product, and other considerations important to the project. Equipment especially designed and built for a research project is an example of what might be provided by a project vendor. These vendors’ performances become important parts of the project, and the project manager assigns resources to coordinate the work and schedule of the vendor.
The third procurement approach is the development of one or more partners. A public relations firm that is awarded the advertising contract for a major project and a research firm that is conducting critical subparts of the research are examples of potential project partners. A partner contributes to and is integrated into the execution plan. Partners perform best when they share the project vision of success and are emotionally invested in the project. The project management team builds and implements a project procurement plan that recognizes the most efficient and effective procurement approach to support the project.
Designers Share Their Experiences
Dr. Andy Gibbons – Instructional Psychology and Technology – BYU
Heather Bryce – Independent Studies – BYU
Dr. Larry Seawright – Center for Teaching and Learning – BYU