12.2 Conduct Procurement

Description: the process of obtaining seller responses, selecting a seller, and awarding the contract. The end results are the established agreements including formal contracts.

Key benefit: it selects a qualified seller and implements the legal agreement for delivery.

Frequency: periodically throughout the project as needed.

The Process	Input	The Process	Output	The Process
Project Management Plan	Scope management plan	12.2 Conduct Procurement	Selected sellers	12.3 Control Procurements
	Requirements management plan		Change requests	4.6 Perform Integrated Change Control
	Communications management plan		Requirements management plan	Project Management Plan
	Risk management plan		Quality management plan
	Procurement management plan		Communication management plan
	Configuration management plan		Risk management plan
	Cost baseline		Procurement management plan
Project Documents	Lesson learned register		Scope baseline
	Project schedule		Schedule baseline
	Requirements documentation		Cost baseline
	Risk register		Lesson learned register	Project Documents
	Stakeholder register		Project documentation
Procurement Documentation			Requirements traceability matrix
Enterprise/ Organization	Enterprise environmental factors		Resource calendars
	Organizational process assets		Risk register
Seller Proposals	Seller proposals		Stakeholder register
			Organizational process assets	Enterprise / Organization
				4.1 Develop Project Charter
				4.7 Close Project or Phase
				7.3 Determine Budget
				12.3 Control Procurements
				13.2 Plan Stakeholder Engagement
				4.5 Monitor and Control Project Work
				6.5 Develop Schedule
				9.6 Control Resources
				13.1 Identify Stakeholders

12.2.1 Inputs

Include:

• Scope management plan: how the overall scope of work will be managed, including the scope performed by sellers.
• Requirements management plan. Describes how requirements will be analyzed, documented, and managed, may include how sellers will manage the requirements they are under agreement to satisfy.
• Communications management plan. Describes how communications between buyers and sellers will be conducted.
• Risk management plan. Describes how risk management activities will be structured and performed for the project.
• Procurement management plan. Contains the activities to be undertaken during the Conduct Procurements process.
• Configuration management plan. Defines those items that are configurable, those items that require formal change control, and the process for controlling changes to such items. It includes formats and processes for how sellers will provide configuration management in a way that is consistent with the buyer's approach.
• Cost baseline. Includes the budget for the procurement as well as costs associated with managing the procurement process and sellers.

12.1.2.2 Project Documents

Include:

• Lessons learned register.
• Project schedule. Identifies the start and end dates of project activities, including procurement activities. It also defines when contractor deliverables are due.
• Requirements documentation. May include:
  • Technical requirements the seller is required to satisfy, and
  • Requirements with contractual and legal implications that may include health, safety, security, performance, environmental, insurance, intellectual property rights, equal employment opportunity, licenses, permits, and other nontechnical requirements.
• Risk register. Each approved seller comes with its own unique set of risks, depending on
  • The seller's organization,
  • The duration of the contract,
  • The external environment,
  • The project delivery method,
  • The type of contracting vehicle chosen, and
  • The final agreed-upon price.
• Stakeholder register. Identified stakeholders.

12.2.1.3 Procurement Documentation

Procurement documentation provides a written record used in reaching the legal agreement, and may include older documents predating the current project. Include:

• Bid documents. RFI, RFP, RFQ, or other documents sent to sellers so they can develop a bid response.
• Procurement statement of work. Provides sellers with a clearly stated set of goals, requirements, and outcomes from which they can provide a quantifiable response.
• Independent cost estimates. Developed either internally or by using external resources and provide a reasonableness check against the proposals submitted by bidders.
• Source selection criteria. Describe how bidder proposals will be evaluated, including evaluation criteria and weights. For risk mitigation, the buyer may decide to sign agreements with more than one seller to mitigate damage caused by a single seller having problems that impact the overall project.

12.2.1.4 Seller Proposals

12.2.1.5 Enterprise Environmental Factors

• Local laws and regulations regarding procurements;
• Local laws and regulations ensuring that the major procurements involve local sellers;
• External economic environment constraining procurement processes;
• Marketplace conditions;
• Information on relevant past experience with sellers, both good and bad;
• Prior agreements already in place; and
• Contract management systems.

12.2.1.6 Organizational Process Assets

• List of preferred sellers that have been prequalified,
• Organizational policies that influence the selection of a seller,
• Specific organizational templates or guidelines that will determine the way agreements are drafted and built, and
• Financial policies and procedures regarding invoicing and payment processes.

12.2.2 Tools and Techniques

12.2.2.1 Expert Judgement

• Proposal evaluation;
• Technical or subject matter;
• Relevant functional areas such as finance, engineering, design, development, supply chain management, etc.;
• Industry regulatory environment;
• Laws, regulations, and compliance requirements; and
• Negotiation.

12.2.2.2 Advertising

Placing advertisements in general circulation publications such as selected newspapers or in specialty trade publications. Most government jurisdictions require public advertising or online posting of pending government contracts.

12.2.2.3 Bidder Conferences

A meetings between the buyer and prospective sellers prior to proposal submittal. They are used to ensure that all prospective bidders have a clear and common understanding of the procurement and no bidders receive preferential treatment.

12.2.2.4 Data Analysis

Proposal evaluation.

12.2.2.5 Interpersonal and Team Skills

Negotiation. Negotiation is a discussion aimed at reaching an agreement. Procurement negotiation clarifies the structure, rights, and obligations of the parties and other terms of the purchases so that mutual agreement can be reached prior to signing the contract. Final document language reflects all agreements reached. Negotiation concludes with a signed contract document or other formal agreement that can be executed by both buyer and seller.

The negotiation should be led by a member of the procurement team that has the authority to sign contracts. The project manager and other members of the project management team may be present during negotiation to provide assistance as needed.

12.2.3 Outputs

12.2.3.1 Selected Sellers

12.2.3.1 Agreements

Components:

• Procurement statement of work or major deliverables;
• Schedule, milestones, or date by which a schedule is required;
• Performance reporting;
• Pricing and payment terms;
• Inspection, quality, and acceptance criteria;
• Warranty and future product support;
• Incentives and penalties;
• Insurance and performance bonds;
• Subordinate subcontractor approvals;
• General terms and conditions;
• Change request handling; and
• Termination clause and alternative dispute resolution mechanisms.

12.2.3.3 Change Requests

12.2.3.4 Project Management Plan Updates

Via a change request.

Include:

• Requirements management plan. Changes to project requirements due to changes identified by sellers.
• Quality management plan. Sellers may offer alternative quality standards or alternative solutions that impact the quality approaches defined in the quality management plan.
• Communications management plan. As sellers are hired, the communications management plan is updated to incorporate their communications needs and approaches.
• Risk management plan. Each agreement and seller has its own set of risks that may require updates to the risk management plan. Specific risks are incorporated into the risk register.
• Procurement management plan. Updates may be required depending on the results of the contracting and negotiations processes.
• Scope baseline. The project WBS and deliverables documented in the scope baseline are considered when performing procurement activities. Any one or all of these may change during the procurement process.
• Schedule baseline. If there are delivery changes created by sellers that impact overall project schedule performance, the baseline schedule may need to be updated and approved to reflect the current expectations.
• Cost baseline. Contractor and materials prices can change frequently during the delivery of a project. These changes can occur because of fluctuating materials and labor prices created by the external economic environment and need to be incorporated into the cost baseline.

12.2.3.5 Project Documents Updates

Include:

• Lessons learned register. Information on challenges encountered while conducting procurements and how they could have been avoided as well as approaches that worked well.
• Requirements documentation. Requirements documentation may include:
  • Technical requirements that the seller is required to satisfy, and
  • Requirements with contractual and legal implications that may include health, safety, security, performance, environmental, insurance, intellectual property rights, equal employment opportunity, licenses, permits, and other nontechnical requirements.
• Requirements traceability matrix. As sellers are incorporated into the project's plan, the requirements register and the traceability matrix may change depending on the capabilities of the specific seller.
• Resource calendars. Schedule resource calendars may need to be updated depending on the availabilities of the sellers.
• Risk register. Each approved seller comes with its own unique set of risks, depending on the seller's organization, the duration of the contract, the external environment, the project delivery method, the type of contracting vehicle chosen, and the final agreed-upon price. Changes are made to the risk register during the contracting process, which reflect the specific risks of each seller.
• Stakeholder register. The details about the identified stakeholders. The stakeholder register is updated as agreements are made with specific sellers.

12.2.3.6 Organizational Process Assets Updates

• Listings of prospective and prequalified sellers; and
• Information on relevant experience with sellers, both good and bad.

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12.1 Plan Procurement Management

Description: it is the process of documenting project procurement decisions, specifying the approach and identifying potential sellers. Goods and services may be procured from other parts of the organization or from external sources. he project manager should ensure that the project team is staffed with procurement expertise at the level required for the project. Typical steps:

• Prepare the procurement statement of work (SOW) or terms of reference (TOR).
• Prepare a high-level cost estimate to determine the budget.
• Advertise the opportunity.
• Identify a short list of qualified sellers.
• Prepare and issue bid documents.
• Prepare and submit proposals by the seller.
• Conduct a technical evaluation of the proposals including quality.
• Perform a cost evaluation of the proposals.
• Prepare the final combined quality and cost evaluation to select the winning proposal.
• Finalize negotiations and sign contract between the buyer and the seller.

The key benefit: it determines whether to acquire goods and services from outside the project and, if so, what to acquire as well as how and when to acquire to.

Frequency: once or at predefined points in the project. The process should be done early.

The Process / Asset Group	Input	The Process	Output	The Process / Asset Group
4.1 Develop Project Charter	Project charter	12.1 Plan Procurement Management	Procurement management plan	Project Management Plan
Project Management Plan	Scope management plan		Procurement strategy	Procurement Documentation
	Quality management plan		Procurement statement of work
	Resource management plan		Bid documents
	Scope baseline		Make-or-buy decisions
Business Documents	Business Case		Independent cost estimates
	Benefits Management Plan		Change requests	4.6 Perform Integrated Change Control
Project Documents	Milestone list		Source selection criteria	Project Documents
	Project team assignments		Lesson learned register
	Requirements documentation		Milestone List
	Requirements traceability matrix		Requirements documentation
	Resource requirements		Requirements traceability matrix
	Risk register		Risk register
	Stakeholder register		Stakeholder register
Enterprise / Organization	Enterprise environmental factors		Organization process assets update	Enterprise / Organization
	Organizational process assets

12.1.1 Inputs

12.1.1.1 Project Charter

It contains the objectives, project description, summary milestones, and the preapproved financial resources.

12.1.1.2 Business Documents

• Business case. The procurement strategy and business case need to be aligned to ensure the business case remains valid.
• Benefits management plan. Benefits schedule => procurement dates and contract language.

12.1.1.3 Project Management Plan

• Scope management plan.
• Quality management plan. The applicable industry standards and codes the project => RFP => the contract.
• Resource management plan. Which resources will be purchased or leased. Assumptions or constraints that would influence the procurement.
• Scope baseline. The scope statement, WBS, and WBS dictionary. The elements of the scope that are known are used to develop the statement of work (SOW) and the terms of reference (TOR).

12.1.1.4 Project Documents

• Milestone list.
• Project team assignments. It contains information on the skills and abilities of the project team and their availability to support the procurement activities.
• Requirements documentation.
  • Technical requirements that the seller is required to satisfy,
  • Requirements with contractual and legal implications that may include
    • Health,
    • Safety,
    • Security,
    • Performance,
    • Environmental,
    • Insurance,
    • Intellectual property rights,
    • Equal employment opportunity,
    • Licenses, permits, and
    • Other nontechnical requirements.
• Requirements traceability matrix. Specific needs such as team and physical resources.
• Risk register. The list of risks, along with the results of risk analysis and risk response planning.
• Stakeholder register. The project participants and their interests in the project, including regulatory agencies, contracting personnel, and legal personnel.

12.1.1.5 Enterprise Environmental Factors

• Marketplace conditions;
• Products, services, and results that are available in the marketplace;
• Sellers, including their past performance or reputation;
• Typical terms and conditions for products, services, and results or for the specific industry;
• Unique local requirements, such as regulatory requirements for local labor or sellers;
• Legal advice regarding procurements;
• Contract management systems, including procedures for contract change control;
• Established multi-tier supplier system of prequalified sellers based on prior experience; and
• Financial accounting and contract payments system.

12.1.1.6 Organizational Process Assets

• Preapproved seller lists.
• Formal procurement policies, procedures, and guidelines.
• Contract types.
  • Fixed-price contracts. This category of contracts involves setting a fixed total price for a defined product, service, or result to be provided. These contracts should be used when the requirements are well defined and no significant changes to the scope are expected. Types of fixed-price contract include:
    • Firm fixed price (FFP). The most commonly used contract type is the FFP. It is favored by most buying organizations because the price for goods is set at the outset and not subject to change unless the scope of work changes.
    • Fixed price incentive fee (FPIF). This fixed-price arrangement gives the buyer and seller some flexibility in that it allows for deviation from performance, with financial incentives tied to achieving agreed-upon metrics. Typically, such financial incentives are related to cost, schedule, or technical performance of the seller. Under FPIF contracts, a price ceiling is set, and all costs above the price ceiling are the responsibility of the seller.
    • Fixed price with economic price adjustments (FPEPA). This type is used whenever the seller's performance period spans a considerable period of years, or if the payments are made in a different currency. It is a fixed-price contract, but with a special provision allowing for predefined final adjustments to the contract price due to changed conditions, such as inflation changes or cost increases (or decreases) for specific commodities.
  • Cost-reimbursable contracts. Payments (cost reimbursements) to the seller for all legitimate actual costs incurred for completed work, plus a fee representing seller profit.
    • Cost plus fixed fee (CPFF). The seller is reimbursed for all allowable costs for performing the contract work and receives a fixed-fee payment calculated as a percentage of the initial estimated project costs. Fee amounts do not change unless the project scope changes.
    • Cost plus incentive fee (CPIF). The seller is reimbursed for all allowable costs for performing the contract work and receives a predetermined incentive fee based on achieving certain performance objectives as set forth in the contract. In CPIF contracts, if the final costs are less or greater than the original estimated costs, then both the buyer and seller share costs from the departures based upon a prenegotiated cost-sharing formula, for example, an 80/20 split over/under target costs based on the actual performance of the seller.
    • Cost plus award fee (CPAF). The seller is reimbursed for all legitimate costs, but the majority of the fee is earned based on the satisfaction of certain broad subjective performance criteria that are defined and incorporated into the contract. The determination of fee is based solely on the subjective determination of seller performance by the buyer and is generally not subject to appeals.
• Time and material contracts (T&M). Time and material contracts (also called time and means) are a hybrid type of contractual arrangement with aspects of both cost-reimbursable and fixed-price contracts. They are often used for staff augmentation, acquisition of experts, and any outside support when a precise statement of work cannot be quickly prescribed.

12.1.2 Tools and Techniques

12.1.2.1 Expert Judgment

• Procurement and purchasing,
• Contract types and contract documents, and
• Regulations and compliance topics.

12.1.2.2 Data Gathering

Market research (includes examination of industry and specific seller capabilities).

12.1.2.3 Data Analysis

Make-or-buy analysis. Factors to consider in the make-or-buy decision include

• The organization's current resource allocation and their skills and abilities,
• The need for specialized expertise, The desire to not expand permanent employment obligations, and
• The need for independent expertise.
• Evaluating the risks involved with each make-or-buy decision.

The method may use

• Payback period,
• Return on investment (ROI),
• Internal rate of return (IRR),
• Discounted cash flow,
• Net present value (NPV),
• Benefit/cost analysis (BCA), or
• Other techniques.

12.1.2.4 Source Selection Analysis

It is necessary to review the prioritization of the competing demands for the project before deciding on the selection method. it is a good practice to include the evaluation method in the procurement documents so bidders know how they will be evaluated.

• Least cost. The least cost method may be appropriate for procurements of a standard or routine nature where well-established practices and standards exist and from which a specific and well-defined outcome is expected, which can be executed at different costs.
• Qualifications only. The qualifications only selection method applies when the time and cost of a full selection process would not make sense because the value of the procurement is relatively small. The buyer establishes a short list and selects the bidder with the best credibility, qualifications, experience, expertise, areas of specialization, and references.
• Quality-based/highest technical proposal score. The selected firm is asked to submit a proposal with both technical and cost details and is then invited to negotiate the contract if the technical proposal proves acceptable. Using this method, technical proposals are first evaluated based on the quality of the technical solution offered. The seller who submitted the highest-ranked technical proposal is selected if their financial proposal can be negotiated and accepted.
• Quality and cost-based. The quality and cost-based method allows cost to be included as a factor in the seller selection process. In general, when risk and/or uncertainty are greater for the project, quality should be a key element when compared to cost.
• Sole source. The buyer asks a specific seller to prepare technical and financial proposals, which are then negotiated. Since there is no competition, this method is acceptable only when properly justified and should be viewed as an exception.
• Fixed budget. The fixed-budget method requires disclosing the available budget to invited sellers in the RFP and selecting the highest-ranking technical proposal within the budget. Because sellers are subject to a cost constraint, they will adapt the scope and quality of their offer to that budget. The buyer should therefore ensure that the budget is compatible with the SOW and that the seller will be able to perform the tasks within the budget. This method is appropriate only when the SOW is precisely defined, no changes are anticipated, and the budget is fixed and cannot be exceeded.

12.1.2.5 Meetings

12.1.3 Outputs

12.1.3.1 Procurement Management Plan

It contains the activities to be undertaken during the procurement process. It should document whether international competitive bidding, national competitive bidding, local bidding, etc., should be done. If the project is financed externally, the sources and availability of funding should be aligned with the procurement management plan and the project schedule.

Include guidance for:

• How procurement will be coordinated with other project aspects, such as project schedule development and control processes;
• Timetable of key procurement activities;
• Procurement metrics to be used to manage contracts;
• Stakeholder roles and responsibilities related to procurement, including authority and constraints of the project team when the performing organization has a procurement department;
• Constraints and assumptions that could affect planned procurements;
• The legal jurisdiction and the currency in which payments will be made;
• Determination of whether independent estimates will be used and whether they are needed as evaluation criteria;
• Risk management issues including identifying requirements for performance bonds or insurance contracts to mitigate some forms of project risk; and
• Prequalified sellers, if any, to be used.

12.1.3.2 Procurement Strategy

The objective of the procurement strategy is

• To determine the project delivery method,
  • For professional services, delivery methods include:
    • Buyer/services provider with no subcontracting,
    • Buyer/services provider with subcontracting allowed,
    • Joint venture between buyer and services provider, and
    • Buyer/services provider acts as the representative.
  • For industrial or commercial construction, project delivery methods include but are not limited to:
  • Turnkey,
  • Design build (DB),
  • Design bid build (DBB),
  • Design build operate (DBO),
  • Build own operate transfer (BOOT), and
  • Others.
• The type of legally binding agreement(s). Contract payment types are separate from the project delivery methods and are coordinated with the buying organization's internal financial systems. They include but are not limited to these contract types plus variations:
  • Lump sum,
  • Firm fixed price,
  • Cost plus award fees,
  • Cost plus incentive fees,
  • Time and materials,
  • Target cost, and
  • Others.
• How the procurement will advance through the procurement phases:
  • Sequencing or phasing of the procurement, a description of each phase and the specific objectives of each phase;
  • Procurement performance indicators and milestones to be used in monitoring;
  • Criteria for moving from phase to phase;
  • Monitoring and evaluation plan for tracking progress; and
  • Process for knowledge transfer for use in subsequent phases.

12.1.3.3 Bid Documents

To solicit proposals from prospective sellers. Terms such as bid, tender, or quotation are generally used when the seller selection decision is based on price (as when buying commercial or standard items), while a term such as proposal is generally used when other considerations such as technical capability or technical approach are the most important. Depending on the goods or services needed, the bidding documents can include a request for information, request for quotation, request for proposal, or other appropriate procurement documents.

The conditions:

• Request for information (RFI). An RFI is used when more information on the goods and services to be acquired is needed from the sellers. It will typically be followed by an RFQ or RFP.
• Request for quotation (RFQ). An RFQ is commonly used when more information is needed on how vendors would satisfy the requirements and/or how much it will cost.
• Request for proposal (RFP). An RFP is used when there is a problem in the project and the solution is not easy to determine. This is the most formal of the “request for” documents and has strict procurement rules for content, timeline, and seller responses.

12.1.3.4 Procurement Statement of Work (SOW)

The statement of work (SOW) for each procurement is developed from the project scope baseline and defines only that portion of the project scope that is to be included within the related contract. The SOW describes the procurement item in sufficient detail to allow prospective sellers to determine if they are capable of providing the products, services, or results. Sufficient detail can vary based on the nature of the item, the needs of the buyer, or the expected contract form. Information included in a SOW can include specifications, quantity desired, quality levels, performance data, period of performance, work location, and other requirements. It includes a description of any collateral services required, such as performance reporting or post-project operational support for the procured item.

Terms of reference (TOR) includes:

• Tasks the contractor is required to perform as well as specified coordination requirements;
• Standards the contractor will fulfill that are applicable to the project;
• Data that needs to be submitted for approval;
• Detailed list of all data and services that will be provided to the contractor by the buyer for use in performing the contract, if applicable; and
• Definition of the schedule for initial submission and the review/approval time required.

12.1.3.5 Source Selection Criteria

It may include:

• Capability and capacity;
• Product cost and life cycle cost;
• Delivery dates;
• Technical expertise and approach;
• Specific relevant experience;
• Adequacy of the proposed approach and work plan in responding to the SOW;
• Key staff's qualifications, availability, and competence;
• Financial stability of the firm;
• Management experience; and
• Suitability of the knowledge transfer program, including training;
• Local country content.

12.1.3.6 Make-or-Buy Decisions

12.1.3.7 Independent Cost Estimates

Significant differences in cost estimates can be an indication that the procurement SOW was deficient or ambiguous, or that the prospective sellers either misunderstood or failed to respond fully to the procurement SOW.

12.1.3.8 Change Requests

12.1.3.9 Project Documents Updates

Include:

• Lessons learned register. Regulations and compliance, data gathering, data analysis, and source selection analysis.
• Milestone list. Shows when the sellers are expected to deliver their results.
• Requirements documentation. May include:
  • Technical requirements that the seller is required to satisfy, and
  • Requirements with contractual and legal implications that may include health, safety, security, performance, environmental, insurance, intellectual property rights, equal employment opportunity, licenses, permits, and other nontechnical requirements.
• Requirements traceability matrix. Links product requirements from their origin to the deliverables that satisfy them.
• Risk register. Each approved seller comes with its own unique set of risks, depending on the seller's organization, the duration of the contract, the external environment, the project delivery method, the type of contracting vehicle chosen, and the final agreed-upon price.
• Stakeholder register. The stakeholder register is updated with any additional information on stakeholders, particularly regulatory agencies, contracting personnel, and legal personnel.

12.1.3.10 Organizational Process Assets Updates

Information on qualified sellers.

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12 Project Procurement Management

It includes the management and control processes required to develop and administer agreements: contracts, purchase orders, memorandum of agreements, service level agreement.

Key Concepts for Project Procurement Management

There can be significant legal obligations and penalties tied to the procurement process. The project manager should be familiar enough with the procurement process to make intelligent decisions regarding contracts and contractual relationships. The project manager is typically not authorized to sign legal agreements binding the organization; this is reserved for those who have the authority to do so.

Trends and Emerging Practices in Procurement Management

• Advances in tools. A single point where procurements can be advertised and provide sellers with a single source to find procurement documents and complete them directly online.
• More advanced risk management. To write contracts that accurately allocate specific risks to those entities most capable of managing them. No contractor is capable of managing all the possible major risks on a project. Contracts may specify that risk management be performed as part of the contract.
• Changing contracting processes. International contracts with multiple contractors from many countries => the use of internationally recognized standard contract forms is increasing in order to reduce problems and claims during execution.
• Logistics and supply chain management. For long-lead items, both the manufacture of the items and their transportation to the project site become schedule-drivers. Long-lead items may be procured in advance of other procurement contracts to meet the planned project completion date. It is possible to begin contracting for these long-lead materials, supplies, or equipment before the final design of the end product itself is completed based on the known requirements identified in the top-level design. Not only are primary sources of supplies identified early in the project, but secondary, back-up sources are also generally identified. Many countries around the world require international contractors to purchase certain minimum percentages of material and supplies from local vendors.
• Technology and stakeholder relations. Publicly funded projects are under increasing scrutiny. A trend in infrastructure and commercial construction projects is the use of technology including web cameras (webcams) to improve stakeholder communications and relations.
• Trial engagements. Some projects will engage several candidate sellers for initial deliverables and work products on a paid basis before making the full commitment to a larger portion of the project scopeTail

Tailoring Considerations

• Complexity of procurement. Is there one main procurement or are there multiple procurements at different times with different sellers that add to the complexity of the procurements?
• Physical location. Are the buyers and sellers in the same location, or reasonably close, or in different time zones, countries, or continents?
• Governance and regulatory environment. Are local laws and regulations regarding procurement activities integrated with the organization's procurement policies? How does this affect contract auditing requirements?
• Availability of contractors. Are there available contractors who are capable of performing the work?

Considerations for Agile/Adaptive Environment

Specific sellers may be used to extend the team. This collaborative working relationship can lead to a shared risk procurement model where both the buyer and the seller share in the risk and rewards associated with a project.

Larger projects may use an adaptive approach for some deliverables and a more stable approach for other parts. In these cases, a governing agreement such as a master services agreement (MSA) may be used for the overall engagement, with the adaptive work being placed in an appendix or supplement. This allows changes to occur on the adaptive scope without impacting the overall contract.

Link to the origin post

11.7 Monitor Risks

Description: the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The process uses performance information generated during project execution to determine if:

• Implemented risk responses are effective,
• Level of overall project risk has changed,
• Status of identified individual project risks has changed,
• New individual project risks have arisen,
• Risk management approach is still appropriate,
• Project assumptions are still valid,
• Risk management policies and procedures are being followed,
• Contingency reserves for cost or schedule require modification, and
• Project strategy is still valid.

Key benefit: it enables project decisions to be based on current information about overall project risk exposure and individual project risks.

Frequency: throughout the project.

Process / Asset Group	Input	The Process	Output	Process / Asset Group
Project Management Plan	Risk management plan	11.7 Monitor Risks	Work performance information	4.5 Monitor and Control Project Work
Project Documents	Issue log		Change requests	4.6 Perform Integrated Change Control
	Lesson learned register		Components	Project Management Plan
	Risk register		Assumption log	Project Documents
	Risk report		Issue log
4.3 Direct and Manage Project Work	Work performance data		Lesson learned register
4.5 Monitor and Control Project Work	Work performance reports		Risk register
			Risk report
			Organizational process assets update	Enterprise / Organization

11.7.1 Inputs

11.7.1.1 Project Management Plan

The risk management plan - guidance on how and when risks should be reviewed, which policies and procedures should be followed, the roles and responsibilities in the monitoring process, and reporting formats.

11.7.1.2 Project Documents

• Issue log.
• Lesson learned register.
• Risk register.
• Risk report.

11.7.1.3 Work Performance Data

Data on project status such as

• Risk responses that have been implemented,
• Risks that have occurred,
• Risks that are active and those that have been closed out.

11.7.1.4 Work Performance Reports

The information is relevant when monitoring performance-related risks:

• Variance analysis
• Earned value data
• Forecasting data

11.7.2 Tools and Techniques

11.7.2.1 Data Analysis

• Technical performance analysis. Technical performance analysis compares technical accomplishments during project execution to the schedule of technical achievement. It requires the definition of objective, quantifiable measures of technical performance, which can be used to compare actual results against targets. Such technical performance measures may include weight, transaction times, number of delivered defects, storage capacity, etc. Deviation can indicate the potential impact of threats or opportunities.
• Reserve analysis. Reserve analysis compares the amount of the contingency reserves remaining to the amount of risk remaining at any time in the project in order to determine if the remaining reserve is adequate. This may be communicated using various graphical representations, including a burndown chart.

11.7.2.2 Audits

A type of audit that may be used to consider the effectiveness of the risk management process. The project manager is responsible for ensuring that risk audits are performed at an appropriate frequency, as defined in the project's risk management plan. Risk audits may be included during routine project review meetings or may form part of a risk review meeting, or the team may choose to hold separate risk audit meetings. The format for the risk audit and its objectives should be clearly defined before the audit is conducted.

11.7.2.3 Meetings

Risk reviews are scheduled regularly and should examine and document the effectiveness of risk responses in dealing with overall project risk and with identified individual project risks. Risk reviews may also result in

• Identification of new individual project risks, (including secondary risks that arise from agreed-upon risk responses),
• Reassessment of current risks,
• The closing of risks that are outdated,
• Issues that have arisen as the result of risks that have occurred, and
• Identification of lessons to be learned for implementation in ongoing phases in the current project or in similar projects in the future.

The risk review may be conducted as part of a periodic project status meeting or a dedicated risk review meeting may be held, as specified in the risk management plan.

11.7.3 Outputs

11.7.3.1 Work Performance Information

How project risk management is performing by comparing the individual risks that have occurred with the expectation of how they would occur.

11.7.3.2 Change Requests

11.7.3.3 Project Management Plan Updates

11.7.3.4 Project Document Updates

• Assumption log.
• Issue log.
• Lesson learned register.
• Risk register.
• Risk report.
  • Reflect the current status of major individual project risks
  • The current level of overall project risk.
  • Details of the top individual project risks,
  • Agreed-upon responses and owners,
  • Conclusions and
  • Recommendations.
  • Conclusions from risk audits on the effectiveness of the risk management process.

11.7.3.5 Organizational Process Asset Updates

• Templates for the risk management plan, risk register, and risk report; and
• Risk breakdown structure.

Ling to the original post

11.6 Implement Risk Responses

Description: the process of implementing agreed-upon risk response plans.

Key benefit: it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities.

Frequency: throughout the project.

Process / Asset Group	Input	The Process	Output	Process / Asset Group
Project Management Plan	Risk management plan	11.6 Implement Risk Responses	Change requests	4.6 Perform Integrated Change Control
Project Documents	Lesson learned register		Lesson learned register	Project Documents
	Risk register		Issue log
	Risk report		Project team assignment
Enterprise / Organization	Organizational process assets		Risk register
			Risk report

11.6.1 Inputs

11.6.1.1 Project Management Plan

The risk management plan

• Lists the roles and responsibilities of project team members and other stakeholders for risk management.
• Defines the level of detail for the risk management methodology for the project.
• Specifies risk thresholds for the project based on the risk appetite of key stakeholders, which define the acceptable target that the implementation of risk responses is required to achieve.

11.6.1.2 Project Documents

• Lesson learned register.
• Risk register. Records the agreed-upon risk responses for each individual risk and the nominated owners for each response plan.
• Risk report. Includes
  • An assessment of the current overall project risk exposure,
  • The agreed-upon risk response strategy.
  • Describes the major individual project risks with their planned responses.

11.6.1.3 Organizational Process Assets

The lessons learned repository.

11.6.2 Tools and Techniques

11.6.2.1 Expert Judgement

To validate or modify risk responses if necessary, and decide how to implement them in the most efficient and effective manner.

11.6.2.2 Interpersonal and Team Skills

Influencing.

11.6.2.3 Project Management Informational System (PMIS)

11.6.3 Outputs

11.6.3.1 Change Requests

11.6.3.2 Project Documents Updates

• Issue log.
• Lesson learned register. Updated with information on challenges encountered when implementing risk responses and how they could have been avoided, as well as approaches that worked well for implementing risk responses.
• Project team assignments.
• Risk register. Updated to reflect any changes to the previously agreed-upon risk responses for individual project risks that are subsequently made as a result of the Implement Risk Responses process.
• Risk report. 

Link to the original post.

11.5 Plan Risk Responses

Description: the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure and individual project risks. The process allocates resources and inserts activities into project documents and the project management plan as needed. Unsuitable risk responses can have the converse effect. Once risks have been identified, analyzed, and prioritized, plans should be developed by the nominated risk owner for addressing every individual project risk the project team considers to be sufficiently important, either because of the threat it poses to the project objectives or the opportunity it offers. Risk responses should be appropriate for the significance of the risk, cost-effective in meeting the challenge, realistic within the project context, agreed upon by all parties involved, and owned by a responsible person. Secondary risks should also be identified. Secondary risks are risks that arise as a direct result of implementing a risk response. A contingency reserve is often allocated for time or cost. If developed, it may include identification of the conditions that trigger its use.

Key benefit: it identifies appropriate ways to address overall project risk and individual project risks.

Frequency: throughout the project.

Process / Asset Group	Input	The Process	Output	Process / Asset Group
Project Management Plan	Resource management plan	11.5 Plan Risk Responses	Change requests	4.6 Perform Integrated Change Control
	Risk management plan			Project Management Plan
	Cost baseline		Schedule management plan
Project Documents	Lesson learned register		Cost management plan
	Project schedule		Quality management plan
	Resource breakdown structure		Resource management plan
	Resource calendars		Procurement management plan
	Risk register		Scope baseline
	Risk report		Schedule baseline
	Stakeholder register		Cost baseline
Enterprise / Organization	Enterprise environmental factors		Assumption log	Project Documents
	Organizational process assets		Cost forecasts
			Lesson learned regiaster
			Project schedule
			Project team assignment
			Risk register
			Risk report

10.5.1 Inputs

11.5.1.1 Project Management Plan

• Resource management plan. To help determine how resources allocated to agreed-upon risk responses will be coordinated with other project resources.
• Risk management plan. Risk management roles and responsibilities and risk thresholds.
• Cost baseline. Information on the contingency fund.

11.5.1.2 Project Documents

• Lesson learned register.
• Project schedule. To determine how agreed-upon risk responses will be scheduled alongside other project activities.
• Project team assignments. The resources that can be allocated to agreed-upon risk responses.
• Resource calendars. When potential resources are available to be allocated to agreed-upon risk responses.
• Risk register. Details of individual project risks that have been identified and prioritized, and for which risk responses are required. The priority level for each risk can help to guide the selection of appropriate risk responses. The nominated risk owner for each risk. It may also contain preliminary risk responses identified earlier in the Project Risk Management process.
• Risk report. The current level of overall risk exposure.
• Stakeholder register. Potential owners for risk responses.

11.5.1.3 Enterprise Environmental Factors

The risk appetite and thresholds of key stakeholders.

11.5.1.4 Organizational Process Assets

• Templates for the risk management plan, risk register, and risk report;
• Historical databases; and
• Lessons learned repositories from similar projects.

11.5.2 Tools and Techniques

11.5.2.1 Expert Judgment

• Threat response strategies,
• Opportunity response strategies,
• Contingent response strategies, and
• Overall project risk response strategies.

11.5.2.2 Data Gathering

Interviews.

11.5.2.3 Interpersonal and Team Skills

Facilitation. To understand the risk, identify and compare alternative possible risk response strategies, choose an appropriate response strategy, and identify and overcome sources of bias.

11.5.2.4 Strategies for Threats

1. Escalate. A threat is outside the scope of the project or that the proposed response would exceed the project manager's authority. Escalated risks are managed at the program level, portfolio level, or other relevant part of the organization, and not on the project level. It is important that ownership of escalated threats is accepted by the relevant party in the organization. Escalated threats are not monitored further by the project team after escalation, although they may be recorded in the risk register for information.
2. Avoid. To eliminate the threat or protect the project from its impact. Change the project management plan/objectives => reduce probability of the risk to zero.
   1. Remove the cause of the a threat;
   2. Extend the schedule;
   3. Change the project strategy;
   4. Reduce scope;
   5. Clarify requirements;
   6. Obtain information;
   7. Improve communication;
   8. Acquire expertise.
3. Transfer. Shifting ownership of a threat to a third party to manage the risk and to bear the impact if the threat occurs:
   1. Use of insurance;
   2. Performance bonds;
   3. Warranties;
   4. Guaranties;
   5. Agreements.
4. Mitigate. Reduce the probability of occurrence and/or impact of a threat. Action to mitigate risks, redundancies, others.
5. Accept. No proactive action is taken. Active acceptance - create a contingency reserves. Passive - periodic review only.

11.5.2.5 Strategies for Opportunities

1. Escalate.
2. Exploit.
3. Share.
4. Enhance. Increase the probability and/or impact of an opportunity.
5. Accept.

11.5.2.6 Contingent Response Strategies

For some risks, it is appropriate for the project team to make a response plan that will only be executed under certain predefined conditions, if it is believed that there will be sufficient warning to implement the plan. Events that trigger the contingency response, such as missing intermediate milestones or gaining higher priority with a seller, should be defined and tracked. Risk responses identified using this technique are often called contingency plans or fallback plans and include identified triggering events that set the plans in effect.

11.5.2.7 Strategies for Overall Project Risk

• Escalate.
• Exploit.
• Transfer/Share.
• Mitigate/Enhance.
• Accept.

11.5.2.8 Data Analysis

• Alternatives analysis. A simple comparison of the characteristics and requirements of alternative risk response options.
• Cost-benefit analysis.

11.5.2.9 Decision Making

Multicriteria decision analysis uses a decision matrix to provide a systematic approach for establishing key decision criteria, evaluating and ranking alternatives, and selecting a preferred option. Criteria for risk response selection may include but are not limited to

• Cost of response,
• Likely effectiveness of response in changing probability and/or impact,
• Resource availability,
• Timing constraints (urgency, proximity, and dormancy),
• Level of impact if the risk occurs,
• Effect of response on related risks,
• Introduction of secondary risks,
• Etc.

11.5.3 Outputs

11.5.3.1 Change Requests

11.5.3.2 Project Management Plan Updates

• Schedule management plan. Changes to resource loading and leveling, or updates to the schedule strategy.
• Cost management plan. Changes to cost accounting, tracking, and reports, as well as updates to the budget strategy and how contingency reserves are consumed.
• Quality management plan. Changes to approaches for meeting requirements, quality management approaches, or quality control processes.
• Resource management plan. Changes to resource allocation, as well as updates to the resource strategy.
• Procurement management plan. Alterations in the make-or-buy decision or contract type(s).
• Scope baseline.
• Schedule baseline.
• Cost baseline.

11.5.3.3 Project Documents Updates

• Assumption log. New assumptions and constraints.
• Cost forecasts.
• Lesson learned register.
• Project schedule.
• Project team assignment.
• Risk register.
  • Agreed-upon response strategies.
  • Specific actions to implement the chosen response strategy.
  • Trigger conditions, symptoms, and warning signs of a risk occurrence.
  • Budget and schedule activities required to implement the chosen responses.
  • Contingency plans and risk triggers that call for their execution.
  • Fallback plans for use when a risk that has occurred and the primary response proves to be inadequate.
  • Residual risks that are expected to remain after planned responses have been taken or accepted.
  • Secondary risks that arise as a direct outcome of a risk response.
  
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11.4 Perform Quantitative Risk Analysis

Description: the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. It usually requires specialized risk software and expertise in the development and interpretation of risk models. It also consumes additional time and cost. It is the only reliable method to assess overall project risk through evaluating the aggregated effect on project outcomes of all individual project risks and other sources of uncertainty. It uses information on individual project risks that have been assessed by the Perform Qualitative Risk Analysis process.

Key benefit: it quantifies overall project risk exposure, can also provide additional quantitative risk information to support risk planning.

Frequency: throughout the project (if used on the project).

Process / Asset Group	Input	The Process	Output	Process / Asset Group
Project Management Plan	Risk Management Plan	11.4 Perform Quantitative Risk Analysis	Risk Report	Project Documents
	Scope baseline
	Schedule baseline
	Cost baseline
Project Documents	Assumption log
	Base of estimates
	Cost estimates
	Cost forecasts
	Duration Estimates
	Milestone list
	Resource requirements
	Risk register
	Risk report
	Schedule forecasts
Enterprise / Organization	Enterprise Environment Factors
	Organizational process assets

11.4.1 Inputs

11.4.1.1 Project Management Plan

• Risk management plan. Whether quantitative risk analysis is required for the project. It also details the resources available for the analysis and the expected frequency of analyses.
• Scope baseline. The starting point from which the effect of individual project risks and other sources of uncertainty are evaluated.
• Schedule baseline. The starting point from which the effect of individual project risks and other sources of uncertainty can be evaluated.
• Cost baseline. The starting point from which the effect of individual project risks and other sources of uncertainty can be evaluated.

11.4.1.2 Project Documents

• Assumption log.
• Basis of estimates. It may be reflected in variability modeled during a quantitative risk analysis process. This may include information on the estimate's purpose, classification, assumed accuracy, methodology, and source.
• Cost estimates.
• Cost forecasts. Estimate to complete (ETC), estimate at completion (EAC), budget at completion (BAC), and to-complete performance index (TCPI) may be compared to the results of a quantitative cost risk analysis to determine the confidence level associated with achieving these targets.
• Duration estimates.
• Milestone list.
• Resource requirements.
• Risk register.
• Risk report.
• Schedule forecast.

11.4.1.3 Enterprise Environmental Factors

• Industry studies of similar projects;
• Published material, including commercial risk databases or checklists.

11.4.1.4 Organizational Process Assets

Information from similar completed projects.

14.4.2 Tools and Techniques

11.4.2.1 Expert Judgement

• Translating information on individual project risks and other sources of uncertainty into numeric inputs for the quantitative risk analysis model,
• Selecting the most appropriate representation of uncertainty to model particular risks or other sources of uncertainty,
• Modeling techniques that are appropriate in the context of the project,
• Identifying which tools would be most suitable for the selected modeling techniques, and
• Interpreting the outputs of quantitative risk analysis.

14.4.2.2 Data Gathering

Interviews.

14.4.2.3 Interpersonal and Team Skills

Facilitation.

14.4.2.4 Representations of Uncertainty

Range of possible values with distribution types:

• Triangular
• Normal
• Lognormal
• Beta
• Uniform
• Discrete

Risks as probabilistic branches. Branches are most useful for risks that might occur independently of any planned activity. Where risks are related, for example, with a common cause or a logical dependency, correlation is used in the model to indicate this relationship.

14.4.2.5 Data Analysis

• Simulation. A model that simulates the combined effects of individual project risks and other sources of uncertainty to evaluate their potential impact on achieving project objectives. a criticality analysis that determines which elements of the risk model have the greatest effect on the project critical path. A criticality index is calculated for each element in the risk model, which gives the frequency with which that element appears on the critical path during the simulation, usually expressed as a percentage.
• Sensitivity analysis. Which individual project risks or other sources of uncertainty have the most potential impact on project outcomes. It correlates variations in project outcomes with variations in elements of the quantitative risk analysis model.

• Decision tree analysis used to support selection of the best of several alternative courses of action. Alternative paths through the project are shown in the decision tree using branches representing different decisions or events, each of which can have associated costs and related individual project risks (including both threats and opportunities). The end-points of branches in the decision tree represent the outcome from following that particular path, which can be negative or positive.

• Influence diagrams. graphical aids to decision making under uncertainty. An influence diagram represents a project or situation within the project as a set of entities, outcomes, and influences, together with the relationships and effects between them. Where an element in the influence diagram is uncertain as a result of the existence of individual project risks or other sources of uncertainty, this can be represented in the influence diagram using ranges or probability distributions. The influence diagram is then evaluated using a simulation technique, such as Monte Carlo analysis, to indicate which elements have the greatest influence on key outcomes. Outputs from an influence diagram are similar to other quantitative risk analysis methods, including S-curves and tornado diagrams.

11.4.3 Outputs

11.4.3.1 Project Documents Updates

Risk report:

• Assessment of overall project risk exposure.
  • Chances of project success, indicated by the probability that the project will achieve its key objectives.
  • Degree of inherent variability remaining within the project at the time the analysis was conducted, indicated by the range of possible project outcomes.
• Detailed probabilistic analysis of the project. S-curves, tornado diagrams, and criticality analysis, together with a narrative interpretation of the results.
  • Amount of contingency reserve needed to provide a specified level of confidence;
  • Identification of individual project risks or other sources of uncertainty that have the greatest effect on the project critical path; and
  • Major drivers of overall project risk, with the greatest influence on uncertainty in project outcomes.
• Prioritized list of individual project risks.
• Trends in quantitative risk analysis results.
• Recommended risk responses.

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