Download ICT 327 Topic 08 2004 Semester 1

Topic 8
Risk & Procurement Management
Schwalbe: Chapters 11, 12
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 1
Learning Objectives
• At the end of this topic, you should be able to:
• Define risk and the importance of good project risk
management
• List the elements involved in risk management planning
• List common sources of risks on information technology
projects
• Describe the risk identification process and tools and
techniques to help identify project risks
• Discuss the qualitative risk analysis process and explain
how to calculate risk factors, use probability/impact matrixes,
the Top Ten Risk Item Tracking technique, and expert
judgment to rank risks
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 2
Learning Objectives
• At the end of this topic, you should be able to:
• Explain the quantify risk analysis process and how to
use decision trees and simulation to quantitative risks
• Provide examples of using different risk response
planning strategies such as risk avoidance,
acceptance, transference, and mitigation
• Discuss what is involved in risk monitoring and control
• Describe how software can assist in project risk
management
• Explain the results of good project risk management
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 3
Why is Project Risk Management important?
• It is the art and science of identifying, assigning,
and responding to risk throughout the life of a
project and in the best interests of meeting project
objectives
• Risk management is often overlooked on projects,
but it can help improve project success by helping
select good projects, determining project scope,
and developing realistic estimates
• Risk management is often neglected, especially
on IT projects (Ibbs and Kwak)
• 55 percent of runaway projects did no risk
management at all (KPMG)
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 4
Project Management Maturity by Industry
Group and Knowledge Area
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 5
What is Risk?
• A dictionary definition of risk is “the
possibility of loss or injury”
• Project risk involves understanding
potential problems that might occur on
the project and how they might impede
project success
• Risk management is like a form of
insurance; it is an investment
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 6
Example risk: It might rain
• How do you manage that risk?
• Take a chance?
• Take an umbrella? Jacket? Drive?
• Does it matter if you get wet? If not, then do
nothing.
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 7
Anatomy of a risk
• Likelihood of it occurring
• Impact if it does
• e.g. something could be very likely, but low
impact.
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 8
Risk of rain in Perth
Project: Outdoor picnic
Likely?
Impact
Rating
Mitigation
(probability)
Jan
Unlikely
High
M
Backup
location
J
July
Likely
High
H
Don’t hold
event or
hold indoors
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 9
Risk Utility
• Risk utility or risk tolerance is the amount of
satisfaction or pleasure received from a
potential payoff
• Utility rises at a decreasing rate for a person
who is risk-averse
• Those who are risk-seeking have a higher
tolerance for risk and their satisfaction
increases when more payoff is at stake
• The risk-neutral approach achieves a balance
between risk and payoff
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 10
Risk Processes
•
•
•
•
•
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Risk Response Planning
Risk monitoring and control
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 11
Question
• Are you:
• risk-averse (conservative)
• risk-neutral, or
• risk-seeking
in relation to:
• finances (investment)
• food
• recreation activities
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 12
Risk Utility Function and Risk Preference
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 13
What is Project Risk Management?
• The goal of project risk management is to
minimize potential risks while maximizing potential
opportunities.
• Example 1: an opportunity may exist to expand
into another country, but the risk of failure is very
high. How is this risk managed?
• Example 2: Possible to deliver system both on
web and hand-held. Hand-held is more difficult, is
it worth the risk of failure?
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 14
Processes
• Risk management planning: deciding how to approach
and plan the risk management activities for the project
• Risk identification: determining which risks are likely to
affect a project and documenting their characteristics
• Qualitative risk analysis: characterizing and analyzing
risks and prioritizing their effects on project objectives
• Quantitative risk analysis: measuring the probability
and consequences of risks
• Risk response planning: taking steps to enhance
opportunities and reduce threats to meeting project
objectives
• Risk monitoring and control: monitoring known risks,
identifying new risks, reducing risks, and evaluating the
effectiveness of risk reduction
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 15
Risk Management Planning
• The main output of risk management
planning is a risk management plan
• The project team should review project
documents and understand the
organization’s and the sponsor’s approach
to risk
• The level of detail will vary with the needs of
the project
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 16
Questions Addressed in a Risk Management Plan
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 17
Contingency & Fallback Plans, Contingency
Reserves
• Contingency plans: predefined actions that the
project team will take if an identified risk event
occurs
• Fallback plans: developed for risks that have a
high impact on meeting project objectives
• Contingency reserves or allowances: provisions
held by the project sponsor that can be used to
mitigate cost or schedule risk if changes in scope
or quality occur
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 18
Common Sources of Risk on Information
Technology Projects
• Several studies show that IT projects share
some common sources of risk
• The Standish Group developed an IT
success potential scoring sheet based on
potential risks
• McFarlan developed a risk questionnaire to
help assess risk
• Other broad categories of risk help identify
potential risks
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 19
Information Technology Success Potential Scoring
Sheet
Success Criterion
Points
User Involvement
19
Executive Management support
16
Clear Statement of Requirements
15
Proper Planning
11
Realistic Expectations
10
Smaller Project Milestones
9
Competent Staff
8
Ownership
6
Clear Visions and Objectives
3
Hard-Working, Focused Staff
3
Total
100
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 20
McFarlan’s Risk Questionnaire
1.
2.
3.
4.
What is the project estimate in calendar (elapsed) time?
( ) 12 months or less
Low = 1 point
( ) 13 months to 24 months
Medium = 2 points
( ) Over 24 months
High = 3 points
Elapsed Time
What is the estimated number of person days for the system?
( ) 12 to 375
Low = 1 point
( ) 375 to 1875
Medium = 2 points
( ) 1875 to 3750
Medium = 3 points
( ) Over 3750
High = 4 points
Effort in days
Number of departments involved (excluding IT)
( ) One
Low = 1 point
( ) Two
Medium = 2 points
( ) Three or more
High = 3 points
# Business areas
Is additional hardware required for the project?
( ) None
Low = 0 points
( ) Central processor type change
Low = 1 point
( ) Peripheral/storage device changes Low = 1
( ) Terminals
Med = 2
( ) Change of platform, for example High = 3
PCs replacing mainframes
Extra hardware
Other Categories of Risk
• Market risk: Will the new product be useful to
the organization or marketable to others? Will
users accept and use the product or service?
• Financial risk: Can the organization afford to
undertake the project? Is this project the best
way to use the company’s financial resources?
• Technology risk: Is the project technically
feasible? Could the technology be obsolete
before a useful product can be produced?
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 22
What Went Wrong?
Many information technology projects fail because of technology risk. One
project manager learned an important lesson on a large IT project: focus on
business needs first, not technology. David Anderson, a project manager for
Kaman Sciences Corp., shared his experience from a project failure in an article
for CIO Enterprise Magazine. After spending two years and several hundred
thousand dollars on a project to provide new client/server-based financial and
human resources information systems for their company, Anderson and his
team finally admitted they had a failure on their hands. Anderson revealed that
he had been too enamored of the use of cutting-edge technology and had taken
a high-risk approach on the project. He "ramrodded through" what the project
team was going to do and then admitted that he was wrong. The company
finally decided to switch to a more stable technology to meet the business needs
of the company.
Hildebrand, Carol. “If At First You Don’t Succeed,” CIO Enterprise Magazine, April 15, 1998
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 23
Risk Identification
• Risk identification is the process of understanding
what potential unsatisfactory outcomes are
associated with a particular project
• Several risk identification tools and techniques
include
•
•
•
•
Brainstorming
The Delphi technique
Interviewing
SWOT analysis
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 24
Potential Risk Conditions Associated with Each
Knowledge Area
Knowledge Area
Risk Conditions
Integration
Inadequate planning; poor resource allocation; poor integration
management; lack of post-project review
Scope
Poor definition of scope or work packages; incomplete definition
of quality requirements; inadequate scope control
Time
Errors in estimating time or resource availability; poor allocation
and management of float; early release of competitive products
Cost
Estimating errors; inadequate productivity, cost, change, or
contingency control; poor maintenance, security, purchasing, etc.
Quality
Poor attitude toward quality; substandard
design/materials/workmanship; inadequate quality assurance
program
Human Resources
Poor conflict management; poor project organization and
definition of responsibilities; absence of leadership
Communications
Carelessness in planning or communicating; lack of consultation
with key stakeholders
Risk
Ignoring risk; unclear assignment of risk; poor insurance
management
Procurement
Unenforceable conditions or contract clauses; adversarial relations
Quantitative Risk Analysis
• Assess the likelihood and impact of
identified risks to determine their magnitude
and priority
• Risk quantification tools and techniques
include
• Probability/Impact matrixes
• The Top 10 Risk Item Tracking technique
• Expert judgment
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 26
Sample Probability/Impact Matrix
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 27
Sample Probability/Impact Matrix for
Qualitative Risk Assessment
Chart Showing High-, Medium-, & Low-Risk
Technologies
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 29
Top 10 Risk Item Tracking
•
•
•
Similar to the 10 ten songs for the week/month.
Top 10 Risk Item Tracking: is a tool for
maintaining an awareness of risk throughout the
life of a project
Steps:
1. Establish a periodic review of the top 10 project risk items
2. List the current ranking, previous ranking, number of times the
risk appears on the list over a period of time, and a summary
of progress made in resolving the risk item
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 30
Example of Top 10 Risk Item Tracking
Monthly Ranking
Risk Item
This
Last
Month
Month
Inadequate
planning
1
2
4
Working on revising the
entire project plan
Poor definition
of scope
2
3
3
Holding meetings with
project customer and
sponsor to clarify scope
Absence of
leadership
3
1
2
Just assigned a new
project manager to lead
the project after old one
quit
Poor cost
estimates
4
4
3
Revising cost estimates
Poor time
estimates
5
5
3
Revising schedule
estimates
ICT 327 Management of IT Projects
Number
Risk Resolution
of Months Progress
Semester 1, 2004
Topic 8- 31
Expert Judgment
• Many organizations rely on the intuitive
feelings and past experience of experts to
help identify potential project risks
• Experts can categorize risks as high,
medium, or low with or without more
sophisticated techniques
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 32
Quantitative Risk Analysis
• Often follows qualitative risk analysis, but
both can be done together or separately
• Large, complex projects involving leading
edge technologies often require extensive
quantitative risk analysis
• Main techniques include
• decision tree analysis
• simulation
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 33
Decision Trees & Expected Monetary Value
(EMV)
• A decision tree is a diagramming method
used to help you select the best course of
action in situations in which future
outcomes are uncertain
• EMV is a type of decision tree where you
calculate the expected monetary value of a
decision based on its risk event probability
and monetary value
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 34
Expected Monetary Value (EMV) Example
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 35
Simulation
• Simulation uses a representation or model of a
system to analyze the expected behavior or
performance of the system
• Monte Carlo analysis simulates a model’s
outcome many times to provide a statistical
distribution of the calculated results
• To use a Monte Carlo simulation, you must have
three estimates (most likely, pessimistic, and
optimistic) plus an estimate of the likelihood of the
estimate being between the optimistic and most
likely values
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 36
What Went Right?
A large aerospace company used Monte Carlo simulation to help quantify
risks on several advanced-design engineering projects. The National
Aerospace Plan (NASP) project involved many risks. The purpose of this
multibillion-dollar project was to design and develop a vehicle that could
fly into space using a single-stage-to-orbit approach. A single-stage-to-orbit
approach meant the vehicle would have to achieve a speed of Mach 25 (25
times the speed of sound) without a rocket booster. A team of engineers and
business professionals worked together in the mid-1980s to develop a
software model for estimating the time and cost of developing the NASP.
This model was then linked with Monte Carlo simulation software to
determine the sources of cost and schedule risk for the project. The results
of the simulation were then used to determine how the company would
invest its internal research and development funds. Although the NASP
project was terminated, the resulting research has helped develop more
advanced materials and propulsion systems used on many modern aircraft.
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 37
Risk Response Planning
• After identifying and quantifying risks, you must
decide how to respond to them
• Four main strategies:
• Risk avoidance: eliminating a specific threat or risk,
usually by eliminating its causes
• Risk acceptance: accepting the consequences should a
risk occur
• Risk transference: shifting the consequence of a risk
and responsibility for its management to a third party
• Risk mitigation: reducing the impact of a risk event by
reducing the probability of its occurrence
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 38
General Risk Mitigation Strategies for
Technical, Cost, and Schedule Risks
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 39
Risk Monitoring and Control
• Monitoring risks involves knowing their status
• Controlling risks involves carrying out the risk
management plans as risks occur
• Workarounds are unplanned responses to risk
events that must be done when there are no
contingency plans
• The main outputs of risk monitoring and control
are corrective action, project change requests,
and updates to other plans
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 40
Risk Response Control
• Risk response control involves executing the risk
management processes and the risk management
plan to respond to risk events
• Risks must be monitored based on defined
milestones and decisions made regarding risks
and mitigation strategies
• Sometimes workarounds or unplanned responses
to risk events are needed when there are no
contingency plans
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 41
Using Software to Assist in Project Risk
Management
• Databases can keep track of risks. Many IT
departments have issue tracking databases
• Spreadsheets can aid in tracking and
quantifying risks
• More sophisticated risk management
software, such as Monte Carlo simulation
tools, help in analyzing project risks
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 42
Sample Monte Carlo Simulation Results for
Project Schedule
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 43
Sample Monte Carlo Simulations Results for
Project Costs
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 44
Results of Good Project Risk Management
• Unlike crisis management, good project risk
management often goes unnoticed
• Well-run projects appear to be almost
effortless, but a lot of work goes into
running a project well
• Project managers should strive to make
their jobs look easy to reflect the results of
well-run projects
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 45
Project Procurement Management
Schwalbe: Chapter 12
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 46
Learning Objectives
• Understand the importance of project procurement
management and the increasing use of outsourcing
for information technology projects
• Describe the procurement planning process,
procurement planning tools and techniques, types
of contracts, and statements of work
• Discuss what is involved in solicitation planning and
the difference between a request for proposal and a
request for quote
• Explain what occurs during the solicitation process
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 47
Learning Objectives
• Describe the source selection process and
different approaches for evaluating proposals or
selecting suppliers
• Discuss the importance of good contract
administration
• Describe the contract close-out process
• Discuss types of software available to assist in
project procurement management
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 48
Importance of Project Procurement
Management
• Procurement means acquiring goods and/or
services from an outside source
• Other terms include purchasing and outsourcing
• Experts predicted that by the year 2003 the
worldwide information technology outsourcing
market would grow to over $110 billion
• U.S. federal spending on IT outsourcing is
projected to increase from $6.6 billion in 2002 to
nearly $15 billion by 2007 due to an emphasis on
e-government, homeland security, and the
shortage of IT workers in government
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 49
Why Outsource?
• To reduce both fixed and recurrent costs
• To allow the client organization to focus on
its core business
• To access skills and technologies
• To provide flexibility
• To increase accountability
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 50
Question
• What are the risks of outsourcing?
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 51
Project Procurement Management Processes
• Procurement planning: determining what to
procure and when
• Solicitation planning: documenting product
requirements and identifying potential sources
• Solicitation: obtaining quotations, bids, offers, or
proposals as appropriate
• Source selection: choosing from among potential
vendors
• Contract administration: managing the
relationship with the vendor
• Contract close-out: completion and settlement of
the contract
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 52
Project Procurement Management Processes
and Key Outputs
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 53
Procurement Planning
• Procurement planning involves identifying
which project needs can be best met by using
products or services outside the organization.
• It includes deciding
•
•
•
•
•
whether to procure
how to procure
what to procure
how much to procure
when to procure
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 54
Question
• What is the relationship between
outsourcing & procurement?
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 55
What Went Right?
• Several organizations, such as The Boots
Company PLC in England, outsourced their
IT services to save money compared with
running the systems themselves
• Carefully planning procurement can also
save millions of dollars, as the U.S. Air
Force did by using a flexible pricing strategy
for a large office automation project
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 56
Procurement Planning Tools and Techniques
• Make-or-buy analysis: determining whether
a particular product or service should be
made or performed inside the organization
or purchased from someone else. Often
involves financial analysis
• Experts, both internal and external, can
provide valuable inputs in procurement
decisions
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 57
Make-or Buy Example
• Assume you can lease an item you need
for a project for $150/day. To purchase the
item, the investment cost is $1,000, and
the daily cost would be another $50/day.
• How long will it take for the lease cost to be
the same as the purchase cost?
• If you need the item for 12 days, should
you lease it or purchase it?
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 58
Make-or Buy Solution
• Set up an equation so the “make” is equal to the “buy”
• In this example, use the following equation. Let d be the
number of days to use the item.
$150d = $1,000 + $50d
• Solve for d as follows:
• Subtract $50d from the right side of the equation to get
$100d = $1,000
• Divide both sides of the equation by $100
d = 10 days
• The lease cost is the same as the purchase cost at 10
days
• If you need the item for 12 days, it would be more
economical to purchase it
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 59
Types of Contracts
• Fixed-price or lump-sum: involve a fixed total
price for a well-defined product or service
• Cost-reimbursable: involve payment to the seller
for direct and indirect costs
• Time and material contracts: hybrid of both fixedprice and cost-reimbursable, often used by
consultants
• Unit price contracts: require the buyer to pay the
seller a predetermined amount per unit of service
ICT 327 Management of IT Projects
Semester 1, 2004
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Cost Reimbursable Contracts
• Cost plus incentive fee (CPIF): the buyer pays
the seller for allowable performance costs plus
a predetermined fee and an incentive bonus
• Cost plus fixed fee (CPFF): the buyer pays the
seller for allowable performance costs plus a
fixed fee payment usually based on a
percentage of estimated costs
• Cost plus percentage of costs (CPPC): the
buyer pays the seller for allowable performance
costs plus a predetermined percentage based
on total costs
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 61
Contract Types Versus Risk
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 62
Statement of Work (SOW)
• A statement of work is a description of the
work required for the procurement
• Many contracts, or mutually binding
agreements, include SOWs
• A good SOW gives bidders a better
understanding of the buyer’s expectations
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 63
Statement of Work (SOW) Template
I.
Scope of Work: Describe the work to be done to detail. Specify the hardware and
software involved and the exact nature of the work.
II.
Location of Work: Describe where the work must be performed. Specify the
location of hardware and software and where the people must perform the work
III.
Period of Performance: Specify when the work is expected to start and end,
working hours, number of hours that can be billed per week, where the work must
be performed, and related schedule information.
IV.
Deliverables Schedule: List specific deliverables, describe them in detail, and
specify when they are due.
V.
Applicable Standards: Specify any company or industry-specific standards that
are relevant to performing the work.
VI.
Acceptance Criteria: Describe how the buyer organization will determine if the
work is acceptable.
VII.
Special Requirements: Specify any special requirements such as hardware or
software certifications, minimum degree or experience level of personnel, travel
requirements, and so on.
ICT 327 Management of IT Projects
Semester 1, 2004
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Solicitation Planning
• Solicitation planning involves preparing
several documents:
• Request for Proposals: used to solicit
proposals from prospective sellers
• Requests for Quotes: used to solicit quotes
for well-defined procurements
• Invitations for bid or negotiation and initial
contractor responses are also part of
solicitation planning
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 65
Outline for a Request for Proposal (RFP)
I.
Purpose of RFP
II.
Organization’s Background
III.
Basic Requirements
IV.
Hardware and Software Environment
V.
Description of RFP Process
VI.
Statement of Work and Schedule Information
VII.
Possible Appendices
A. Current System Overview
B. System Requirements
C. Volume and Size Data
D. Required Contents of Vendor’s Response to RFP
E. Sample Contract
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 66
Solicitation
• Solicitation involves obtaining proposals or
bids from prospective sellers
• Organizations can advertise to procure
goods and services in several ways
• approaching the preferred vendor
• approaching several potential vendors
• advertising to anyone interested
• A bidders’ conference can help clarify the
buyer’s expectations
ICT 327 Management of IT Projects
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Source Selection
• Source selection involves
•
•
•
•
evaluating bidders’ proposals
choosing the best one
negotiating the contract
awarding the contract
• It is helpful to prepare formal evaluation
procedures for selecting vendors
• Buyers often create a “short list”
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 68
Sample Proposal Evaluation Sheet
ICT 327 Management of IT Projects
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Topic 8- 69
Detailed Criteria for Selecting Suppliers
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Topic 8- 70
Be Careful in Selecting Suppliers and Writing
Their Contracts
• Many dot-com companies were created to meet
potential market needs, but many went out of
business, mainly due to poor business planning,
lack of senior management operations
experience, lack of leadership, and lack of visions.
Check the stability of suppliers
• Even well-known suppliers can impede project
success. Be sure to write and manage contracts
well with all suppliers (see What Went Wrong?)
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 71
Contract Administration
• Contract administration ensures that the
seller’s performance meets contractual
requirements
• Contracts are legal relationships, so it is
important that legal and contracting
professionals be involved in writing and
administering contracts
• Many project managers ignore contractual
issues, which can result in serious problems
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 72
Suggestions on Change Control for
Contracts
• Changes to any part of the project need to be
reviewed, approved, and documented by the
same people in the same way that the original
part of the plan was approved
• Evaluation of any change should include an
impact analysis. How will the change affect the
scope, time, cost, and quality of the goods or
services being provided?
• Changes must be documented in writing.
Project team members should also document
all important meetings and telephone calls
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 73
Contract Close-out
• Contract close-out includes
• product verification to determine if all work was
completed correctly and satisfactorily
• administrative activities to update records to
reflect final results
• archiving information for future use
• Procurement audits identify lessons learned
in the procurement process
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 74
Using Software to Assist in Project
Procurement Management
• Word processing software: writing
proposals and contracts. (Templates &
macros)
• Spreadsheets: help in evaluating suppliers.
(Templates & macros)
• Databases help track suppliers, and
presentation software aids in presenting
procurement-related information
ICT 327 Management of IT Projects
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Topic 8- 75
Procurement Systems
• In the late 1990s and early 2000s, many
companies started using e-procurement software
to do many procurement functions electronically
• Companies such as Commerce One, Ariba,
Concur Technologies, SAS, and Baan provide
corporate procurement services over the Internet
• Organizations also use other Internet tools to help
find information on suppliers or auction goods and
services
• WA State Government: Government Electronic Market
(GEM) www.gem.wa.gov.au/Gem
ICT 327 Management of IT Projects
Semester 1, 2004
Topic 8- 76
www.gem.wa.gov.au/Gem
http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/PROCUREMENT/0,,pagePK:84271~theSitePK:84266,00.html
procurement
guidelines