Plan Contracting: Inputs Plan Contracting

12.4.2 Select Sellers: Tools and Techniques

.1 Weighting System A weighting system is a method for quantifying qualitative data to minimize the effect of personal prejudice on seller selection. Most such systems involve assigning a numerical weight to each of the evaluation criteria, rating the prospective sellers on each criterion, multiplying the weight by the rating, and totaling the resultant products to compute an overall score. .2 Independent Estimates For many procurement items, the procuring organization can either prepare its own independent estimates or have prepared an independent estimate of the costs as a check on proposed pricing. This independent estimate is sometimes referred to as a “should-cost” estimate. Significant differences from these cost estimates can be an indication that the contract statement of work was not adequate, that the prospective seller either misunderstood or failed to respond fully to the contract statement of work, or that the marketplace changed. .3 Screening System A screening system involves establishing minimum requirements of performance for one or more of the evaluation criteria, and can employ a weighting system and independent estimates. For example, a prospective seller might be required to propose a project manager who has specific qualifications before the remainder of the proposal would be considered. These screening systems are used to provide a weighted ranking from best to worst for all sellers who submitted a proposal. .4 Contract Negotiation Contract negotiation clarifies the structure and requirements of the contract so that mutual agreement can be reached prior to signing the contract. Final contract language reflects all agreements reached. Subjects covered include responsibilities and authorities, applicable terms and law, technical and business management approaches, proprietary rights, contract financing, technical solution, overall schedule, payments, and price. Contract negotiations conclude with a document that can be signed by both buyer and seller, that is, the contract. The final contract can be a revised offer by the seller or a counter offer by the buyer. For complex procurement items, contract negotiation can be an independent process with inputs e.g., an issues or open items list and outputs e.g., documented decisions of its own. For simple procurement items, the terms and conditions of the contract can be fixed and non-negotiable, and only need to be accepted by the seller. The project manager may not be the lead negotiator on the contract. The project manager and other members of the project management team may be present during negotiations to provide, if needed, any clarification of the project’s technical, quality, and management requirements . A Guide to the Project Management Body of Knowledge PMBOK ® Guide Third Edition 288 2004 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA .5 Seller Rating Systems Seller rating systems are developed by many organizations and use information such as the seller’s past performance, quality ratings, delivery performance, and contractual compliance. The seller performance evaluation documentation generated during the Contract Administration process for previous sellers is one source of relevant information. These rating systems are used in addition to the proposal evaluations screening system to select sellers. .6 Expert Judgment Expert judgment is used in evaluating seller proposals. The evaluation of proposals is accomplished by a multi-discipline review team with expertise in each of the areas covered by the procurement documents and proposed contract. This can include expertise from functional disciplines, such as contracts, legal, finance, accounting, engineering, design, research, development, sales, and manufacturing. .7 Proposal Evaluation Techniques Many different techniques can be used to rate and score proposals, but all will use some expert judgment and some form of evaluation criteria Section 12.2.3.2. The evaluation criteria can involve both objective and subjective components. Evaluation criteria, when used for a formalized proposal evaluation, are usually assigned predefined weightings with respect to each other. The proposal evaluation then uses inputs from multiple reviewers that are obtained during the Select Sellers process, and any significant differences in scoring are resolved. An overall assessment and comparison of all proposals can then be developed using a weighting system that determines the total weighted score for each proposal. These proposal evaluation techniques also can employ a screening system and use data from a seller rating system. 12

12.4.3 Select Sellers: Outputs

.1 Selected Sellers The sellers selected are those sellers who have been judged to be in a competitive range based upon the outcome of the proposal or bid evaluation, and who have negotiated a draft contract, which will be the actual contract when an award is made. .2 Contract A contract is awarded to each selected seller. The contract can be in the form of a complex document or a simple purchase order. Regardless of the document’s complexity, a contract is a mutually binding legal agreement that obligates the seller to provide the specified products, services, or results, and obligates the buyer to pay the seller. A contract is a legal relationship subject to remedy in the courts. The major components in a contract document generally include, but are not limited to, section headings, statement of work, schedule, period of performance, roles and responsibilities, pricing and payment, inflation adjustments, acceptance criteria, warranty, product support, limitation of liability, fees, retainage, penalties, incentives, insurance, performance bonds, subcontractor approval, change request handling, and a termination and disputes resolution mechanism. A Guide to the Project Management Body of Knowledge PMBOK ® Guide Third Edition 2004 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA 289