Plan Purchases and Acquisitions: Outputs

.3 Proposals Proposals are seller-prepared documents that describe the seller’s ability and willingness to provide the requested products, services, or results described in the procurement documentation. Proposals are prepared in accordance with the requirements of the relevant procurement documents and reflect the application of applicable contract principles. The seller’s proposal constitutes a formal and legal offer in response to a buyer’s request. After a proposal is formally submitted, the buyer sometimes requests the seller to supplement its proposals with an oral presentation. The oral presentation is meant to provide additional information with respect to the seller’s proposed staff, management proposal, and technical proposal, which can be used by the buyer in evaluating the seller’s proposal.

12.4 Select Sellers

The Select Sellers process receives bids or proposals and applies evaluation criteria, as applicable, to select one or more sellers who are both qualified and acceptable as a seller. Many factors such as the following can be evaluated in the seller selection decision process: • Price or cost can be the primary determinant for an off-the-shelf item, but the lowest proposed price may not be the lowest cost if the seller proves unable to deliver the products, services, or results in a timely manner. • Proposals are often separated into technical approach and commercial price sections, with each evaluated separately. Sometimes, management sections are required as part of the proposal and also have to be evaluated. • Multiple sources could be required for critical products, services, and results to mitigate risks that can be associated with issues such as delivery schedules and quality requirements. The potentially higher cost associated with such multiple sellers, including any loss of possible quantity discounts, and replacement and maintenance issues, are considered. The tools and techniques described here can be used alone or in combination to select sellers. For example, a weighting system can be used to: • Select a single seller that will be asked to sign a standard contract. • Establish a negotiating sequence by ranking all proposals by the weighed evaluation scores assigned to each proposal. On major procurement items, the overall process of requesting responses from sellers and evaluating sellers’ responses can be repeated. A short list of qualified sellers can be established based on a preliminary proposal. A more detailed evaluation can then be conducted based on a more detailed and comprehensive proposal that is requested from the sellers on the short list. A Guide to the Project Management Body of Knowledge PMBOK ® Guide Third Edition 286 2004 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA 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 287 12 Figure 12-6. Select Sellers: Inputs, Tools Techniques, and Outputs

12.4.1 Select Sellers: Inputs

.1 Organizational Process Assets The organizational process assets of the organizations involved in project procurement typically have formal policies that affect the evaluation of proposals. .2 Procurement Management Plan Described in Section 12.1.3.1. .3 Evaluation Criteria Evaluation criteria Section 12.2.3.2 can include samples of the supplier’s previously produced products, services, or results for the purpose of providing a way to evaluate the supplier’s capabilities and quality of products. Evaluation criteria also can include a review of the supplier’s history with the contracting organization and others. .4 Procurement Document Package Described in Section 12.3.3.2. .5 Proposals Seller proposals prepared in response to a procurement document package Section 12.3.3.3 form the basic set of information that will be used by an evaluation body to select one or more successful bidders sellers. .6 Qualified Sellers List Described in Section 12.3.3.1. .7 Project Management Plan The project management plan provides the overall plan for managing the project and includes subsidiary plans and other components. To the extent that other component documents are available, they are considered during the Select Sellers process. Other documents that are often considered include: • Risk register Section 11.5.1.2. • Risk-related contractual agreements Section 11.5.3.3.

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