Learning Chapters on Project Procurement Management

Topics: Procurement, Cost-plus contract, Project management Pages: 42 (13041 words) Published: May 3, 2010
CHAPTER

1
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MENT

JEeT MANAGEMENT
LEARNING
After reading this chapter, you will b • Understand the importance of proj increasing use of outsourcing for inf Describe the work involved in plannin determining the proper type of contract t management plan, statement of work, so buy analysis Discuss what is involved in conducting obtaining seller responses, selecti Understand the process of admin ment relationships and monito Describe the process of closin Discuss types of software availa management

• Marie McBride could not believe how much money her company was paying for outside consultants to help the company finish an important operating system conversion project. The consulting company's proposal said it would provide experienced professionals who had completed similar conversions, and that the job would be finished in six months or less with four consultants working full time. Nine months later her company was still paying high consulting fees, and half of the original consultants on the project had been replaced with new people. One new consultant had graduated from college only two months before and had extremely poor communications skills. Marie's internal staff complained that they were wasting time training some of these "experienced professionals." Marie talked to her company's purchasing manager about the contract, fees, and special clauses that might be relevant to the problems they were experiencing. Marie was dismayed at how difficult it was to interpret the contract. It was very long and obviously written by someone with a legal background. When she asked what her company could do since the consulting firm was not following its proposal, the purchasing manager stated that the proposal was not part of the official contract. Marie's company was paying for time and materials, not specific deliverables. There was no clause stating the minimum experience level required for the consultants, nor were there penalty clauses for not completing the work on time. There was a termination clause, however, meaning the company could terminate the contract. Marie wondered why her company had signed such a poor contract. Was there a better way to deal with procuring services from outside the company?

Although global outsourcing displaces some IT workers, total employment in the United States increases, according to ITAA, as the benefits ripple through the economy. "The incremental economic activity that follows offshore IT outsourcing creates over 257,000 net new jobs in 2005 and is expected to create over 337,000 net new jobs by ?010.,,1

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Politicians debate on whether offshore outsourcing helps their own country or not. Andy Bork, chief operating officer of a computer network support service provider, describes outsourcing as an essential part of a healthy business diet. He describes good vs. bad outsourcing as something like good vs. bad cholesterol. He says that most people view offshore outsourcing as being bad because it takes jobs away from domestic workers. However, many companies are realizing that they can use offshore outsourcing and create more jobs at home. For example, Atlanta-based Delta Air Lines created 1,000 call-center jobs in India in 2003, saving $25 million, which enabled it to add 1,200 job positions for reservations and sales agents in the United States. 2 Other companies, like Wal-Mart, successfully manage the majority of their information technology projects in-house with very little commercial software and no outsourcing at all. (See the Suggested Reading on the companion Web site on "Wal-Mart's Way.") Deciding whether to outsource, what to outsource, and how to outsource are important topics for many organizations throughout the world. In a 2008 survey, 74 percent of 600 global procurement executives believed that procurement issues are a high priority for their companies. About half of respondents also said that their companies focus too much on cost reduction instead of value...
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