Cost Estimate and Procurement, Research Paper Example

Abstract

Project procurement is implemented during the execution phase of the project management life cycle.  This means that the groundwork for the project has been established and the project is ultimately underway in regard to scope, schedule and cost estimates.  Project procurement management plays a vital role in the process of the project in regard to procuring the necessary products, services or results needed to provide the requirements outlined in the project plan.  Project procurement management includes contract management, change control, administration of the contracts and provides the framework for meeting the obligations the company or individual representing the organization committed to.  This provides an opportunity for the project manager to view into the benefits the procurement and utilization of resources that progress the project toward completion.  This is done through monitoring the progress that is achieved versus the amount of resources required to achieve those objectives.  This project encapsulates a large endeavor over a ten year period.  The governance and policies of the Independent Government Cost Estimate (IGCE) process will provide a framework for project structure.

Importance of IGCE

The Independent Government Cost Estimate (IGCE) is a basic framework provisioning the ability to outline and guide the cost estimate activities so that a contractor or other agency can provide goods or services to facilitate key objectives of the government.  While cost estimation and building proposals for procurement activities are critical for the project management lifecycle it is inherently more stringent and controlled through the governing entities of the government.  The IGCE provides the governance needed to fully meet the requisite measures set forth by the government including structure on the planning, drafting and requisition for the procurement as well as the statement of work and overall IGCE.  The IGCE is the government’s projection on the cost of a program which will allow the selection of the appropriate vendor as well as help in the planning process for the appropriated funds.  The IGCE also illustrates the differences in both the rationale and the assumptions of the cost estimate and explain if there are differences between the government’s cost estimate and that of the proposals received.

Confidentiality

In order to create and maintain confidentiality, the policies must be set forth in the governing documentation. That being said, the IGCE is to remain confidential between the contracting office of the government and the contracting officers.  This confidentiality is important as it provides what the government estimates the project value is going to be.  This information would provide information that could be used by vendors and create an unfair platform for one vendor over the other.  The confidentiality of the IGCE is never to be broken and never to be provided to the contractors.  The interest of the procurement process hinges upon the confidentiality of the government’s cost estimate.  The cost estimate should be created by the contracting officer that will be working with the technical and implementation contract development and the other way to protect confidentiality is to ensure the information is held in a central location that require not only a login authority but also a signed non-disclosure agreement between those people reading the information (Budd & Budd, 2009).

Cost Estimate

The cost estimate is based on a ten year implementation in which the program manager is needed for the entire project lifecycle but many other resources can be dropped after the sustainment activities begin in year 4.  The total for year 1-4 for direct labor is $10,857,600 and the remaining years equate to $13,228,800.  This plus the direct material of $2,000,000 equals a project total of $26,086,400.

 Statement of Work

The conceptual vision of the scope planning event includes first the business identifying a need or a change.  Normally a business does not change unless it sees an area of opportunity, there is current problem or it is forced by an outside entity.  The business need feeds into a leadership group that devises a vision or direction in which the company needs to go.  This could be a special project that needs a project manager or it could be an entire section that needs to be stood up to address the issue.  Once this is established a person or group of people are charged with solving the issue and a project management team is born.  The initial planning requires developing a charter that will include: project purpose, objectives and success criteria, high-level requirements, high-level project description, high-level risks, a summary milestone schedule and the approval criteria.   This document also assigns the project manager to the project as well as the sponsor of the project.  From the charter the scope documentation is developed.  The scope is developed by interviewing members that have accomplished this task and creative workshops to determine what the project needs to entail.  The output will be a scope statement that defines what the scope of the project is; it will be measurable, attainable and will ultimately be accepted by the stakeholders.  The scope document reigns in all the current information to provide a concise and direct set of information answering what the project is, the goals and objectives, what needs are being addressed and constraints (Dobson, 2004).

Proposed Process Solution

Procurement management is the identification and acquisition through the expenditure of resources to garner the necessary goods or services required to execute the project.  There are multiple steps within project procurement that go through the life cycle of the procurement process.  Procurement process brings two parties together with an aim of facilitating the exchange of goods and services (Fleming, 2003).  It entails a well-coordinated purchase mechanism for acquisition of goods and services from an external source which will enable the work to be done.  It brings together the aspects of contract management and control processes necessary to administer contracts or purchase orders.  It also includes processes that facilitate the administration of a contract for proper management of the relationship between the buyer and the seller.  This final deliverable will enable the project procurement framework to be followed to ensure the appropriate resources are used in the project to meet the demands of the scope.

The procurement management activities are vital to the success of this project.  The procurement process will determine which goods or services are wither purchased from an outside entity or provided internally by company resources.  Once a decision is made to either “make or buy” the product or service there are other areas that the project manager responsible for the procurement management portion of the project.  These include the vendor selection process, proposal management, contract negotiation, and contract award.  There are multiple decision points that occur from the outputs of other portions of the project management methodology.  The procurement management process takes the outputs of the initiation phase, such as the project definition, requirements and project charter (Cooper, Grey, Raymond & Walker, 2005).  The project lifecycle’s phases build off of each other so that each section supports critical decisions that will be made in latter parts of the project.  Understanding the requirements that were built in the beginning of the project will allow the procurement manager to communicate the needs of the business to the suppliers.  The procurement process will integrate into the rest of the project due to the simple fact that the outputs and work effort that was performed in the initiation phase directly correlates to the inputs needed to perform the procurement functions.  Once the procurement functions are completed this will result in a need for management and controlling of both internal work efforts and supplier product or service quality and delivery (Project Management Institute, 2008).  The management and controlling phase is the next phase of the project lifecycle and requires the outputs and actions of the procurement manager in order to obtain the goals and objects set forth for the project.

By following the proper project management methodology and utilizing the guidelines set forth there is a significant reduction in risk to the project’s success.  This is accomplished by ensuring that key actions are taken and removing the possibility of human error by utilizing a guideline with required inputs and outputs to progress through the lifecycle.  The benefits extend across the entire project by allowing a consistent project methodology across the different functions and allowing cohesion and communication between team members.  Without the structure of the project management methodology the project becomes an ad-hoc adventure without structure or clearly defined or achievable results.  Using a project management methodology will provide clear processes for managing the project which allows the expectations to be understood and the project member will understand what their efforts are being applied toward.  By using the methodologies the needs and outputs are clearly defined which allows the project members to understand what they are delivering and what the customer will receive at the completion of the project.

References

Budd, C. I., & Budd, C. S. (2009). Earned value project management. (2nd ed.). Vienna, VA: ManagementConcepts.

Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines, managing risk in large projects and complex procurements. John Wiley & Sons

Dobson, M. (2004). The triple constraints in project management. Vienna, VA: ManagementConcepts.

Fleming, W. (2003). Project procurement management, CA, FMC Press.

Project Management Institute, P. M. (2008). A guide to the project management body of knowledge. (4th ed.). Newtown Square: Project Management Inst.