Although a Project Management Information System (PMIS) like PMWeb is mainly used to manage the delivery of capital construction projects, nevertheless, organizations who are keen to digital transform their current procurement and contract management practices, PMWeb can provide an agile yet comprehensive solution.
In principle, a contract is no different than a project in many ways. A contract agreement is usually unique in what it might encounter when it is managed and executed. It also should have a defined scope of work that need to be delivered within a certain period, at an agreed cost and to produce deliverables of specified quality standard. Every contract delivery entails risks that could impact its successful execution. The delivery of a contract requires the involvement of different resources and will generate different type of communications. Procurement management processes are the core of contract management processes.
Each contract that needs to be managed by the procurement and contracts department will be added as a project unless the contracts to be managed are closely interrelated. For example, the organization might have a project for developing the project management skills for their employees. This will require having contracts with different training providers as well as the certification testing company. In this case, a single project titled “Professional Project Management Development Program” will be added and for which all contracts with the training providers and certification testing company will be part of this project.
Another example could be when there is a program to upgrade the Information Technology Infrastructure where there will be contracts with hardware vendors, cabling and infrastructure, software vendors among others. The advantage of using PMWeb projects and contracts modules is that different user access permission and security rights can be assigned to each project, contract and process.
Similar to any other department, the procurement and contracts department needs to have a document management repository to upload and store all documents that they will use. PMWeb document management module allows creating folders and subfolders in the desired structure to upload and store documents.
The documents filing structure will usually match the physical filing structure maintained by the procurement and contracts department. Permission rights can be added to each folder and subfolder as well as subscribe to each folder or subfolder to receive email or online notifications when documents or document versions are uploaded or downloaded. As a recommendation, the PMWeb folders can be structured by project and contracts within a project to enforce controlled access among all individuals.
Another requirement for the procurement and contracts department is to have a single and comprehensive repository of all vendors, suppliers and other entities that might do business with the organization. PMWeb vendors module will be used to capture the details for all those entities include their addresses, contacts, registrations, insurances among others. Of course, all supportive documents for each entity can be uploaded into PMWeb document management repository and attached to the relevant entity.
If the procurement and contracts department have the requirement to formalize the registration and prequalification of vendors and suppliers, then PMWeb Vendor Prequalification module will be used. The prequalification page can be configured to include the fields for needed information for which vendors and suppliers can access and complete online. When submitted, the procurement and contracts department will review and qualify each entity using a predefined scoring template.
The management of contracts requires defining the cost accounts breakdown structure that will be used by the procurement and contracts department to manage the cost associated with the awarded contracts. PMWeb allows creating up to 16 levels of cost accounts although most organizations will not use more than 5 levels. In addition, the financial periods also need to be captured in PMWeb.
In addition, those cost accounts are very important and a must to have if the procurement and cost information captured in PMWeb needs to be integrated with the organization’s financial or ERP solution. The PMWeb cost accounts need to be aligned with the cost accounts using in the financial or ERP solution.
To have a comprehensive and auditable contract management process, it is recommended that a process to be implemented to capture the requirements of all departments in terms of what projects representing the contracts they need to have for the next fiscal year. For each one of those project requests, also known as initiatives, each requesting department needs to provide the cost estimate for the scope of work as well as an overall master schedule. Each submitted initiative will be reviewed and scored against a pre-defined selection criterium. For approved initiatives, a project will be generated as detailed above.
PMWeb provides different options to create the cost estimate. The first is to add new items with unit price, unit of measure and quantities. The second option is to use the PMWeb cost database for which the procurement and contracts department will populate with items that are commonly procured by the organization. Each item in the cost database has its unit price, unit of measure and cost account it belongs to. The third option is to import the cost estimate from MS Excel while the last option is to have predefined cost assemblies of items that are part of each project.
As for the schedule, the user can create the project schedule by either using PMWeb scheduling module or import the schedule from MS Project or Primavera P6. PMWeb allows uploading and storing all project schedule versions and updates.
When an initiative or a project request is approved as a project, PMWeb allows generating the project from the initiative. The approved cost estimate will become the basis for creating the project budget which will be captured in PMWeb budget module. In addition, PMWeb allows creating the budget spending plan which needs to be aligned with the project schedule.
For all budget omissions, additions and transfers, PMWeb budget request module will be used to capture those details. The budget adjustment details will be associated with the affected cost account as well as the period of when this adjustment will take place.
The approved cost estimate will also become the basis for creating the procurement packages for each contract. PMWeb procurement module will be generated from the approved cost estimate to capture the details of the vendors and suppliers to be invited as well as to compare the received bids to what was estimated.
Selected suppliers and vendors will receive invitations to submit their proposals using PMWeb online bid module. The online bid will include list of all technical submission and non-disclosure agreement to be accepted by the bidders. By submitting those bids, the procurement and contracts department can compare bid proposals to the approved cost estimate to ensure that there are no unbalanced bids as well as what is submitted is realistic and inline to what was estimated.
A commitment contract will be generated for the successful bidder which will include the bill of quantity values for each item. The contract will include all terms and conditions including retention percentage, advance payment and advance payment recovery. Each contract will include fields to capture the details of performance bonds, insurances and other documents required for each contract including the expiry date of those documents. This will enable the procurement and contracts department to report on the status of those time sensitive documents.
During each contract execution, changes might occur for different reasons. PMWeb change order module will be used to capture all those change requests. In addition, PMWeb has a module to capture all potential changes that could become change requests if they have merit.
PMWeb progress invoice module will be used to capture the details of all interim and final payment certificates for each contract. The progress invoice module also includes a tab to capture the details of actual payments made against each approved progress invoice.
Although payment invoices should be always associated with awarded contract agreements, nevertheless, if there is a need to make direct payment for non-contract expenses, PMWeb miscellaneous invoices module will be used to capture the details of those invoices as well as payments made against the approved invoices.
The cost data captured in the budget, budget requests, commitments, potential change orders, change orders, progress invoices and payment will be consolidated and reported on using PMWeb cost worksheet module. There is no limit to the number of cost worksheets that can be created to provide a real-time single version of the truth reporting of all contracts managed by the procurement and contracts department.
PMWeb funding sources, requests and authorizations can be also used by the procurement and contracts department in case they want to align funding received from the finance department with the project or contracts budget. PMWeb allows capturing details of funding sources and all authorizations to release those funds.
In addition to the different procurement and contract management modules that comes ready to use in PMWeb, the custom form builder allows creating the many other processes needed for managing contracts. For example, PMWeb custom form builder can be used to create the templates for letter of intent, letter of regret, letter of award, notice to proceed, contract management checklist, contract closeout, supplier performance appraisal among many others.
Most of the transactions for the procurement and contract management processes, could have supportive documents such as drawings, pictures among others that need to be attached to the form as well as links to other related records and imported MS Outlook emails. Those documents which are already uploaded and stored in PMWeb document management repository can be attached to any process transaction.
In addition, and to enforce accountability in reviewing and approving or rejecting transactions of any of the defined procurement and contract processes, a workflow will be assigned to each process. The workflow will detail the tasks assigned to each individual, the duration for each task, available actions to be made, rules for multiple reviewers and the sequence for performing those tasks. In addition, the workflow could include conditions to enforce the approval authority levels.
The information captured in the different procurement and contract management processes will become the basis for creating real-time single version of the truth reports and dashboards. Those could include reports that are specific to each process as well as reports and dashboards the different procurement and contract management processes as well as dashboard for the overall performance of the procurement and contracts department.
Those reports and dashboards could include scorecards and visuals to better understand, analyze, assess and visualize the performance of the different procurement and contract management processes. All of those reports and reports will include filters to select the projects, contracts or vendors to be reported on.
About the Author
Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services and project management information system to over than 400 projects with a total value in excess of US$ 400 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training and business development.
Bassam is a frequent speaker in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 40 years he has lectured at more than 400 events and courses at different locations in the Middle East, North Africa, Europe and South America. He has written more than 400 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He was a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP) and Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE) and Green Project Management (GPM).
Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA and London Business School, London, UK.