Contract Change Control System

After contracting the procurement from performing organization to the vendor, the changes are inevitable. These changes should be incorporated if required in a controlled way. This will be taken care by the technique Contract Change Control System. This can be paperwork, disputes, approvals, etc.. Contract Change Control System is integrated with Integrated Change Control System.

Contract Change Control System technique is used under the process Control Procurements.

Procurement Negotiations

Without negotiations no contract will be signed. Procurement negotiations is about arriving at the mutual understanding between buyer and the seller in the area of requirements, responsibilities, authority to make any changes, terms and conditions, technical aspects, IP rights, financing, schedule, payment frequency, price, etc… For complex procurement negotiations can be independent process where as for the simple procurement purchase order kind of agreements can be signed need to be accepted by the seller.

The project manager should involve other project management team while negotiation with seller so that it will assist in understanding the technical, quality and management requirements.

Also Procurement Negotiations are used if any disputes, outstanding issues, claims during the closing of procurements. If this is not working, one can use Alternative Dispute Resolution (ADR) through mediation. In the worst case it has to be settled in the court which is least preferred.

At the end of the day the Procurement Negotiations should be from win-win proposition.

Procurement Negotiations technique is used under the processes Conduct Procurements and Close Procurements.

Advertising

The organization needs to find more potential sellers available in the market when they want to go for procurement. Advertising is one of the techniques which can be useful. This can be done using newspapers or publications. Also the other options are online marketing, social media, digital marketing, etc.. It depends on the organization, culture, rules and regulations. For example in the private organizations the Advertising can be through online to the vendor community where as in government it is through public advertising.

Advertising technique is used the process Conduct Procurements.

Independent Estimates

In response to RFQ and RFB it is required for the performance organization to see is the bidding prices from the seller is matching with our pricing or not. This gap can be known from the technique called Independent Estimates. It can be done by performing organization on their own or can get it done from 3rd party. This technique helps in bridging the gap if any between the seller and the buyer in terms of scope, assumptions, and ambiguities.

For example if the bidding price is $20K and our estimation is $15k, this is a considerable gap. The reasons can be either the scope understanding from the seller side is incorrect or the buyer has not done his estimate properly.

Independent Estimates techniques is used the process Conduct Procurements.

Proposal Evaluation Techniques

Most of the matured organizations for complex projects they will be having criteria to select the sellers. Proposal Evaluation Techniques is one of the them. Here different parameters are considered, for example, the process capability, the financial capability, vicinity of the seller, the qualification of project manager from seller side, the credential of the sellers, etc.. For each of these parameters weightage will be given and the one who is scoring higher the contract will be awarded.

Proposal Evaluation Techniques is used the process Conduct Procurements.

Bidder Conferences

It is absolutely required to have clear and common understanding of the scope of work between the buyer and seller before going for final bidding. This point will be taken care by the technique called Bidder Conferences also called as contractor conferences, vendor conferences or pr-bid conferences. This is done before getting the final bid or proposals from the perspective sellers by the buyer. In this conference the buyer needs to clarify all the queries raised by the prospective sellers. The technique can be carried out by requesting the sellers to send the questions or by visiting the seller’s site. Any questions/clarifications which are missed out while preparing the procurement documents can be amended.

Bidder Conferences technique is used the process Conduct Procurements.

Market Research

For the project if you want to procure any resources it s required for the performing organization to find vendors and their capabilities. One can use Market Research technique to find the vendors and their capabilities. This can be through conferences, online research, social media which is the recent trend. This technique also helps in refining the vendors based on the information through research and which helps further in balancing the risks.

Market Research technique is used under the process Plan Procurement Management.

Make-or-Buy Analysis

In the given situation to execute some part of the scope of the project the team need to decide is it worth to do it within the performing organization or need to outsource. Make-or-Buy Analysis technique helps in arriving the decision in such situation. The buy decision will be taken under the circumstances when the performing organization is not having the capability or they may be having the capability but the required resources are engaged in some other work and there is a constraint in the schedule. Again once we decide for buy decision need to find out is it purchase or lease or rental.

Sometimes the budget constraints also influence make-or-buy decisions. In either case we need to consider both direct and indirect costs. Also once we decide on buy decision the type of contracts need to be considered based on the risk sharing between the buyer and seller.

The Make-or-Buy Analysis results in Make-or-Bye Decisions.

Make-or-Buy Analysis technique is used under the process Plan Procurement Management.

Technical Performance Measurement

The measurements pertaining to technical data helps in comparing with the expected values/results. For example defects, functionality, performance, wastage/scrapping of the materials, network down, storage, etc.. When these measurements are having deviation from the expected metrics, it can results in risks in the future. Because the rework may delay the schedule or increase the cost of the project.

Technical Performance Measurement technique is used under the process Control Risks

Risk Audit

Risk Audit is to ensure the risk management activities are happening as per the risk management plan and also the responses which are plan are implemented as per the expectation. The frequency of Risk Audit depends on the situation and has to be agreed and documented in the plan and accordingly we need to follow. The Project Manager should ensure it is happening. Risk Audits may be addressed through routine status meeting or one can have separate risk audit itself. Risk Audit technique is used under the process Control Risks.

Variance and Trend Analysis

The project progress and deviations from the baseline line indicates potential threats and/or opportunities. The variance can be observed using earned value technique. The variance analysis helps in understanding the trend and also the forecasting about the project.

Variance and Trend Analysis technique is used under the process Control Risks.

Risk Reassessment

Once the risks are identified, analyzed, risk responses implemented we need to check is it working as per the planned. As we know risk management is very dynamic and the responses which we planned or implemented may not work. So we need to reassess the risks which are open, closing the risks which are no longer exists and even we need to identify new risks. These actions will be taken care by Risk Reassessment technique. The frequency of monitoring to reassesses depends on size and complexity of project and also the severity and number of risks identified.

Risk Reassessment technique is used under the process Control Risks.

Contingent Response Strategies

There will be some situation in the project when the risk materializes or when the trigger occurs, the action will be taken. This is called Contingent Response Strategies. For example the first milestone is missed and this triggers to delay to the project itself. So you will allocate the funding to go for crashing using contingency funding or management reserve to avoid the delay in project. To use this response fallback plan or the contingency plan will be defined and used.

Contingent Response Strategies technique is used under the process Plan Risk Responses.

Strategies for Negative Risks or Threats and Strategies for Positive Risks or Opportunities

There are seven types of risk responses. They are Avoid, Transfer, Mitigate and Accept which are negative risks responses, Exploit, Share, Enhance and Accept which are positive risks responses. Accept is under both positive and negative.

Avoid is used when you don’t want to get into the situation. Example: avoiding the scope, extending the schedule, changing the strategies and even avoiding the project itself. This response is used when the risk ranking is high with high probability and high impact.

Transfer is shifting the risk to some other party. By transferring the risk means not disowning the risk. Still the project team owns the risk but usually transfer from the financial angle. For example Insurance, bonds, warranty, guarantee or even transferring some of the work/scope back to the customer. This response is used when the risk is at lower ranking.

Mitigation is reducing the probability and/or impact to the situation. For example providing the training to the staff when there is no expertise available, having the standby machines when the primary fails. This response is used when the risk ranking is high with high probability and high impact.

Accept is acknowledge the risk and don’t take any action till it materializes. There are two types of acceptance. One is passive and second is active acceptance. Passive acceptance is don’t do anything. When it happens then get into action. For example you know that machine is going to be down. When goes down then only you will try to get another one or repair it. Active acceptance is preparing for contingency reserve in terms of cost, schedule or resource. This response is used when the risk is at lower ranking.

Exploit is used to realizing the opportunities. For example early delivery to get more business, use latest technology to save cost. Here the team ensures that risk materializes and the response is in an aggressive manner.

Share is allocation of entire or partial risk to some other third parties to gain benefits. For example joint venture, partnership.

Enhance is increasing the possibility of occurrence of risk by increasing the probability and or impact. This is similar to Exploit but not in an aggressive way. For example, adding the resources to complete the project early.

Accept is taking the opportunity if it occurs, but not activity pursing it.

Strategies for Negative Risks or Threats and Strategies for Positive Risks or Opportunities techniques used under the process Plan Risk Responses.

Quantitative Risk Analysis and Modeling Techniques

Sensitivity analysis, Expected monetary value analysis and Modeling & simulation techniques are used under Quantitative Risk Analysis and Modeling Techniques to get the numerical risk value of the project objectives.

Sensitivity analysis is used when we change any of the variables what can be the impact on the end result. The most common diagram used under Sensitivity analysis is Tornado diagram. It is a bar chart to compare the relative importance of the variables. The y- axis consists of different risks and the x axis represents uncertainties for range for each of these risks in the form of bar chart and is drawn from highest length to the lowest length of the bars.

Expected monetary value analysis helps in finding which is riskier by comparing two different scenarios. For example is it worth to buy equipment or build on your own. The calculation is based on initial investment, probability and impact. The higher the value better is the option.

Modeling and simulation technique uses Monte Carlo simulation analysis by choosing the random values for each iteration and provides what should be the contingencies for every risk.

Quantitative Risk Analysis and Modeling Techniques is used under the process Perform Quantitative Risk Analysis.

Data Gathering and Representation Techniques

Once we are done with qualitative analysis of the risk need to carry out quantitative analysis. Interviews and Probability distributions helps in arriving at quantification of risks.

An interview is to gather information from experts based on historical information. While collecting the probability and impact there may be situation stakeholders having difference of opinion. For example for a particular risk one may say the probability is 20%, the other stakeholder may say the probability is 40% and one more stakeholder may say it is 80%. So we can use three point estimation (PERT) to arrive the more approximate or realistic value. Similarly it is applicable for Impact.

Probability distribution uses two types one is Beta distribution and the second is Triangular distribution. These distributions provide the relative likely hood of risks in terms of cost and time.

Data Gathering and Representation Techniques is used under the process Perform Quantitative Risk Analysis.

Risk Urgency Assessment

The most urgent risks need to be addressed on priority with risk responses. The urgency assessment can be done using parameters like probability, impact and detection. Using these parameters one can arrive at Risk Priority Number (RPN).

Risk Urgency Assessment technique is used the process Perform Qualitative Risk Analysis.

Risk Categorization

We can categorize the risk under external, internal, project management and technology. External is something where we don’t have any control. For example Government approval, vendor supply dates. Internal which we can have control over it. For example resource, funding, etc…Project management risks like bad planning, poor estimation, etc.. Technology risks like requirement is not clear, technology is changing. Further it can be decomposed to cost, schedule, scope, quality… using Risk Breakdown Structure (RBS). Categorization helps in understanding the areas affected which could be phases, work packages, activities or even roles and helpful in taking further action of risk response planning.

Risk Categorization technique is used under the process Perform Qualitative Risk Analysis.

Risk Data Quality Assessment

In the first place Risk Management itself is different and added to that we need to ensure the identified risk data is correct or not! We need to see the credential of the data the stakeholders are providing. The assessment involves checking the integrity, accuracy, quality and reliability. If the data is not acceptable we need to use different approach to collect better data. These challenges will be overcome by Risk Data Quality Assessment technique.

Risk Data Quality Assessment technique is used under the process Perform Qualitative Risk Analysis.

Probability and Impact Matrix

Once the probability and Impact assessment is done we can use lookup table or the probability and impact matrix. It is a 2X2 matrix, one side indicating Probability and the other side representing Impact. Have a look into the following table. The matrix is divided into three areas namely High, Medium and Low. Red is High priority, Yellow is Medium Priority and Green is Low priority. How to use this table? This table should be used in alignment with Probability and Impact assessment. For example there is a risk which is having probability with scaling of 9 and Impact with scaling 9. It falls under High risk area. Similarly a risk with probability of 7 and Impact of 5 lies under the Medium area. In this way we can use this matrix to provide ranking of each and every risk and will be helpful for further quantitative analysis and risk response planning.

Probability and Impact Matrix technique is used under the process Perform Qualitative Risk Analysis.

Risk Probability and Impact Assessment

Risk is calculated based on two values probability and impact. Probability is the likely hood of an occurrence of a risk and the impact is what can be the effect if risk occurs on any project objectives like cost, time, quality, scope, etc… The impact can be positive or negative. If positive make it as an opportunity and if it is negative it is threat. The project manager should increase the impact if it is opportunity and should reduce the impact if it is negative.

Once you identify the risks we can’t address all the risks with same priority. One needs to assess the probability and Impact by using the scaling. For example probability with >80% can be of higher scale and <10% can be in the lower scale. Similarly for the impact we can use the scaling factor. If the impact is >$40K then scaling is high <$5K the scaling low. The definitions of these scales are defined as part of Risk Management plan. By using this one can arrive the risk priorities like high, medium, low…

If the risk ranking is low it should be kept as watch list.

Risk Probability and Impact Assessment technique is used under the process Perform Qualitative Risk Analysis.