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Saturday, July 9, 2011

Chapter 92: Performing Procurement Closure

A project might include work that was procured. Performing procurement closure means completing each procurement and giving it a proper closure. Project closure is not complete without procurement closure.

Some people might be tempted to think that procurement closure is not part of the project manager’s responsibility. But, let me repeat, it is our job to close-off all procurements that were started as part of our projects lifecycle. No matter what.

All the procurement contracts are closed at the end of a project or a phase by using the contract closure procedure. Procurement closure accomplishes the following two major goals:
• Close all the contracts applicable to the project.
• Receive verification (if you are a seller) or issue verification (if you are a buyer) that all the procured deliverables were received and accepted. In this respect, the contract closure process supports the administrative closure of the project.

If the project terminates without completion, you still need to go through the contract closure procedure, if there is a contract. Usually, a contract contains the contract termination clause, which contains the terms of the project termination, including the rights and responsibilities of the parties in case of the project’s early termination.

The Close Procurements process is illustrated using the picture below:

Input to Closing Procurements

The input items to the contract closure process are what you need to close the contract. They are:
Procurement management plan - This is needed to check whether the procurement requirements are met; it might have some procedures that you need to follow during closure.
Procurement documentation - You need all the procurement documentation at this time for two purposes: You want to close the procurements according to the requirements in the procurement documents, and you want to archive the documentation.

The procurement management plan may contain a contract closure procedure developed to formally close all contracts associated with the project. It specifies a step by step methodology to execute activities needed to close the contracts. The roles and responsibilities of the team members who will be involved in the closure process are also specified.

Tools and Techniques for Closing Procurements

The tools and techniques for the contract closure process are the items you need to facilitate contract closure. They are:

Procurement audits - This is a structured review of the procurement process with the purpose of identifying successes and failures from the planning through the executing stage of the project. The lessons learned from the audit can be applied to other phases of the same project (if it is a phase closeout) or to other projects within the same performing organization.

Settlement negotiations - Negotiations are a tool, a technique, and a skill that become very useful during the procurement closure process. Negotiations are used to give a proper closure through settlements to all outstanding claims, issues, and disputes. If direct negotiations fail, the option of some kind of mediation or arbitration should be explored. Obviously, the legal department of your organization should be involved here in case of any issues.

Records management system - This is a part of the project management information system and can be used to manage contract documentation and records. For example, you can use this system to archive documents, maintain an index of contract and communication documents, and retrieve documents.

Output of Closing Procurements

The output of this process will be:

Procurement closure - Procurement closure means the procured work is completed with all its requirements and is accepted. Generally, it is accomplished by a formal notice from the buyer to the seller, which might come, through the buyer’s authorized administrator or the seller’s. The requirements for formal contract closure are usually defined in the terms of the contract and are included in the procurement management plan.

Updates to organizational process assets - The following items should be added to the organizational process assets:
Procurement documentation - This includes all the procurement documents, including the procurement management plan, closed contracts, and the procurement closure notice. These documents should be archived for future reference both for you and other similar projects that your company may take up in future.
Acceptance notice - This notice formally acknowledges the acceptance of deliverables through a notice from the buyer to the seller, notifying that the procurement deliverables have been accepted. This is an important document and should be preserved.
Lessons learned - The procurement experience for this project should be analyzed, and the lessons learned should be gathered, recorded, and archived so that future projects can benefit from them.

Prev: Closing the Project

Next: The Finishing Touch

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