Discussion Posts J.E. 1. Hiring technicians to install and configure the software for your environment 2. Hiring a training entity to teach the student PMs the mechanics of using the new tool 3. Buying a new server and software to run the tool and house the project database 4. Hiring tool usage experts to transfer knowledge to the student PMs about the use of the tool on the job for the first 60 days after going live 5. Planning for the removal and disposal of the scheduling tool software and hardware that are no longer to be used Q: Which contract type is the most appropriate for the product or service purchase? A: 1. 2. 3. 4. 5. Unit Rate Contracts Time and Materials Contracts Firm Fixed Price Unit Rate Contracts Unit Rate Contracts Q: How would you effectively justify your selection to other project managers? A: To justify which type of contract I chose for each of the above mentioned taskings I would simply have to convey the definition of all the contracts and hope that the leadership that has chosen me as the PM will understand why I chose those contract types. Any type of contract I chose is due to the fact that it will best suit the company’s goal and bottom line which we know is the budget. Initially I wanted to go with an FFP for all of the contracts but after conducting a bit of research on other contracts I see that there are others that can be beneficial to the organization other than FFP. I think that 1, 4 and 5 could be best used in a URC because I can simply charge them based on the cost of the materials and supplies that have been used or even based on a set of hours that could be easily identified. I felt that the T&MC contract fits the idea of having someone come to instruct the proper use of new tools. I feel as if I could have planned a new tools and instructions package deal and save the organization some money. Number 3 I went with an FFP because we all know that being able to identify the cost of equipment is the easiest thing to do and being able to negotiate how long its going to take to install something is a no brainer. Q: What arguments might they use to debate your selection? A: Most arguments will come due to personal experiences, we all have had or used our own techniques to be successful at a project. What I may feel is best for the project others may not and in part the organizations historic data will play a role in the decision-making process. If they have been known to have greater success with the FFP as the military has then they tend to not want to let the tradition go. Q: How would you effectively address those arguments? A: Just as the statement above I would use the organizations project management history as evidence or if not my own personal achievements as a PM. Q: What risks are associated with the type of contract selected? A: The risks are all the same for each contract type in my opinion, either you’re going to gain or lose money. There is a possibility that the organization will complete the task on time due to the vendors or our in-house experience or fail dramatically. Q: Explain exactly how you factored these risks into your selection. A: Factoring lose is all part of the game rather it be from shipping, loss of products, bad vendors or bad team members. I factor in everything in every project because I would rather do that than not factor most things and be surprised when it causes a catastrophic failure. Q: What general purposes and functions does the contract type address? A: Honestly I could use the FFP on every project there is, all you would have to do is conduct some market research and when you identify what the average costs of most products and services cost you can put out a bid based on that. Even man hours can be identified and calculated into the pricing and I always calculate for overages in the project budget for what ifs and hope I never have to use it. Q: How does the selected contract meet the project objectives? A: All of them in most part meet the project objects, but it is based majorly on how the PM negotiates the contracts and its services. B.H. As the project manager, I have been tasked with the choosing the type of contract to use for ADC’s project management software upgrade. The purchases included are installing and configuring the software, training each project manager how to use the new tool, transferring knowledge to the project managers after role out for 60 days, buying a new server and software necessary to run and house the project database and disposal of the hardware no longer to be used. I previously determined after both a qualitative make or buy analysis and a cost analysis that ADC should buy services to install, configure software, buy the new server and house the database, because it needs to be done properly to avoid additional cost and downtime. Unfortunately, ADC does not have the software design expertise within the team of project managers to ensure quality. The decision was also made to dispose of the old scheduling tools and software using the vendor, because the task can be done in conjunction with the install to save on the cost of transportation and time. Based on the cost analysis both training and transfer of knowledge should be kept in house using ADC’s experienced trainer. For this plan to work the trainer will need to spend time with experts from the vendor to shadow and learn prior to rolling out the tool to our PMs. This is not only cost effective, but it will also allow the firm to have a growing expert in house beyond the 60 days. It was necessary to consider employee turn around and future growth. The acceptance of the new tool or “buy in” from the project managers may also be more positive using someone they have already worked with. I do not think it is beneficial to hire a vendor for all five purchases related to the project, but I will consider all of them for the purpose of this discussion. There are three types of contracts, fixed price, cost plus and time and materials (PMI, 2017). In our last discussion, I stated that I believe that the most common contract, firm fixed price or FFP should be used for this project (PMI, 2017). FFP will allow for a fixed price and is beneficial to ADC, because if more resources are needed as the vendor completes work, the cost remains the same (PMI, 2017). This contract type is best for the install, configuring software, buying the new server and housing the database. It can be debated that fixed price with economic price adjustment would be a better contract fit and it would be if ADC plans to continue this contract beyond the 90 days. Before we can determine which contract is better, it is necessary to determine if the contract will only include the initial 90 days or to 10, 15, 20 or 25 years for future upgrades and installs for additional project managers coming in and for long term support. The contract decisions caused me to consider some risks. Does ADC have an IT department with the strength and knowledge to support the programs on their own and install and configure new machines later? What if the software crashes? What if there is a virus? What about security? Can someone work on machines remotely, or will someone need to travel to a remote area? What will happen if future maintenance is needed? What if technology improves so much that the software needs upgraded in less than a year causing the need for more hardware, an upgrade purchase and additional training? Would it be cost effective to hire an IT specialist full time to support the project management software? When considering these risks, the cost of a long-term contract with the vendor seems more lucrative. If the request for proposal will only include the purchase price without long term support than the best contract is FFP. If this relationship between the vendor and ADC is long term, which I believe will make more sense if a break-even analysis considering risk is completed, then fixed price with economic price adjustment is the best option. Similarly, if ADC is going to purchase the trainer and the knowledge expert, rather than using the in-house trainer, FFP is the best option, but fixed price with economic price adjustment is better if the contract will span years. Other project managers may think that fixed price incentive fee or a hybrid contract is better to use, but since the initial project length is only 90 days and even if the contract is extended it is for continued support rather than completing a product on time, the incentive is not needed. The future needs of ADC , such as support, maintenance and growth was not included in the scope of this project so my final answer is FFP for all purchases, but if this were an actual project with me in charge, ADC’s future would have been part of the plan and long term contracts considered in the project scope, RFP and contract negotiations. Class Scenario ACME Development Corporation (ADC), a developer of custom homes and apartment complexes, has decided to standardize its project management practices and processes across its national organization. The goal is to standardize with one single project-scheduling tool and to have the tool installed and be operational within 90 days. To this end, the company is forming a central project management office (PMO). Until now, project managers (there are 40 presently on staff distributed all over the United States) have been able to use whatever scheduling tool they liked, within their budget constraints. They have also been able to buy equipment and engage contractors at will. The PMO will be determining one scheduling tool that all PMs will be expected to use, exclusive of any other scheduling tools. The PMO will also develop and implement a standardized procurement process. Because the PMs are located across the United States, a Web-based solution seems likely to be the most successful tool. As the project manager, you have been charged with implementing the procurement process, and you decide that your first project will be purchasing the scheduling tool for ACME Development Corporation. PMI is one of the world’s largest not-for-profit membership associations for the project management profession. Our professional resources and research empower more than 700,000 members, credential holders, and volunteers in nearly every country in the world to enhance their careers, improve their organizations’ success and further mature the profession. PMI’s worldwide advocacy for project management is reinforced by our globally recognized standards and certification program, extensive academic and market research programs, chapters and communities of practice, and professional development opportunities.
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