Procurement, Contracts and Benefits Management
Procurement
Start with a make-or-buy decision, then follow the cycle: define requirements and specifications (output- or outcome-based) → evaluate options and sourcing strategy (single, dual, multi-source; framework agreements) → select and tender (ITT, RFQ, RFP) → evaluate bids using weighted criteria covering capability, capacity, price and whole-life cost - not lowest price alone → negotiate → award and manage the contract.
Contract types and risk allocation
The central idea is that risk should sit with the party best able to manage it. Fixed price transfers cost risk to the supplier and suits well-defined scope; with unclear scope it produces high prices or disputes. Cost-plus leaves cost risk with the buyer and suits urgent or uncertain work. Target cost shares over/under-run through a pain/gain mechanism. Time and materials is flexible but open-ended. Know the levers: service levels and KPIs, retention, liquidated damages, warranties, change control within the contract, and supplier relationship management through regular performance reviews.
Benefits management
A benefits profile defines each benefit, its measure, baseline, owner, timing and dependencies. Benefit owners are usually business managers, not the PM, because benefits are realised after handover. A benefits realisation plan sets out how and when benefits will be measured; dis-benefits are the negative consequences to be acknowledged and managed.
Worked example
A council needs a bespoke case-management system with unstable requirements. Fixed price would invite large risk premiums and disputes, so a target-cost or phased time-and-materials approach with strong change control is preferable.
Traps
Assuming the PM owns benefits; assuming fixed price removes all risk; evaluating on lowest price only.