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MSC PROJECT MANAGEMENT PROGRAMME MODULE 6 CONTRACTS AND PROCUREMENT

PROJECT- CASE STUDY:


NORTH BRISTOL NHS SOUTHMEAD INTEGRATED COMMUNITY HOSPITAL REDEVELOPMENT PROJECT PROCUREMENT PLAN

FINAL PROJECT

Student name: Student ID: Date:

Davidson Ferreira 15799388 29-October-2011

Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

Table of Contents

1.

PROJECT BACKGROUND AND OBJECTIVES............................................................... 3 1.1. PROJECT OBJECTIVES .................................................................................... 4

2.

PROCUREMENT PLAN FOR THE HOSPITAL DEVELOPMENT .................................... 5 2.1. PLAN SCHEDULE GANTT CHART ..................................................................... 5 2.2. SUPPLIER SELECTION PLAN ........................................................................... 7 2.3. CONTRACT AWARDING PLAN .......................................................................... 8 2.4. CONTRACT TYPES AND APPLICATION SPECIFICATIONS ................................ 8

3.

FOUR PROCUREMENT ISSUES FACED BY PROCUREMENT MANAGERS IN NHS ... 9 3.1. POST TENDER NEGOTIATIONS ....................................................................... 9 3.2. SUSTAINABILITY AND COMMUNITY IMPACT .................................................... 9 3.3. ENVIRONMENTAL IMPACT ............................................................................... 9 3.4. USE OF INFORMATION TECHNOLOGY............................................................. 9

4.

STRATEGY TO HANDLE PROCUREMENT FOR UK HOSPITAL ................................. 10 4.1. STRATEGY FOR POST TENDER NEGOTIATIONS ........................................... 10 4.2. SUSTAINABILITY AND COMMUNITY IMPACT .................................................. 10 4.3. USE OF INFORMATION TECHNOLOGY........................................................... 11 4.4. SUSTAINABILITY, COMMUNITY AND ENVIRONMENTAL IMPACT .................... 11

5. 6.

CONCLUSION ............................................................................................................... 12 REFERENCE LIST ........................................................................................................ 13

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

1.

PROJECT BACKGROUND AND OBJECTIVES As part of North Bristol Trust program, the Southmead Integrated Community Hospital redevelopment project has been approved for the construction of new facilities capacity to support a service activity forecasted for up to 30,000 patients. The full capacity expected is shown in the activity table below: Table 1: New Southmead Community Hospital Activity (North Bristol NHS Trust, 2009: 4)
Activity Category Patients Per Year

Outpatients and Triage Minor Injuries Diagnostic Tests (Plain film and ultrasound) Therapy Appointments Inpatient spells to avoid admission to acute hospital Inpatient spells for community rehabilitation

26,242 24,000 33,661 30,000 657 500

Public procurement strategies in the health sector is related to these strategic aims of NHS procurement plans for the Southmead Hospital redevelopment project as it is expected to take the majority of the project funding under the current approval amount. (Munday, M. & Roberts, A. 2010: 8) The procurement team of will recognize the value of public procurement strategies have on developing a knowledge-based economy, promoting low-carbon strategies, delivering social and territorial cohesion, and meeting environmental targets. Therefore, the procurement team need to commit through national and local procurement policies to strategies that take such objectives into account, i.e. flexibility to accommodate limitations to local or regional contractors.(NHS EU Office, nd.: 9)

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

1.1.

PROJECT OBJECTIVES The purpose of the procurement plan is to establish the North Bristol NHS trust methodology to acquire its products and services objectives through fair and transparent procurement practices while having a positive impact on the local community and environment. The main project goals are: Prepare a procurement plan for the hospital construction and development Identify four procurement issues faced by procurement managers in NHS in UK. Develop a strategy to handle procurement for UK hospital, by addressing the issues faced by NHS manager in UK.

In order to meet the activity requirements set in table 1, the project team is tasked with design and construction management of the new community hospital facilities as well as the refurbishment of medical service equipment. To support the project team, a procurement plan needs to be developed to guide the procurement professionals, bidding vendors and the technical team to understand and successfully execute the procurement plan to procure services and goods required to complete the project within budget, scope and schedule. A procurement flow path is shown below to illustrate the procurement process and the various stakeholders integration on the process. The Gantt chart on the section to follow will describe the process including the time lime factor.

Figure 1.1 Procurement process stakeholders interaction

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

2.

PROCUREMENT PLAN FOR THE HOSPITAL DEVELOPMENT 2.1. PLAN SCHEDULE GANTT CHART The early develop of a procurement plan in from of Gantt chart will enable both the procurement team but most important the sponsor stakeholder a relative quick overview of main activities, their relation and the overall timeline of the procurement process. The Gantt chart, is a live document, thus, it is expected to change as the procurement process starts and therefore, several updates will be done prior to completion of the project. Therefore, it is important that in particular to large size project, a dedicated planner position is made available to collect and publish project schedule updates on the overall project execution, but also for the procurement activities as this will support and alert the procurement team on any forecasted delays and their impact on the project completion as these may enter the project critical path. The typical procurement process will entail the following major activities: Selection of services to be procured: which will entail several discussions on make-or-buy decision, customization vs. off the shelf services and goods. (Sollish, F., Semanik, J., Morris, P.W.G. ed. & Pinto, J.K. ed. 2011: 157) Selection of which goods to be procured; will be a follow-up from the technical teams, but it will take the project sponsor to approve the selection of items (services and goods) to which will be pursue through outsourcing and which will use the in-house resources. Vendors may be contacted directly or available data (web, catalogs, etc.). The end result will be a list of services and goods (special hospital equipment, systems, bulk equipments and materials, etc.) pre-approved for procurement. Scope specifications as well as preliminary data sheets for equipment are expected by the procurement team to be developed in order to support the next phase of the procurement plan (the development of the contracting plan). Development of contracting plan: one of the most important phases, as the team needs to consider a variety to factor, like local vs. national vs. international supplier affecting quality, schedule and standardization of products and services. The contracting plan shall be in accordance with rules and regulations and most important the terms and conditions guidelines of NHS contracting strategy. Preparation and issuing of Invitation To Tender (ITT) to potential suppliers: at this stage, the procurement team will have a set of requirements (scope specifications, windows of deliverables, supplier characteristics) so that all pre-selected vendors will be issued with a set of relevant Invitation to
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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

Tender (ITT) for bidding on the service or product line the NHS believes they can supply according to their requirements. It is also in this phase, where a majority of clarifications is conducted and only a handful of vendors remain interested on continuing the bidding process. The NHS function teams, also take a chance to update the technical specifications in order to ensure there are procuring a existing product or service. Preparation and issue of request for proposal on service acquisitions; likewise for goods, not all pre-specified services SOW, can be executed as preliminary intended, thus important to allow the vendor (service contractors) to have an input on the outcome of the product, as this may not only benefit to the contractors, but also the buying party as this formers may be more up-to-date on new technologies or techniques that could improve performance, reduce cost or simply less expensive. Preparation and issue of request for quotations on both services and goods potential suppliers. This final set of activities will provide the procurement team with the documentation and data required to complete the most important step on the evaluation process, thus is critical that all vendors bidding for the same service or product provide quotations that are structured as per NHS guidelines for a fair and standardize evaluation. Perform bid evaluations and complete supplier selection process, is a complex process, and in particular to public enterprise more so. Guidelines on bidding evaluation and bidding criteria are touched on the next section and details on similar procurement strategy plans (see Torbay NHS Care
Trust, 2010: 7-11)

Award winning contractors with Contract Agreements for review and acceptance, discuss non-price related final points and update contract based on the agreed (finalized) terms and condition including deliverable(s) date(s), quality specifications, etc. This is further discussed in following sections. Contract management, involving (according to contract agreement) contract performance review activities, reporting, audits and scope changes within agreed terms and conditions. Contract closure activities, including review and acceptance of punch list items for services and material/equipment quality certificates by respective function/department review teams and finally make final payments and issuance of contract completion certificate along with all closeout documentation.

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

Figure 2.1 bellow illustrates a typical procurement process plan, with a standard cascade of activities required for an effective procurement program for non-complex projects in a summarized form (full expanded Gantt chart is available under appendix B of this report for further details).

Figure 2.1: Collapsed Gantt Chart: Typical Procurement process

2.2.

SUPPLIER SELECTION PLAN In order ensure a significant level of cross-discipline buy-in for the selection criteria de supplier selection team shall involve representatives from all areas with invested interest on the serviced and/or goods to be procured (Cavinato, J.L., Flynn, A.E. & Kaufmann, R.G. 2006: 728). Additionally, supplier selection criteria (above meeting policies and regulations) will be based on service/material costs and by the supplier administrative costs under the awarded contract. (Cavinato, J.L., et. al. 2006: 744) Typical selection process will be governed by the relationship between supplier price/service/quality/technology and may include the following (Sollish, et al.
2011: 57-73)

Evaluating offers Suppler responsiveness Capabilities assessment Competitive value

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

2.3.

CONTRACT AWARDING PLAN The use of traditional processes for procurement management, in particular for public enterprises/entities has shown to be a to be relatively inefficient, as the timeline from issuing ITT/RFP/RFQ to a contract award stage can be long and use considerable amount of time and resources from the procurement team and more critical from other invested interest departments. (Cavinato, J.L., et. al. 2006: 429) Although widely recommended approach for supplier selection is indeed the lowers price citus paribus, the NHS procurement team is not obligated to select the lowest price tender. Instead, there is the possibility of awarding a contract to the most economically advantageous tender, in which case they can use criteria linked to the subject-matter of the contract in question (such as quality, price, technical merit, supplier location (local or national), after-sales service, delivery date and completion date), all of which have to be weighted in descending order of importance. Munday, M. & Roberts, A. (2010: 9)

2.4.

CONTRACT TYPES Procurement plan will incorporate the outsourcing of services and the purchasing of goods. As the diversity of acquiring items vary in complexity and size, the contracts type developed to ensure the primary objectives as discussed before will include among others the following contract types: (as defined in PMBOK (2008: 322), cited in Heldman, K. (2009: 290) Fixed price or lump sum: which will be typically used for all low risk projects where complexity and/or bidders understanding of the scope of work specifications is sufficient to low the risk of implementation. Also for projects where the project team does not anticipate major changes. Cost reimbursable: for procurement of equipments where specification were not fully developed and final specification can be modified after contract award. Time and materials (T&M): typical for service contracts only, due to the uncertainty level and the complexity, in particular due to the fact that the project team expects major scope changes

The three categories selected above are described in relation to the procurement objectives of the Southmead Hospital redevelopment project, and not in general, as this may entail additional parameters.

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

3.

FOUR PROCUREMENT ISSUES FACED BY PROCUREMENT MANAGERS IN NHS 3.1. POST TENDER NEGOTIATIONS In NHS procurement, post tender negotiation, or price negotiation after tender submittal, is not permitted. (NHS Barnet, 2009:37) In theory, if bidding suppliers are aware that PTN is not allowed, then it is expected the best price for the service scoped. In practice it doesnt work as not all aspects of the scope of work will be clarified to a minimum risk, and in particular to specialty services and equipment specifications, thus it is expected further clarifications/discussion and this may happen only after contract award and supplier will not spend resources on clarifications without some assurance of winning the bid or even after a PO is secured.( Peter W. G. Morris and Jeffrey K. Pinto (2007: 308) 3.2. SUSTAINABILITY AND COMMUNITY IMPACT Better public funds management, means capital procurement team in the NHS, has to achieve this through delivering better-quality healthcare buildings and improved value for money. The issues in safeguarding such objectives involve the following challenges: ( Peter W. G. Morris and Jeffrey K. Pinto 2007: 274276) Creating a partnership program that will develop long-term agreements with the local private sector to deliver better value for money and a better service for patients while monitoring contract performance through performance management Qualifying the NHS to be a best client while endorsing the use of highquality designs.

3.3.

ENVIRONMENTAL IMPACT A study sponsored by Torbay NHS Care Trust, (2010: 10) has revealed that More than half of the NHS England total carbon footprint is associated with the products and services it procures, as this account for 60% of the total NHS carbon footprint. In order to balance cost vs. quality and environmental impact, procurement manager will need to perform complex bid evaluation such that none of the parameters is outside the regulation and guidelines established.

3.4.

USE OF INFORMATION TECHNOLOGY The implementation of eCommerce within government departments is recognised as a major initiative, and is fully reinforced in this procurement plan. This may prove a challenge to local supplier and smaller business ability to engage the e-tendering process and therefore hinder the local community.

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

4.

STRATEGY TO HANDLE PROCUREMENT FOR UK HOSPITAL The purpose of the procurement strategy is to set out the approach to accomplishing its service and goods delivery objectives through the application of good procurement practice. As hospital patients and users in general are depended on the secure availability of quality services and accountability for spending public funds, it requires proper economic decisions. All public sector procurement processes are required to be transparent, open to competition and secure best value (Pamela Nicholson, 2010: 3) Although not comprehensive, below are four issues faced by NHS procurement manager in UK as identified early in section 3 of this report, the proposed solution overview. 4.1. STRATEGY FOR POST TENDER NEGOTIATIONS Although, tendering and post tender negotiation are core important of purchasing and supply management and, thus, all procurement professionals should be competent in their application and use, CIPS, (nd.: 1) it is not applicable for the current procurement plan for Southmead Hospital redevelopment project, as stated before by NHS regulation. Therefore, In order to still produced value for money on the procured goods and services, the procurement team and project team in general will invest careful attention to the early tendering process through the use of ITT, RFI, RFP and finally RFQ clarification section to ensure that suppliers have a clear understanding of the scope of work specification as well as the terms and conditions for the specific contract they will be bidding to. 4.2. SUSTAINABILITY AND COMMUNITY IMPACT The key procurement principles that will address the challenges with sustainability and community impact on the procurement plan such that both the local community as we the environment benefit from the project at the implementation phase are: Barnet NHS (2009: 7-9) Procurement strategy is consistent with Department of Health regulation and legislative guidelines. Procurement strategy needs to ensure procurement processes are effective, are transparent and are equitable. NHS Barnet NHS (2009: 7) Procurement policy will be fair, transparent, equitable and non discriminatory. Value for Money is a pre-requisite of services and goods procured.

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

4.3.

USE OF INFORMATION TECHNOLOGY Public bodies must consider the application of the public procurement rules in procuring the e-tendering solution or service itself. E-tendering delivers suppliers with electronic access to ITT and associated documents and permits suppliers to securely lodge their completed tenders electronically. These tenders are then released to authorised staff in the procuring organisation after the closing date for the submission of tenders. For the purposes of this project, an e-tendering service will be assumed to include secure hosting of electronic tender-boxes and possibly other related services, as well as the software solution.(OGC, 2010: 5) E-tendering solutions may include tools such as: o o o requirement development supplier selection and pre-qualification contract performance and vendor management

4.4.

ENVIRONMENTAL IMPACT Part of the procurement strategy, under the bidder selection criteria, the project team will consider the footprint of the products being procured across all bidding contractors and consider the greenest service and/good as a advantage point on the selection process. The objective is to ensure among other the following are met: NHS Care Trust, (2010: 10) Meeting current Waste Electrical and Electronic Equipment Regulations for areas such as equipment disposal. Reduction in surplus packaging at supplier locations prior shipping. And effective use of re-useable containers. Minimize travelling of people, goods and services including raw material, as this will affect cost reduction as well. Ensuring that all contract terms and conditions are accommodating for sustainable procurement activities. The development of a local sustainability policy reflecting the environmental considerations and social responsibilities of good procurement practice. Reducing both our own and our contractors carbon footprint

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

5.

CONCLUSION The strategic procurement plan will take into account the following priorities: (Pamela Nicholson, 2010: 15) Ethical Procurement: working towards the recommendations of the NHS in Saving Carbon Improving Health and developing the Trusts Ethical Procurement Policy in accordance with national guidelines. Supply chain management: creating viable and efficient supplier markets, developing effective supplier relations. Strategic procurement: finding and developing more innovative and proactive ways of achieving year on year cost and quality improvements through market segmentation, demand consolidation. eCommerce: Endorsing the use of e-business technology for early vendor information acquisition, demand analysis, business to business trading and specifically electronic tendering, catalogue management and product control as well as the all-suite of activities supporting contract performance monitoring and even payments via electronic transfer of funds. Change management: developing proactive methods of delivering real and sustainable changes in the project that are benefits to health and social care services, given the cost of project changes. Collaboration: constantly reviewing the configuration of demand and options for effective networking and inter-trust supply collaboration within the local health economy and the wider public sector network.

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

6.

REFERENCE LIST
Laureate Education Inc. (2011), North Bristol- Integrated Community Hospital development specifications: Final module project: Contracts and procurement module. Week 4 Assignment question. Laureate Online Education B.V. Peter W. G. Morris and Jeffrey K. Pinto (2007) The Wiley Guide to project technology, supply chain & procurement management John Wiley & Sons, Inc., Hoboken, New Jersey. Max Munday & Annette Roberts (2010) The Economic Impact of NHS Procurement: A Study of the Aneurin Bevan Health Board, Welsh Economy Research Unit. NHS Barnet (2009), Procurement Strategy 2009-2014, available online at: www.barnet.nhs.uk/files/trustuploads/procurement%20strategy.pdf, last accessed on 23-Sep-2011. CIPS, (ND.), Tendering and Post Tender Negotiation, CIPS Knowledge Works. Available online at: www.cips.org. Last accessed on 20-Oct-2011. Pamela Nicholson, (2010), Corporate Procurement Strategy, available online at: www.torbaycaretrust.nhs.uk/publications/.../ProcurementStrategy.pdf, last accessed on 26-September 2011. www.bipsolutions.com, Selling to the NHS A Guide for Suppliers, available on-line at: http://www.bipsolutions.com/briefings/Briefings2004/Brief04_08.php, last accessed on 18-Sep-2011. Sollish, F., Semanik, J., Morris, P.W.G. ed. & Pinto, J.K. ed. 2011. Planning and administering project contracts and procurement. Laureate Education, Inc., custom ed. Hoboken: John Wiley & Sons. Cavinato, J.L., Flynn, A.E. & Kaufmann, R.G.7th Ed. (2006) Supply management handbook. 7th Ed. New York: McGraw-Hill [Online]. Available from: http://site.ebrary.com.ezproxy.liv.ac.uk/lib/liverpool/docDetail.action?docID=10 155019 (Accessed: 19 Oct 2011). Project Management Institute (2008) A guide to the project management body of knowledge. 4th Ed. Newton Square, PA: Project Management Institute.Heldman, K. (2009) PMP project management professional exam study guide. 5th Ed. Indianapolis: Wiley Publishing Inc. Office of Government Commerce (OGC) 1 HM Treasury (2010) Implementing etendering. London: OCG [Online]. Available from: http://www.ogc.gov.uk/documents/etendering_ Guidance.pdf (Accessed: 15 September 2011).

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Module 6: Contracts and Procurement Individual project: Final Project Report University of Liverpool Laureate Online Education

Case Study: Southmead Hospital Redevelopment Procurement Plan Rev. A 29-October-2011

APPENDIX A: PROCUREMENT PLAN MAJOR ACTIVITIES GANTT CHART

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MODULE 5: CONTRACTS AND PROCUREMENT FINAL PROJECT DAVIDSON FERREIRA ID 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Task Name Duration 4th Quarter D 1st Quarter J F M 2nd Quarter A M J 3rd Quarter J A S 4th Quarter O N D 1st Quarter J F M 2nd Quarter A M J 3rd Quarter J A S 4th Quarter O N D 1st Quarter J F M 2nd Quarter A M J

SOUTHMEAD REDEVELOPMENT PROJECT TYPICAL PROCUREMENT PROCESS SERVICES AND SPECIAL EQUIPMENT PURCHASE 3rd Quarter J A S 4th Quarter O N D 1st Quarter J F M 2nd Qu A

PROCUREMENT PROCESS PURCHASE SERVICE SELECTION SERVICE MAKE OR BUY DECISION PROCESS CROSS FUNCTION APPROVALS PURCHASE GOODS SELECTION PRELIMINARY GOODS/MATERIAL SPECIFICATIONS VENDORS INPUT ON SPECIFICATIONS GOODS/MATERIALS/EQUIPMENT DETAIL SPECIFICATION AND DATA SHEETS CONTRACTING PLAN

840 days 15 days 2 wks 1 wk 90 days 6 wks 8 wks 4 wks 50 days

Prepare set of policies and regulations for selected procurement goods/services 8 wks Prepare preliminary bidders list REQUEST FOR INFORMATION Issue invitation to tender for pre-selected bidders list Hold preliminary scope clarifications meetings REQUEST FOR PROPOSALS Issue RFPs Issue typical contract terms and conditions for supplier review and comments Hold scope and compliance clarifications meeting with suppliers Perform supplier qualification process REQUEST FOR QUOTATIONS Issue Request For Quotations Hold price/scope specifications negotiations SUPPLIER SELECTION Prepare bid tab for evaluations Conduct supplier bid evaluations Prepare list of winning contractors and have management approval CONTRACT AWARDING Select contract type Issue contract agreement to winning contractors Receive and accpetance of contract agreement Issue contract management plan Issue bidding results to all bidding suppliers CONTRACT MANAGEMENT Perform regular contract review/audits Prepare and issue score cards Issue correction letters to out of scope suppliers Make payments according to terms and conditions CONTRACT CLOSURE Review and Accept punch list items Hold contract closeout meeting with supplier and target departments Issue contractor score card Make final payments Issue certificate of contract completion
Task Summary Project Summary External Tasks

2 wks 20 days 3 wks 1 wk 40 days 2 wks 1 wk 1 wk 4 wks 25 days 1 wk 4 wks 45 days 4 wks 4 wks 1 wk 25 days 2 wks 1 wk 1 wk 1 wk 1 wk 480 days 24 mons 24 mons 24 mons 24 mons 50 days 4 wks 2 wks 2 wks 1 wk 1 wk
External Milestone Inactive Task Inactive Milestone Inactive Summary Manual Task Duration-only TYPICAL PROCUREMENT PROCESS GANTT CHART FOR SERVICES AND SPECIAL EQUIPMENT ACQUISITION Manual Summary Rollup Manual Summary Start-only Finish-only Deadline Progress

Project: Gantt Chart.mpp Date: Tue 11-10-11

Split Milestone

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