Update: This process has been discontinued by PMI in the 6th version of PMBOK.
This project management activity is about closing project procurements by ensuring that all product deliverables meet requirements, and technical documentation, test artifacts such as test plan, test metrics, test cases, and other deliverables as mentioned in the contract have been delivered.
A contract can only end at one of two places.
Either at your office, or in the court.
Either successfully (even prematurely, when both seller and buyer agree to close), or in dispute (seller didn’t deliver, buyer didn’t pay, seller escalated, buyer didn’t respond…). Terms of such a premature closure are also mentioned in the contract.
If there are multiple contracts in a project each one of them need to be closed using this process. Contract terms may also include what needs to be done as part of closing the contract – such as specific deliverables, signing certain forms and declarations and so on.
What do we need?
Project plan and Procurement related documents
Collect, index and file all the documents created as part of conducting and administrating contract. These will be useful for creating and managing contracts in the future.
How do we close procurements?
Procurement audits
Again, this is to understand lessons learned. Go over all the processes, documents, communication and such, compare them against the contract terms, schedules and cost plans and document what went right and what did not.
Issue settlements
When a contract ends you need to ensure that deliverables are verified as per contract terms, and there are no outstanding claims by either party. There are times when claims are not settled and it goes through the following steps, which are progressively harder or undesirable –
- Negotiation – both parties sit and resolve the claim through mutual understanding and compromise.
- Mediation – a mediator acting as a neutral third party assists both parties reach a settlement. This undergoes certain structure, timetable and dynamics that lack in mutual negotiation.
- Arbitration – this is a bit stronger form of dispute resolution than mediation. An impartial adjudicator (one or more than one person) will hear both sides, examine evidences and declare decision. There are two types – binding and non-binding. If both parties agree for the latter type then they are bound by the outcome.
- Litigation – this is the last option, where both parties go to the court and seek justice.
The last three options are the ones where a third party is involved to resolve claim, and these are called Alternate Dispute Resolution (ADR) ways.
There are more ways of getting resolution in ADR, such as Conciliation, but not part of PMBOK®. Hence these are not discussed here.
Management of Records
This is a system that maintains and manages all contract related records.
What do we produce in this project management activity?
We close procurements, of course
When a contract is closed, you verify all artifacts delivered by seller to your satisfaction and send a formal written notice terminating the contract. This part is also part of contract terms so the seller will be expecting to receive this notice. It formally closes any obligation between two parties (except pending claims, settlement process of which can continue even after contract is closed).
