Procurement Process
Deanna Thele
CPMGT/302
January 30, 2012
Pamela Hill
Procurement Process
Procurement management is the processes to purchase or acquire the products, services or results needed from outside the project team to perform the work. Project Procurement Management involves not just purchasing products, services or results, but also ensuring that those that are purchased are right for the project, meets standards and is based on project requirements. This life cycle includes tracking from order through deployment and completing with invoice reconciliation.
All projects are defined by the purpose, objectives and deliverables. Properly defining these, as well as the other aspects of the project management plan will
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Once the Procurement Plan is defined and agreed upon, any changes to the Scope require formal change management as described in the Integration Process.
The most valuable output of the Plan Procurement Process is the Procurement Management Plan. As is the case with almost every aspect of the project management process, it is essential and imperative that the project management team implement an effective and concise plan when it comes to the various components of procurement throughout the project’s life cycle. Specifically speaking, the procurement management plan refers to the plan that has been put into place that is meant to dictate and describe the entirety of the procurement process and how it is means to relate to and with the developing procurement documentation, and how contract closure will relate to all. The procurement management plan should be implemented and developed as early in the project life cycle as possible to assure that the procurement process is consistent throughout, however, in some cases the plan may be altered once the project begins, particularly if budgetary reasons dictate.
A Fixed Price contract provides for a price which normally is not subject to any adjustment unless certain provisions are included in the agreement, such as contract change, economic pricing, or defective pricing. These contracts are negotiated usually where reasonably definite specifications are available, and costs can be estimated with reasonable accuracy. A
Fixed-price contracts use a fixed total price for the defined product, service, or result to be provided. The seller has the most risk in this contract type because they are obligated to complete the contracts and they will have to pay financial damages if they do not complete it. In the cost-reimbursable contracts, cost reimbursements are involved with additional fee that represents seller profit. This contract type is flexible especially when the project scope changes. Buyers have the most risk in this contract because it is possible that sellers increase prices and fees in the process. The time and material contracts is a hybrid of the fixed-price contracts and cost-reimbursable contracts. Buyers have the most risk in this contract type because the contracts can be open-ended allowing the sellers to increase the price of materials or services.
This report explains in detail an approach to understanding the importance of procurement strategies and the importance of resource management.
Procurement intends to explore supply market opportunities and to implement resourcing strategies that deliver the best possible supply outcome to the organization, its stakeholders and clients (Kidd, 2005). Therefore, construction procurement exists to purchase a construction project as requirement of firms or organizational entities to achieve its goals. However, the choice to use external resources is the part of firms’ decision-making
The purpose of defining this project is to make the deliverables of the project clear to the client and to place more focus on project plans.
The Project Management Plan provides the framework to manage the various resources required to meet project goals and objectives. The Plan clarifies roles and responsibilities for project stakeholders and intends to focus the project on performance standards that meet the defined scope, time requirements, and budget requirements. Periodic changes and updates to this plan may become necessary and shall involve participation of all project stakeholders with the approval of the project sponsor Mark Johnson, VP of Strategic Planning and project approver and the Chief Financial Officer, Clair Adams.
Time and material contracts are a hybrid as they contain aspects of both fixed-price and cost-reimbursable contracts. This contract type is used when it is impossible to estimate accurately the extent or duration of the contracted work. Time and material contract represents the highest risk to the buyer.
Most project, before construction contract is being choosen, it is nearly crucial to think about the most suitable procurement route. This is the way in which the client and contractor will work together to realise the project, and will depend on several factors including quality,risk,timing,budget and the extent to which you, as the client, wish to be involved in the process of construction.
Successful projects require a sound organization-wide project management (PM) system and plan. Equally important, individual project managers must prepare specific plans for managing each job under their leadership. There are a variety of types of plans and approaches project managers need to recognize as they undertake their daily activities.
Procurement also is the selecting from a range of options for acquisitions, and in analyzing and identifying the requirements for the purchasing, negotiating contracts, picking the suppliers, the creating of strategic alliances with suppliers, or the acting as a liaison between the user and suppliers. The current state of procurement practice reflects the dynamic interaction between the opposing forces, leaving the remaining in limbo. The two complementary process is involved in the procurement is vendor selling and customer buying. The best practice in the procurement process is the Exchange-Point Analysis. The exchange points highlight the opportunities for the process integration, which are noted for performance improvement opportunities. The process integration is to convert critical aspects for the supply chain process and procurement from one based on commercial norms about markets and current laws to the one that relies upon goal alignment and trust through the chain of command. The current best practices in industry or government project management include the belief based operations between vendors and customers (Morris & Pinto,
The important of the procurement plan is all needs will be listed and to be obtained over a period time. When procurement schedule develops, all the procurement process will be timelines and fulfillment. Furthermore, procurement plan allows one contract consists of similar needs or division needs into several contract packages. With procurement plan, it allows to monitoring procuring process to determine actual performance compare with planned activities and to alert the related departments and adjust the procurement plan. Hence, it enhances the transparency and liability of the procurement
The plan began by “determining which project needs can be fulfilled internally by the project team and which can best be met externally (Marchewka, 2012, p. 382). The project team made decisions about when, how, what quantities and what sources would sustain the insourced and outsourced tasks. With this information and the results of the plan inputs, tools and techniques, either a detailed or a broadly organized project procurement management plan that includes guidance for procurements from inception to closure. The documentation would comprise the e-Discovery procurement statement of work identifying where documents should be collected, and from which custodians. Where documents should be sent for processing, processing specifications and options, document review requirements and rules, categorization specifications, production format agreements and production deadlines. Included would be the documentation for any make or buy analyses and peripheral
According to the Project Management Body of Knowledge (PMBOK), a project includes the following four phases: initiation, planning, execution and closure. (PMI, 2004) Project planning is the stage that defines how the project is going to be undertaken to a successful execution and delivery. “In present times any kind of activity is considered as a project” (Toader , 2010), “The quality and importance of project planning has been considered a major cornerstone of every successful project. (Dvir, 2004). “Numerous empirical studies of project management success factors suggested planning as one of the major contributors to project success.” (Pinto & Slevin, 1987)
The procurement plan for the NHS hospital development may be undertaken through the following steps and processes:
Procurement is the process by which organizations acquire goods, works and services. The procurement cycle involves planning, beginning with needs assessment through needs preparation, inviting offers, contractor selection, awarding contracts, executing and managing contracts, as well as final accounting and auditing. Procurement can therefore be viewed as a strategic component of supply chain management relating to satisfying customer or buyer needs.
Project management has many important components that must be integrated in order to ensure the overall success of an endeavor. One area that many businesses focus on is procurement in order to maximize the benefits for the organization. As a result, many organizations are hiring procurement specialists with the purpose of ensuring that their procurement practices are efficient and current with business practices. This paper will discuss the procurement process, some of the benefits procurement offers a business, and the attributes a procurement professional should possess to become successful in the field.