Procurement And Project Stakeholders: A Comprehensive Overview

Defining Procurement and Project Stakeholders

Discuss about the Characteristics of Good Contract Compliance.

Procurement refers to the process of finding products, works, or services from external sources, agreeing terms, and acquiring the goods/ services usually through a given defined process such as tendering, single sourcing, or competitive bidding (Dalkin, 2014)

Project stakeholders refer to a group, individual, or organization that may affect, perceive to be affected by a given project undertaking, or be affected by any activity, decision, or outcome of the project.  For example, a company CEO that approves a major capital investment their organization will be affected by the project outcomes; it can fail or succeed, and so is a stakeholder (Usmani, 2018)

The recent car recalls by Toyota for various problems, including faulty seats and steering is due to a gap in the procurement process (‘The Economist’, 2010). The gap in this case is reliance on single sourced suppliers that have been used before, and so are assumed to be able to deliver the right product, without fresh vetting or testing of the delivered products long term. This gap can be filled through competitive bidding and extensive product testing of samples before making a substantial order and using them in cars

In making the order for chips for the Tsunami benefits game, the first step would entail determining the amount of chips to order and the required quality, then evaluating this against a budget, and then determining the possible suppliers. The next step would be to invite the identified suppliers to give more details and then vet them based on set criteria, including price, quality, ability to deliver, compliance with standards and regulations, guarantee on quality (Steinfeld, 2010). 

The documents to rely upon in making the decision include the potential suppliers’ company profiles and certifications to demonstrate compliance and capability. The expected attendees list from ticket sales will also be used to forecast the demand for chips. The relevant regulations and rules by authorities (State and Local) will also be used to get the exact requirements in procuring food for a public event

To help make the decision, samples would be requested from all suppliers, along with the staff involved in the supply and a document on the supplier supply chain process, including how and where they source the raw materials

Ordering too few would mean some people stay hungry, while ordering too much will result in wasted food as well as resources and time taken to dispose of, or manage the surplus

The Impact of Project Stakeholders on Project Outcomes

The plan for when to procure services or products for project activities is done based on the project plan itself, the schedule of activities (WBS), the approval time for the project and funds, and the milestones and project deliverables (Norman, Brotherton, & Fried, 2011).

The project manager working with a supply manager decides on when to make project procurement.

The documents to refer to when planning procurement include the Work Breakdown Structure, the Project quality planning document, the risk management document, and the project Gantt chart as well as the organizations’ procurement policies and regulations document

When products or services arrive early, they add to costs of storage and management and can force compression of project tasks to accommodate the early arrival; when they arrive late, its worse since this inevitably leads to delays, affected project scopes, and increased costs

In going to the market, consideration is made on whether the particular product or service can be single sourced, must be tendered for or competitive bidders invited: basically the form of invitation to express interest

In evaluating responses, all interested bidders are evaluated against a benchmark on a variety of factors, including capacity, legal issues, financial strength, experience, and the personnel as well as compliance with various legal and statutory regulations, including environmental compliance

In developing a contract KPI’s, the project objectives and deliverables are referred to, as well as the project and quality management plans

Monitoring contractor performance is done through inspection of works and reviewing the project progress report against the project plan (Gantt chart) and project scope and budget (Mead & Gruneberg, 2013)

This is initiated officially by the project manager and then sent to the executive sponsor/ owner and/ or the project steering committee for approvals. Approvals must be informed by circumstances, including the inputs such as project plan, the techniques and tools such as market research and expert analysis, and the plan outputs

Conducting reviews on procurement activities entails evaluating all inputs to the plan, including the activity cost estimates, whether the objectives were met, and if the quality and budget parameters were met

Without such documents, procurement becomes ‘much easier’ but highly flawed since a random decision can be made without going through the due process and reviewing other documents and inputs, but with disastrous consequences

Purchase of commercial juice extractor for multiple fruits (configurable) for an upcoming establishment of a fresh fruit juice processing plant

Gap in Procurement Process: The Recent Example of Toyota Car Recalls

The team searched online suppliers’ portals and supplier associations to seek out potential suppliers using the internet and catalogs. In addition, the placed adverts in local and international media (print and electronic), seeking for expressions of interest

They used the company procurement policy guidelines to determine the suitable acquisition plan, the procurement initiation request document, and the form of invitation.

The listed suppliers are the following;

		FENCO Food Machinery s.r.l.- Italy		Shanghai Triowin Intelligent Machinery Co.,Ltd- China		Aguapuro  Equipments Private Limited
	Weight	Score	Weighted score	Score	Weighted score	Score	Weighted score
Financial health	0.075	4	0.3	4	0.3	4.1	0.3075
Capacity	0.125	3.8	0.475	3.9	0.4875	4	0.5
Experience, including supplying to Australia	0.06	4.5	0.27	4.4	0.264	4.3	0.258
Reviews	0.07	4.2	0.294	4.1	0.287	4.2	0.294
Warranty and Guarantee	0.15	4.5	0.675	4.4	0.66	4.3	0.645
Pricing	0.15	3.65	0.5475	4.15	0.6225	4.2	0.63
After sales service	0.1	3.9	0.39	4.2	0.42	4.1	0.41
Speed of delivery	0.05	3.8	0.19	3.9	0.195	4	0.2
Parts and supplies	0.12	4.2	0.504	4.3	0.516	4.35	0.522
Installation and configuration	0.1	4	0.4	4	0.4	4	0.4
Totals	1		4.0455		4.152		4.1665

Various performance indices were developed as shown in the table above and assigned weights in order of importance. The indices were then graded for each firm and the weighted averages summed after multiplying with the weight and aggregate score used for evaluating suppliers. The Indian supplier is chosen because of overall better performance across all areas, including the crucial areas of parts and suppliers, pricing, and after sales services

The task was completed professionally, following procurement guidelines and the procurement management plan. However, advice is given to include more factors in evaluating suppliers, such as green energy star certifications and innovation, as well as ease of use of equipment

Once tenders are received, the tender box is opened, preferably in the presence of all bidders or their representatives and recorded.  The tenders are then put through an evaluation process by the procurement and tender selection committee. Each tender is evaluated based on its performance against a set criteria, including price, experience, financial health, capacity, past supply history, compliance with legal and environmental regulations, tax compliance, among others. The suppliers are then scored based on the evaluation criteria and awarded marks. Those that perform well are then shortlisted for a further detailed evaluation, including the use of an extensive interview. The final chosen supplier is then invited for a contract negotiation where they are given an opportunity to raise any issues and clarifications made, including agreements on payment plans, work place health and safety, among other finer details. A contract that is binding is then signed. Prior to awarding the contract, all bidders are sent letters of their performance with an explanation of the decisions made and why

The organization followed their procurement guidelines and regulations and issued an expression of interest as a document (tender document). The bidders sent in documents, including a duly filled tender document and attachments including financial reports, tax compliance, registration and certification documents, testimonials, and a guarantee letter from a recognized banker and insurer

The key things to remember are the points used to make evaluations and government regulations/ legal requirements, as well as the desired delivery outcome

Procurement Planning

Bias and basing decisions on past performance rather than undertaking a completely competitive tender review

• Explicit in detailing roles, responsibilities, and obligations
• Drafted using legal terms and with legal input
• Validly signed in the presence of a witness
• Willingly accented to
• Must be an offer given and accepted, with due considerations made
• Has certainty of terms
• The offer must be properly communicated and can be revoked at any time prior to being signed
• Offers must be distinguishable from invitations to tender
• A poorly written contract may result in legal challenges or financial losses or even increased liability on the part of either party which should not have happened (Naughter, 2018)

The contract was for the provision of clearing and forwarding services to a major telecommunications player in Sydney.

The contract KPI’s included vendor fraud, compliance, complaints resolved (Quality), Terminated contract remaining value, order value variance from the original contract value, and annualized contract value

The contract was monitored using the following tools:

• Contractor progress reports
• Quality Assurance (QA) Surveillance Plan
• Contractor Quality Assurance Plan
• Performance Assessment
• Earned Value Management
• Service/ Product Inspection and Acceptance

The procurement manager and the assistant project manager were involved, as were the risk management team

The contract was professionally and properly managed

The evaluation of bids by subcontractors

The initial phase of the contract was characterized by late deliveries due to natural circumstances; planning could have been done better

Communications was done based on a project communications plan through e-mail, memos, and face to face meetings

The communication was daily among the contract team where meetings were held each morning

The terms of the contract, liabilities and responsibilities, terms and conditions, description of services, and means for conflict resolution, as well as contract amounts

The contract details, the project delivery timelines, contract sum/ budget

The contract was managed well and in a professional manner

The dispute arose after a natural disaster (bad weather and heavy rains) led to delivery delays and loss of some shipment portions

The dispute involved the contractors and a client we were working on behalf of

The dispute resolution mechanism was used in handling the issue by meeting with the contractor and insurer as well as lawyers representing both parties

The procedures used was mediation and arbitration, rather than following a legal process

The outcome was a fairly resolved dispute with all parties being satisfied

Follow the mediation and arbitration procedures and not accept any liability upfront.

Done by reviewing the contract after extensive negotiations before signing off the contracts once all parties are satisfied with it and the contract is then filed and the necessary notifications made

At the end of each project, a review is done and documented with a version number, and a person in charge of managing it assigned to file and archive the review and evaluation document. The document is managed under the general document management procedure

References

Dalkin, J. (2014, July 10). Definition - What is Procurement? Meaning & Process. Retrieved from https://www.capital.uk.com/2014/07/definition-procurement/

Mead, J., & Gruneberg, S. L. (2013). Programme procurement in construction: Learning from London, 2012.

Naughter, T. (n.d.). Characteristics of a Good Contract Compliance Manager. Retrieved from https://www.contractworks.com/blog/characteristics-of-a-good-contract-compliance-manager

Norman, E. S., Brotherton, S. A., & Fried, R. T. (2011). Work Breakdown Structures: The Foundation for Project Management Excellence. Hoboken: John Wiley & Sons.

Steinfeld, J. (2010, November 17). 4 Things You Must Consider When Choosing a Supplier. Retrieved from https://www.cbsnews.com/news/4-things-you-must-consider-when-choosing-a-supplier/

'The Economist'. (2010). The machine that ran too hot. Retrieved from https://www.economist.com/node/15581072

Usmani, F. (2018, April 17). Stakeholders in Project Management. Retrieved from https://pmstudycircle.com/2012/03/stakeholders-in-project-management-definition-and-types/