Best Practice For Contract And Procurement Management Essay For Global Project Management.

1.Critically evaluate the risks associated with contract and procurement management approaches and make recommendations to global project sponsors with regard to ‘best practice’ in this area.

2.Apply judgement and initiative in the development of ‘best practice’ contract and procurement process for global project management, identifying the external factors that need to be considered and mitigated for in every instance.

3.Analyse the responsibilities of the procurement manager and project manager necessary to ensure stakeholder satisfaction and successful project outcomes.

Project Procurement Context

Royal Aldelaide Hospital (RAH) is the largest social infrastructural project category executed by the government. RAH project was constructed, implemented, and financially aided through public-private partnership, the support covered non-medical services and equipment. The project company given the mandate consisted of a team that was mandated with management works, awarding of contracts, change management, and risk management.  The project team covered procurement plan drafted to represent a logical plan of processes and requirements to ensure the project is accomplished as per specifications. RAH formulated key governance arrangements and monitoring sections that are crucial in executing complex projects. The procurement was very useful to the project team to ensure that the project life cycle was followed.

According to PMBOK (2013), the project management processes should include a procurement plan that defines project needs, avenues for negotiations, contractual agreements, supplier evaluations, procurement risk management, and issuance of contracts. RAH is facing the challenge of less budget and accountability which means they have to balance a good procurement process. Some of the procurement deliverables facing RAH included coming up with a setup of 800 beds that comprises proper 100 standard rooms, with 700-dimensional utility rooms. The structures will host 40 technical suits that will contain operating theaters, intervention suits, and additional procedural rooms.  The project will support an automated system that will help in drug supply, and capacity holding of biomedical equipment which is marked electronically. The purpose of having such technology is safeguarding supplies in the stores.

RAH management can influence procurement activity by planning for purchase and ways of acquiring the required resources. The process will involve identifying resources and materials the project will need, and following an efficient procedure to acquire them. The project team working for RAH was a useful component in execution and implementation of the project. Proper contracts will be generated with external bodies to ensure objectives are met for the purchase of good, services, and products. A clear evaluation of the suppliers will carried out based on the criteria outlined by the steering committees. The subcontractor will be useful in coming up with a proper design that covers building construction and designs. The project will then be financially aided by the countries department of planning, transport, and infrastructure.  

The project is influenced by the external and internal environment surrounding the project. The environment factors define inputs and processes required for planning purchases and acquisition. A survey of environmental factors will be useful in ensuring that factors and conditions are followed and considered as required.  The project team decision will be based on the type of organizational factors which are inherent in the project. The organizational factors include formal policies, procedures, guidelines and organizational structures that promote better procurement environment. External environment include forces from outside that influence procurement decisions. The evaluation of the two environment forms a critical component in ensuring that a proper procurement plan is being implemented and documented (Chen & Lee, 2016).

Procurement Risks and Management

The project scope statement will need to provide better project needs on documented profile. The project plan will clearly indicate a proper list of expected deliverables and expected criteria for services, products, and results. RAH management needs to consider leads to proper procurement formulation and leading which flowed contract to sellers. Project contract is important for any project in defining performance. Plan contracting involves preparing the necessary documentations that are useful in the process of requesting seller responses and selecting of sellers. RAH management need to consider the following contracting inputs before they engage to any major contracts they include: plan for procurement, statement of specifications, supplier sourcing strategies, writing of project plan, project costs estimates, risk mitigation plans, scheduling of activities, derivation of baselines, milestones definitions, human resource plans, and contract formulations. If planning contracting is done well it can produce good procurement documentations, supplier evaluations metrics and order of specifications for a project. It is important for RAH management to consider several factors contributions towards contracting that ensures performance of the project (Chen & Lee, 2016).

Mitigation of risks in procurement is important in ensuring loses do not occur in projects. Any procurement process needs to create value, be dynamic, and need to be iterative responsive to the user needs. It is expected to form part of any decision making process of procurement teams. Project procurement process needs to make out any potential problems before they follow risk-handling activities before they are they occur.  The risks integration will need to be unified in project life cycle, and provides a means of mitigating effects of risks. Project Agreement was designed by RAH management to good relational agreement with the project Co. to provide a good framework for design, execution, and evaluation of procurement risks facing construction and design methodology. Procurement risks are categorized based on the cost or value of project activities. The health facility project design and construction are financed supported by the Project Co’s financiers who bare the entire financial risks.  Under the agreement, proper consultations and arrangements are documented with the financiers to receive repayments from Project Co based on the data of approval and acceptance. That shows how financial procurement risk has been taken in considerations. Performance procurement risks were taken into consideration when agreements were being done. If the building agency which is subcontracted by Project Co delays in his work, Project Co is obliged to apply legally any compensations originating from liquidated damages during constructions to cover cases of risks, uncertainty, and performance delays.

The project manager needs to develop a risk register a document developed during a risk identification process. The risk plan is prepared after procurement risks have been analyzed qualitatively or quantitatively. Having a risk response planning procedure is important in identifying risks, evaluation of risks, and providing risk responses and mitigation procedures before the risk is felt. The risk register, in addition, can provide the best input when selecting sellers. RAH involves risk related contractual agreement with several parties involved. Some of the contractual agreements include those for insurance services, and those specifying roles of party participation to specific tasks and responsibilities (Chen & Lee, 2016). The management of RAH needs to formulate purchase specification and requisition. Specifications will depend on type of goods industry, organization, and nature of the project. After need identification request is made from the department it needs to define quoted prices, delivery promises, reputations, expected performance and recommended supplies. Specification writing is initiated by the need to discover raw materials, components or other items. RAH will be able to write specifications from engineering designs and production reports (Chong, Staropoli & Yvrande-Billon, 2014).

Any project is faced with procurement management plan updates which include changes affecting the contents of the plan. A project management team needs to update the project plan to reflect any change request which may affect it. Risk management will involve having a clear pattern of adapting to any changes in project scope. The updates will originate from the requested updates which were approved before implementations. RAH management in ensuring that every procedure is taken into consideration and change is adopted; they approved change requests, documented them, and authorized those changes. The approved change request can create changes on the documentation of the project they such as procurement policies, project plans, cost budgets, revise schedules, and change request forms. The purchase specifications and requisitions can be initiated by the discovery of the need for raw materials, components or other items. The procurement specification should be based on the following: stock control indicators, stores management reports, engineering design, and production control (Chen & Lee, 2016).

Throughout the project, the project Co’s have argued for support of direct costs provided by the co-project financiers, and provisions created that will facilitate changes in structures and appearances of the methods. The government was mitigating several risks that create changes need modifications that originated from delays in execution of responsibilities for the clinical equipment and ICT systems for the health facility. Examples of risks that can face any business organizations include: risk aversion of several activities, tick box risk management, ignoring and not ensuring that the opportunities are adopted, and inflating the risk can occur (Van Meerveld, Nauta & Whyles, 2015).

The management of RAH had to resolve several emerging issues facing project activities and functions. The emerging issues included risk aversions, solutions that require remedial, project modifications and other undecided matters. Having an integrated change control process accomplished from inception through achievement. Project managers need to integrate a procurement change plan that is formulated based on the overall procurement project management plan. Outlining a project scope statement is important for the project team because it defines the required resources, requirements, and milestones for the project. The plan shows the required variations and changes to support approval ratings of the project in case of uncertainties and changes (Uttam & Roos, 2015).

Project contract can be in the customized to become a complex document or a simple non-complicated purchase order. It should be clear legal binding documents that provide mutual agreements for specifications and statements of works. RAH project is graded to be highly intensive complexity, costs, resources that will be equipped with proper tools, equipment’s that is suitable for enhancing health services in South Australia. The component of the project contract will include: statements of works, time of work, pricing of works, roles & responsibilities, inflations, specifications criteria, warranty, inflations, liability statements, product support, change requests, and compensation measures.  The contract will outline the guidelines and procedures that will cover penalties, age, incentives, insurance policies, conflict resolution mechanisms and other approvals (Meybodi, 2013). A project team is obliged to formulate a documented project contract that focuses on the agreement between users and suppliers that will meet required standards and requirements. The project contract plan covers the operation functions of the life of the contract and contents that it will address (Byoun & Xu, 2014).

RAH management decided to use a contract based on Public-private partnerships (PPP). The PPP agreement defines rights of the two parties. The use of PPP solves issues on a wider range which include economic structures, methodologies, and concepts.  The process involves co-sharing risks and duties among parties in public and private sectors (Macbeth, & Project Management Institute, 2012). Fundamentally, PPPs represents a private management into a wider public service that facilitates long-term contractual bond covering operator and public authority. PPP secures part of the public service activities while RAH is delegated responsibility to focus on private funding and calls upon private sector know-how evaluations.

The PPP is based on availability-based payments focusing on a number of private partnerships to provide administering infrastructure for the public authority (Biesenthal & Wilden, 2014). In this PPP model, payments to the private partner will take form of various compensations.  The private partner will not take any form of charges paid by the users of the works or of the service, but of regular payments by the public partner based on several detectible factors. These factors to be considered include the level of service providing by project procurement management (Nawi, Nifa, & Ahmed, 2014). The new RAH project focuses on providing substantial information on any PPP arrangement. The Minister for Health entered into Project Agreement with Project Co. and agreed on a number of factors including designs, financial needs, financial management schemes, and compensation measure. The PPP arrangements provide a wider perspective of funding that focuses on providing a better means of completing work and providing clinical services and equipment for the hospital (Roehrich, Lewis & George, 2014).

On the case of RAH, it was reported that a contract management framework was needed for clinical equipment procurement program formulated and designed for identifying contracts, quantum, value, and status of those activities that require ICT provision of services (Roehrich, Lewis & George, 2014). The new RAH project has significant contextual complexities and coverage risks ahead as construction is completed; facility testing is performed and transition planning developments of a new focus of November 2016. These are all subject to oversight by SA Health and the governance committees established to monitor the project (Bender, 2014).

Project management scope was documented by RAH to improve contract management practices formalization of documents. The project leading officer had responsibility for certifying compliance to specific clauses of several sections of PPP Project Agreement and, providing regular reporting on ensuring the status of compliance (Miller, 2014). There are several road user types of payments that are traditionally linked through the concession model, this is categorized by the direct link between the private partner and the final user; the private partner will provide a wider service to the public. The concessionaire that is permitted to charge or cost the general public Service Fees through a better means and procedure (Zhao, Hwang, & Phng, 2014).

The section will cover the various learning outcomes of the course; details of the number of topics include reading sources, learning experiences, and supporting materials including your prior learning. The learning outcomes are discussed as follows:

First learning outcome: Critically evaluate the risks associated with contract and procurement management approaches and make recommendations to global project sponsors with regard to ‘best practice’ in this area.

Description of the topic with reference support:  The coverage of the course and courseware I was able to identify some of the procurement risks involved in projects. Boyce & Lake (2009) on the principles of commercial risk management argues that some of the commercial Manager procurement risks associated with contracts includes: seller evaluation risks, change in plans in contract, and performance risks associated with contracts. Liu & Lin (2010) for agile and well-diversified kind of supply chain which reduces the various operational risks and argues on the best practice of project is to having a defined project management plan that tries to cover risk mitigation procedures and best mitigation ways of procurement plan.

Learning from one's experience: Learning provided a clear view in which risks associated with projects can be maintained through a risk mitigation plan.

Supporting materials prior to learning: From university sources of materials including secondary sources: journals and books.

Second learning outcome: Apply judgment and initiative in the development of ‘best practice’ contract and procurement process for global project management, identifying the external factors that need to be considered and mitigated for in every instance.

Description of the topic with reference support: The project is characterized by the external and internal environment surrounding the project. Macbeth & Project Management Institute (2012) states that a project needs to define inputs required for planning purchases and acquisition. Part of the environment is the enterprise environmental factors that address marketplace, products, services, and results of a marketplace with well-defined terms and conditions. Bender (2014) on the book effective Vendor Management argues that supplier evaluations form a critical component in contract management in ensuring risks are minimized in projects and better supplier evaluation.

Learning from your experience: Learning clearly exposed me to the best methods of carrying out project contracts. It is a clear understanding of the project needs in order to establish proper specifications and procurement. One needs to be guided by the environmental factors that support project activities. Project procurement management includes the processes to purchase or acquire the products, materials, services, or results needed from outside the project team to perform the work (Schwalbe, 2015).

Supporting materials prior to learning: From university sources of materials including secondary sources: journals and books.

Third learning outcome: Analyze responsibilities of the procurement manager and project manager necessary to ensure stakeholder satisfaction and successful project outcomes

Description of the topic with reference support:  The main objectives of the any engagement process should include a project plan early and ensure a proper genuine engagement of the key stakeholders, who understand and needs to be engaged in a clear, accurate and timely information about a number of project to stakeholders, define effectively convey key messages about the Project.  Meybodi (2013) can encourage collaboration and co-operation amongst stakeholders where need arises or desirable, they need to provide relevant and effective avenues for two-way communication and engagement, maintain open communication in an environment that generates trust and credibility, identify and respond to general and specific issues and opportunities in a well proactive manner, share stakeholder feedback with both project team,  demonstrate to stakeholders how their feedback has been considered, mitigate and action project risks that have been identified throughout the stakeholder engagement process (Davies & Mackenzie, 2014).

Learning from your experience: Stakeholder analysis is an important component in ensuring performance I did as per the required standards. I was able to understand the need of carrying out stakeholder analysis in projects especially engaging them in supplier evaluation process, and designing project procurement plan (Takano, Yuichi, Nobuaki Ishii, & Masaaki Muraki).  

Supporting materials prior to learning: Sourced from secondary books and university learning support materials.

References

Bender, L. Effective vendor management collector (0010082x), 79 (8), 9-50

Biesenthal, C., & Wilden, R. (2014). Multi-level project governance: Trends and opportunities. International Journal of Project Management, 32(8), 1291-1308.

Byoun, S. & Xu Z (2014). Contracts, governance, and country risk in project finance: theory and evidence. Journal of corporate finance, 26, 124-144

Chen,  S.  & Lee, H. (2016). Incentives alignment and co-ordination of project supply chains. Management science. Vol. 3 (4) pp.23-45

Chong, E, Staropoli, C. & Yvrande Billion, A. (2014). Auction versus negotiation in public procurement: Looking for empirical evidence.

Davies, A., & Mackenzie, I. (2014). Project complexity and systems integration: Constructing the London 2012 Olympics and Paralympics Games. International journal of project management, 32(5), 773-790.

Goldman, E. Rocholl, J &

Goldman, E., Rocholl, J., & So, J. (2013). Politically connected boards of directors and the allocation of procurement contracts. Review of Finance, rfs039.

Guccio, C., Pignataro, G., & Rizzo, I. (2014). Evaluating the efficiency of public procurement contracts for cultural heritage conservation works in Italy. Journal of Cultural Economics, 38(1), 43-70.

Guo, F., Chang-Richards, Y., Wilkinson, S., & Li, T. C. (2014). Effects of project governance structures on the management of risks in major infrastructure projects: A comparative analysis. International Journal of Project Management, 32(5), 815-826.

Lechler, T., & Byrne, J. C. (2010). The Mindset for Creating Project Value. Newtown Square, Pa: Project Management Institute.

Liu, S., & Lin, J. (2010). An agile and diversified supply chain: reducing operational risks. Competitiveness Review: An International Business Journal, 20(3), 222-234.

Macbeth, D. K., & Project Management Institute. (2012). Procurement and supply in projects: Misunderstood and under-researched. Newtown Square, Pa: Project Management Institute.

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Meybodi, M. Z. (2013). Alignment of strategic benchmarking performance measures: a lean manufacturing perspective. Advances in Competitiveness Research, (1-2), 14.

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Miller, D, P (2014). Subcontracting and competitive bidding on an incomplete procurement contract. The RAND Journal of Economics, 45(4), 705-746.

Nawi, M. N. M., Nifa, F. A. A., & Ahmed, V. (2014). A review of traditional project procurement towards integrated practice. American-Eurasian Journal of Sustainable Agriculture, 65-71.

Roehrich, J. K., Lewis, M. A., & George, G. (2014). Are public–private partnerships a healthy option? A systematic literature review. Social Science & Medicine, 113, 110-119.

Schwalbe, K. (2015). Information technology project management. Cengage Learning.

Tang, C. S., Zhang, K. R., & Zhou, S. (2013). Evaluating project contracts with time-related incentives. Unpublished Manuscript, UCLA Anderson

Takano, Yuichi, Nobuaki Ishii, and Masaaki Muraki. "A sequential competitive bidding strategy considering inaccurate cost estimates." Omega 42, no. 1 (2014): 132-140.

Uttam, K., & Roos, C. L. L. (2015). Competitive dialogue procedure for sustainable public procurement. Journal of Cleaner Production, 86, 403-416.

Van Meerveld, H., Nauta, J., & Whyles, G. (2015). Forward commitment procurement and its effect on perceived risks in PPI projects. Cheltenham: Edward Elgar Publishing Limited.

Zhao, X., Hwang, B. G., & Phng, W. (2014). Construction project risk management in Singapore: resources, effectiveness, impact, and understanding. KSCE Journal of Civil Engineering, 18(1), 27-36.