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Project Procurement And Contract Management

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Question:

Discuss about the Project Procurement and Contract Management.

 

Answer:

Introduction

Procurement management plan is built under various strategies that have also help contributing to the value for money outcomes. Procurement strategy is a long range plans set to ensure supply of goods and services critical to organization’s ability that ensures it meet objective of its core business. The strategies includes: using performance specifications, ensuring risk allocations between parties are optimized, encouraging a great innovation, setting contract periods which are appropriate, rewarding the best performers through use of incentives and adopting the most appropriate procurement strategy for the procurement project. Departments should therefore select and adopt strategies that can achieve value for money which in turn ensures accountability and profitability.

 

Procurement Strategies

Some of the common procurement strategies developed to satisfy different project procurement objectives and limitations associated with the supply of the intended goods and services to the project includes: leverage technology, improvement in technology have been identified to give  business people a humble time where communication  is improved and made more fast, there is also easy integrations of operations, faster machine and devise operations and widening connections allowing business task to be more fast, effective and efficient. Right technology is seen to have positive influence on all set business strategy like, logistic integration, strategic purchasing and business performance. Examples of technology that assists in easy planning of procurement operations or strategy planning are, management software, warehouse management system, and supplier management system and supply chain management software.

Another critical procurement strategy is outsourcing of the procurement needs. Recently, the nature of business operations have been very hectic sometimes being unable to complete the given duty in time agreed, in this scenario, an individual will consider outsourcing the task to specialist so that they can meet their customers’ needs without delays and in the long run saving the company money that leads to a greater savings. Another procurement strategy is to organize with others to increase buying power. Small businesses which have embraced the use of technology fully, has improved processes of procurement operations and have strong strategic partnership with suppliers still stands in a great risk of falling in less purchasing savings due to their small size. Therefore, the small firms should set a strategy of organizing with other to maximize their sales. (Sollish, & Semanik, 2013)

Improve internal procurement process is another procurement strategy that firms should formulate. Firms should seek internal changes in all their processes of procurement in addition to improvements in technology and relationship between suppliers. Evaluating suppliers with systems which are standardized, their performance will be easy to track especially for small businesses and making the whole process efficient. In addition, another procurement strategy is to build and maintain strategic partnerships. This strategy helps create a strong relationship with suppliers both direct and indirect and in the end resulting to more benefits to the firm. Firm should therefore seek and maintain strategic partnerships that are long-lasting with key suppliers.

The objectives, processes and expected outcomes  associated with each procurement strategy discussed above includes;  For the leverage technology, the main objective is to improve procurement operations according to the changing technology and the expected outcome is an effective business operations. The second strategy which is organize with others to increase buying power, its objective is to increase on sales and maximize on profit, the outcome of the strategy will be expand in sales and increase in profit. Third is the outsourcing of procurement needs, its objective is to ensure better service to customers and meeting the consumer’s needs. The outcome will be positive feedback from consumers which will eventually build a good reputation for the firm. Lastly, is the strategy of building and maintain strategic partnership. Its objective is to create a strong supplier relationship and the outcome will be maintaining a good number of suppliers for consistent supplies. (Sollish, & Semanik, 2013) 

 

Factors Influencing Procurement Strategies Selection

 Before selecting the Procurement strategy for any project, it’s important to identify the factors which will determine the most suitable procurement strategy. Some of the factors that influence formulation of procurement strategy include: the legal factors which mostly influence compliance to implemented policy to guide and ensure compliance to any set laws and rules in accordance to business operation carried out some laws that procurement strategy formed should comply with includes: consumer protection law which ensures supply of the right requested goods and services by consumers, second is discrimination law that protects consumers against discrimination when supplied with goods and services. To add to that, anti-trust law also influence formulation and execution of procurement strategy. (Baily, Farmer, Crocker, Jessop, & Jones, 2010)

In case of risk arising during delivery of procurement projects, the law helps to ensure how those risks will be dealt with. The other factor influencing the formulation of procurement strategy is political factor, the state of the government in terms of its stability, tax policy of the country, import quality and quantity restrictions and consumer protection are the main political factors that influence the plans on how the supply of goods and services should be formulated. Economic factors influences formulation and execution of procurement strategy through fluctuation and level of growth rate, inflation rate, interest rates, price fluctuation which greatly affect the long range plans on supply of goods and services, the stock market trends and monetary policies. In addition social cultural factors also influence the formulation of the procurement strategy in terms of buying habits of the customers that provide an ability to arrange well on the plans of supplying goods and services according to buying habit of the customers. Secondly, the population growth rate also influence procurement strategy formulation whereby it helps determine the population of a country and how it grows so that a firm plans well on how to supply goods and services according to population growth rate changes. (Chick, & Handfield, 2011)

Age distribution and life expectancy rates are also another social factor that influences procurement strategy formulation. Different age range should be supplied with different type and quantity of goods and services depending on their tastes and preferences. In the case of life expectancy, individuals with short life expectancy that is mostly the old are to be supplied with goods and services in a different way compared to young individuals with a long life expectancy. Social classes also matters, if the customers targeted are of high class, the strategy formulated should focus on supplying of high class expensive goods and services unlike if the customer is of low or middle class, the plan in this case should focus on supply of medium class goods and services.

Technical factors also influence the formulation and execution of procurement strategy. The access to new technology is the major factor that influences the plan of supply of goods and services since the world is moving to digital way of carrying out operations by use of the internet. Nowadays most supply of goods and services are done online and this has resulted in most effective and efficient procurement operations. (Chick, & Handfield, 2015) The formulation of procurement strategy is also influenced by the environmental factors like the weather, climate change, waste management, attitudes towards green product, and attitudes towards support for renewable energy, laws regulating environment pollution and recycling. All these factors helps a firm determine the plans to make for supply of goods and services in compliance to all the environmental factors.

 

A Procurement Strategy Decision Support Tool

From the analysis of completed task 1 and 2 the decision support tool developed that identifies the most effective generic procurement strategy for a good or service given is to emphasis more on all factors related with strategic procurement plan and ensure objectives are set to have efficient and effective operations. Some strategies create limitations like the company not complying so well with the strategies formulated due to lack of clearly analyzing and defining its strategies. Despite the limitations, some opportunities are created by the formulated strategies including, access to new technology and expanding in business operations as well as creation of good relationships with suppliers. (Sollish, & Semanik, 2013)

Scenarios That Demonstrates the Effectiveness of Decision Support Tool

The factors discussed above can be used to evaluate the most likely procurement strategy for a range of goods and services in number of different project procurement scenarios. The scenarios include:

Scenario 1; procuring services of an engineering and construction firm to oversee the design and construction of a new warehousing and logistics facility in a regional location, the most appropriate factor to evaluate procurement strategy in this scenario is demographic factors that will determine the best location to choose for constructing the warehouse.

 Scenario 2; Procuring a range of commonly-available Personal Protective Equipment (PPE) to support operations during the construction and commissioning phase of a new industrial facility. In this scenario the appropriate factor is legal factor which when engaged in formulation of strategies in supplying this type of products, it will ensure consumers are protected and covered against any risks. (Turner, 2012)

Scenario 3; procuring a new MRI scanner for a remote regional hospital upgrade project on behalf of a state government, technological and legal factors should be considered in this type of business. First, technological factors come in to ensure the new scanners have the latest features and operate well to ensure efficient and effective results.

Assumptions made from the scenarios are; for scenario one I assume that the firms want to expand the procuring of its services and so it needs to choose the most appropriate strategy to make this a success and be able to outsmart its competitors. In the second scenario, I assume that the firm has focused in ensuring they comply with the law of protecting employees and their consumers, it should therefore enforce a strategy that ensures maximum compliance to the laws. In scenario three, I assume the firm is introducing new hospital equipment to remote hospitals, it should therefore focus on enforcing strategies that will enable it embrace fast the rapid changing technology and provide technology based resources. In addition, I was able to arrive at the above mentioned procurement strategies after rating the firm’s objectives, the products it is willing to procure, and the location where the firm want to place their warehouse and the response to changes in technology. (Turner, 2012) 

 

Summary

Various important factors that can be influential in procurement planning and strategy development as discussed in assessment 1 above influences procurement planning and strategy requirements in different contexts and in different ways. The technical factors influence effective operations; the legal factors influence compliance to all business policy operations, rules and laws while the environmental and demographic factors influence the location to situate the business and the environmental friendly products to focus on. The social cultural factors influence the types of products to produce in terms of customer’s preferences, taste and attitudes.

 

References

Baily, P., Farmer, D., Crocker, B., Jessop, D., & Jones, D. Procurement principles and management.

Bower, D. (2010). Management of procurement. London: Thomas Telford.

Chick, G., & Handfield, R. The procurement value proposition.

Edwards, T., & Scholtz, A. Supplier category management.

Eglin, I. Procurement management.

McAfee, R. Improving Federal Procurement: The Benefits of Vendor-Neutral Contract Specifications. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.882509

Sabri, E., Gupta, A., & Beitler, M. (2007). Purchase order management best practices. Ft. Lauderdale, Fla.: J. Ross Pub.

Sollish, F., & Semanik, J. (2013). The procurement and supply manager's desk reference.  Hoboken, N.J.: Wiley.

Turner, R. (2012). Supply management and procurement. Boca Raton, Fla.: J. Ross.

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