Introduction
Procurement Management is acquiring of goods and services effectively from an outside organization and gaining maximum benefit to the organization in question for the intended project. (David I. & Roland, G. 89).To add on to that project procurement management also helps in maintaining good relationship between the buyer and the seller. Since a contract is a legally biding agreement between two or more parties, it should include documentation. The procurement part of it deals with acquisition or obtaining what is needed. In any contract, both parties involved should agree to do or supply whatever planned to do in written form. There might be fraud in any contract and this call for proper procumbent procedure in order to ensure that what was contracted for is worth it. Procurement is very essential in any organization since without it goods or services ordered for might be of substandard quality. Consequently an organization may run into a loss and even close down. (David I. & Roland, G. 21).
Procurement planning ensures that all possible options are considered and the best one which meets the project need is chosen. When undertaking procurement process there are several questions which one have to ask. . (David I. & Roland, G. 189). the questions are but not limited to what to procure, whether to procure, how to procure when to procure and how much to procure. There is a possibility that a procurement process can be done from outside the organization. If this happens then all the process starting with solicitation planning all through to contract close-out will be performed at least once for each and every product or service and if the procurement is done form inside the organization the above stated procedure will be ignored.
For you to ensure that things which were contracted for are obtained, and then there should be some procedure to procurement process. There should be scope statement which is used to define all the project needs as well as giving the limitations of the project and finally states all the strategies that can be laid in order to make a proper procurement planning. (Martin, S. 56). The product or service being purchased must be given proper specifications. This is skewed towards technical aspects of the project that should be given priority while undertaking procurement planning procedure.
A product description should give the final end-product of the entire project. (Martin, S. 77). For one to ensure that the right product is found, the process of procurement should involve finding out what is in the market, from whom and under what conditions should they be bought.(David I. & Roland, G. 11). Proper procurement process should involve planning outputs such as identification of risk; schedule and cost estimates must be done properly, cash flow projections and the work breakdown structure. The above procurement outputs will make it easy for the organization to follow very closely the kind of product or service they are ordering for. Some constraints such as available cash should be put into considering since they always determine the quality of the products and services.
Procurement process has got techniques that should be employed in the process of finding a better product. One of them is make or buy analysis. (Martin, S. 19).This management technique helps the organization to decide whether a product should be procured or made within the organization. It also helps in determining the right and effective cost after carefully comparing both direct and indirect coast which are incurred in both cases.
Another tool is expert judgment which involves seeking of knowledge form expert or a group of experts who are highly trained and also have the knowledge of the product or service to be procured. The organization can decide to seek information form be a consultant, professional or technical associations or industry groups. (Martin, S. 156). As we all know that knowledge is power. It will highly boost the quality of the product and even identify the right use of that particular good.
The type of contract which is supposed to be selected is of great importance. This will entirely depend on the type and the objective of the project and purchase. There are several types of contracts to be chosen. One of them is fixed price contracts. (Martin, S. 51).This entails a well defined price or fix price for the product to be purchased. The idea is that if the price is not well defined there is a possibility of getting low quality product from the buyer. Without a fixed price, there can be risks involved for both the buyer and the seller. The buyer might not get the right product which was ordered for and the seller may be tempted to add more money in order to satisfy the client.
Another type of contract which might be considered by an organization is cost reimbursable contracts. (Martin, S. 41). For the right product or service to be purchased, the organization which in this case the buyer can opt to pay the seller the actual cost. The actual costs include both the direct and indirect costs. The direct costs are those which are made exclusively for the benefit of the whole project. (Martin, S. 22). An example of the direct cost is the salary of the staff. On the other hand, indirect costs are the one which involves the salary of the corporate executive. These are costs which are incurred because of running the contract. (Martin, S. 32). This particular contract also involves the incentives for meeting or above the allocated targets. Finally, an organization may choose to use unit price contract where the seller is paid in terms of per unit cost considering the present cost.
Procurement management plan is another important aspect to be considered in a procurement process. It helps in ensuring that proper execution and management of all the remaining procurement process is one in a proper manner. This procurement process entails all the way from soliciting planning to contract close out. It also helps in determi9ng the type of contract to be used as well as singling out the person who will be responsible for evaluation criteria for every individual estimates and at what period. (Martin, S. 87). Procurement management plan will help in managing multiple suppliers and show how to coordinate the procurement process with other aspects of the project which might include scheduling as well as performance reporting. Another action should be taken if the organization realizes that the management team of the seller also has another procurement process.
For a good procurement process, work statement should be used. (Albert, H. 67). It will help the seller with all the information needed for the product. The seller will now be in a position to decide whether the required specifications of the product are available. This work statement may be varied in accordance to the type of product being purchased and the requirement process. The procurement team is given the mandate to revise the statement of work as the procurement process progresses as per the requirements. (Caldwell, N.D. Roehrich, J.K. and Davies, A.C. 564). For the required product to be found, the statement of work should be very clear and complete. It should contain every single detail of the product including describing any collateral services involved. The collateral services include performance reporting or post-project operational support for the procured item. (Albert, H. 59). The statement of work cannot be ignored in any procurement process because it act as a reminder in any case the specifications are not met. The organization also can use it to compare the specifications of the product purchased and those ones which were ordered for. It greatly enhances accuracy and convenience since a substandard product cannot be purchased.
Solicitation planning must also be done and it includes the use of standard forms which contain all the description of all the purchased items or sometimes part of the needed bid documents. The procurement team should seek expert judgment form experienced people or people within the required field. These people should have a wider knowledge about the items to be purchased and therefore are in a position to make sound decision. (Martin, S. 43).
Solicitation planning is important since it has some its outputs which are very vital in the procurement process. The procurement documents include petition of proposals which are made by various prospective sellers who form part of the procurement planning. (Caldwell, N.D. Roehrich, J.K. and Davies, A.C. 59). One of the documents is bid or commonly known as quotation is used when the product is by viewed on the financial position. When the finance is not included then it is referred to as proposal. These documents should not contain any unclear information. This enables the buyers to get proper response from the sellers. (Caldwell, N.D. Roehrich, J.K. and Davies, A.C 256). The documents should contain all the information which are relevant starting with the statement of work, well form of response required by from the seller and any relevant contractual requirements such a copy of a model contract together with non -disclosure provisions clearly. Nonetheless, the information should be made available to the management whenever needed.
Good evaluation criteria should be put in place. This will enable the rating of efficiency of proposals. The criteria can either be subjective or objective. There can be a case where the same item to be procured has got a number of suppliers. Here, the evaluation criterion is restricted only to the purchase price. However, it is open that other evaluation criteria can also be used. The other evaluation criteria are but not limited to, overall cost, management aspect, financial aspects or technical aspects.
The procurement team should ensure that there is Contract administration. This is a process of monitoring and evaluating the seller’s progress and performance. (Albert, H. 66). This will ensure that the seller is delivering according to the expectation of the buyer and fulfilling the requirements as per the contract specifications. In case of malty providers, the contract administration is very important since each and every supplier will be directly responsible for the item or project they are working on. Another important aspect of contract administration is that it ensures that each and every member of the procurement team is much aware of the legal part of the project. Good contract administrations make use of various project management processes and comparing the results with the overall project management.
The project management processes which are commonly applied include project plan execution. A proper plan for the whole project is made and how the project will be carried out in order to ensure that the work is executed as per time and plan. There should also be performance reporting on a daily basis. (Caldwell, N.D. Roehrich, J.K. and Davies, A.C. 90). Some of the things which should be reported daily include which are the project progress, contract cost, schedule and technical performance. Then quality management is carried out by inspection and verification of the products contracted. Finally, there might be some changes while the project is in progress. These changes should be integrate and fixed appropriately. The entire process if carried out well then the project will come out to the buyer’s expectation.
For a better product to be delivered there should be contract negotiation. (Albert, H. 100). This important since clarification is given and mutual agreement is made before the contract begins. The signing of the contract agreement should involve all the contract details including responsibilities and authorities not forgetting the terms and condition of the contract.(David I. & Roland, G. 51) .The business management approaches should also be stated as well as how the contract will be financed and the price. Any issue which might results to compromising the quality of the product is discussed and settled before the contract is completed.
The selection of the product should not be based on a single person. The entire procurement team should be given chance to air there views. Consequently, a weighting system is used to curb this problem. A weighting system is a tool used to calculate the qualitative part of the data in order to a void personal interest on source selection.(David I. & Roland, G. 78). This entails each of the evaluation criteria being assigned a numerical weight. Then the weight is multiplied by rating and finally, the resultant product is totaled in order to compute the final results.
Another very important factor in procurement management is selection of the type of suppliers. Be very careful while choosing the type of suppler to work with. (Albert, H. 76). Many companies are nowadays created to meet the requirements of the clients but some of them have gone out a stray. In that they don’t meet the expectation of the clients and this may lead to a loss or purchasing poor quality product. This is may be due to lack of better planning, the senior movement may also lack experience and it can be due to looking for high profit but using less capital which sometimes is not enough. Lack of vision and poor leadership can also lead to poor performance. The credibility and stability of the suppliers must be determined in order to come up with a qualified supplier. (David I. & Roland, G. 57). Don’t be cheated with the names of the known suppliers since they can as well let you down. There past work and performance is what should be looked at. Be keen to write and manage the contracts well to avoid mistakes. This aspect of procurement is very important since it will determine the whole process and failure in this part leads to the failure of the whole procurement management process.
Project procurement management can be modernized by using Software to assist in the process. While writing proposals and contracts, word processing software can be used. Evaluating the suppliers can be done by spreadsheets. (Albert, H. 97).Databases can be used to track the suppliers in the procurement process in order to realize good monitoring for better results. Related procurement information can be presented by the presentation software. An organization might choose to use e-procurement to perform many procurement functions electrically. The internet is also very good source of information which might be used by organization to find the best suppliers as well as what they offer. In fact this has become a very quick and accurate source of information. (Albert, H. 88). It is usually very rare not to find whatever you are looking for through the internet. Procurement being one of the most important process in any organization, it might choose to employ the use of this method.
The supplier should also provide the company with performance assurance more specifically while dealing with large companies. (Albert, H. 97). The seller in the performance report should show that what is written there is actually what has happened in the ground. The seller should treat this as mistrust but it should be taken as prudent management to make sure that the project does not contain some hiccups. As discussed earlier, some suppliers might not reflect the true picture of what they have actually done. There this should be avoided since they can be well known suppliers but they do bad jobs.
Finally, closing out of contract takes place in any procurement process. In this stage administrative closure is done. It entails the final results or output of the project is up to the expectations. (Caldwell, N.D. Roehrich, J.K. and Davies, A.C. 78).This is done through examination and verification of the entire project properly.(Caldwell, N.D. Roehrich, J.K. and Davies, A.C 43). Some of the tings involved here are saving information for future use, the procurement audit also takes place by identifying the lessons learnt in the entire process and the suppliers with good records are kept.
Conclusion
For the entire procurement process to begin, the project team together with the organization should decide whether the product can be made within the company or it can be outsourced. To come out with this decision, the project manager and the organization should verify that the product ca be made within the organization. However, procurement management process is very important since it ensures that one get whatever ordered for according to the specifications. (Albert, H. 87). Procurement planning ensures that all possible options are considered and the best one which meets the project need is chosen. It also improves the performance of a company by ensuring that the right products are purchased and good projects are realized. (Martin, S. 94).The procedure under the rightful hands of procurement team can yield a great advance in the organization by ensuring that the company receives proper goods.
Work cited
Albert, H. Handbook of Project Management Procedures. London.TTL Publishing, Ltd.2004.Print.
David I. & Roland, G. Global Project Management Handbook. London: McGraw-Hill Professional, 2006. Print.
Martin, S. Project Management Pathways. Association for Project Management. New York: APM Publishing Limited, 2002.print.
Caldwell, N.D. Roehrich, J.K. and Davies, A.C. procuring complex performance in construction: London. Heathrow.2009.Print.
Lewis, M.A. and Roehrich, J.K.Contracts, relationships and integration: Towards a model of the procurement of complex performance. Oxford: Oxford University Press. 2009. Print.
