Project Procurement Management - Week 9

• The planning process group establishes the total scope, defines objectives, and develops a course of action.
• These processes develop the project management plan (PMP) and related documents.
• The PMP includes subplans for knowledge areas like procurement management.
• Significant project changes may require revising planning documents.
• Project management teams should seek stakeholder input during the planning process.
• The approved version of the project management plan becomes the baseline once the initial planning effort is complete.
• When managing project procurement, the "plan procurement management" process applies.
• The "plan procurement management" process requires prior development of the Work Breakdown Structure (WBS).
• A procurement plan details how a company acquires necessary materials for goods and services.
• Strategic procurement planning uses data and analytics to monitor the procurement procedure's impact and effectiveness.
• Procurement planning requires understanding of all aspects used to produce goods/services.
• It is important to know utilization rates, pricing negotiation, transport needs, supply chain coordination, and to mitigate potential issues.
• Supply and demand analysis is also helpful when planning.

Objectives of Procurement Planning

• A predefined aim.
• A step-by-step procedure may involve consulting and outsourcing.
• Utilise a strategic framework presented by a service provider.
• Use key performance indicators, evaluation criteria, and metrics to track the procurement plan and outcomes.

Procurement Planning: The Three C's

• Control: Overseeing purchasing and viewing spending habits.
• Consolidation: Streamlining suppliers to simplify procurement and improve savings tracking.
• Cost Savings: Central to an effective procurement system and savings goal tracker; achieved via optimized practices and strategic sourcing.
• These 3 elements are essential for optimizing procurement processes, managing resources efficiently, and achieving cost savings.

Procurement Planning Considerations

• Type of goods or works
• Estimated cost.
• Availability.
• Quality.
• Price levels.
• Capacity.
• Risks.
• Competition.
• Urgency.
• Other Factors.

Splitting Procurement Objects

• Item: A single article or unit in a list with an identified quantity.
• Lot: A multiple of items grouped together.
• Package: A multiple of lots grouped together; usually no more than 5 lots to qualify for for a cross discount.
• Contract: Agreement through which the Item/Lot/Package is purchased.

Key Steps in Preparing the Procurement Plan

• List objects to be acquired, categorizing procurement into:
  • Goods (raw materials, products, equipment, etc.).
  • Works (construction, site preparation, etc.).
  • Services (goods, physical, or intellectual/professional services).
• Consider the time scale and target dates when each object of plant, equipment, vehicles, fertilizers, books, works, services should be ready for use, within the overall project implementation framework
• Identify the relationships between processing these procurement objects.
• Decide on the content of individual procurement packages.
• Determine the procurement lead times for the process, including administrative, manufacturing, and construction delivery lags.
• Prepare an implementation schedule (table, bar chart or list) identifying key dates for each package (Gantt Chart).
• Develop a monitoring system to ensure timely procurement decisions and implementation follow-up actions.

Outsourcing

• Involves outside organizations not affiliated with the company to complete specific tasks.
• The organisation will give up control over certain operations and decision making.
• Involves an outside origination separate from the company's operation.
• Clients look at the outsourcer as a long-term asset, dedicating time and resources to manage and maximize it.
• Hold resources accountable for extracting value from the outsourcing relationship.
• Understanding new technology and organizations may lead to establishing new parties and alliances.
• Interdependency requires understanding of cost drivers and coordination to avoid additional costs.

Outsourcing Implementation

• Define and Organize Outsourcing
  • Establish Outsourcing Team
  • Conduct Strategic Analysis
  • Identify the "Best Candidate"
  • Plan the Outsource Contract
• Plan the Outsource
  • Define & Develop Outsource Work Requirements Structure
  • Select Partner(s)
  • Conduct Risk Management
  • Transition to Management
• Measure & Manage Outsource Relationship
  • Collect Status, Create Initiatives
  • Analyze Variance, Define Elements of Relationship
  • Take Adaptive Action
  • Report Status
  • Close Out & External Benchmark

Implications of Outsourcing in Project Management

• Project management is outsourced when external services are provided separately from the main service contract.
• Involves outsourcing project management functions to a vendor/service provider or among vendors.
• Project management functions are considered separately and awarded as a separate assignment or contract.
• Planning, monitoring/controlling, and closing are processes commonly outsourced in PM, while initiating and executing typically are not.

Pros of Outsourcing in Project Management

• Clients can focus on core competencies.
• Faster ramp-up time.
• Outsiders bring a fresh perspective.
• Vendors ensure best practices and provide trends in specific sectors.
• Preparation for similar projects in the future is enhanced.

Cons of Outsourcing in Project Management

• Commitment (buy-in) and internal resources are required.
• Relationship with the vendor has to be managed to accrue benefits.
• Vendor can discontinue the relationship because the ownership of the resources does not exist .
• Data security of the project is potentially compromised.

Assignment 2: Bid Assessment Report

• Prepare a report to evaluate three RFQs (Request for Quotations), with competing quotations received.
• Recommend the best RFQ after evaluating the replies.
• Fabricate a single-page quotation displaying criteria consistent with the original RFQ.
• Report due in Week 11.
• Marks awarded for hypothetical quotations and their evaluation.
• Stages of Bid Evaluation Process:
  • preliminary examination for responsiveness to formal qualification requirements,
  • evaluation for compliance with technical requirements,
  • price/financial evaluation and
  • post qualification/due diligence.

Assignment 2: Report Requirements

• What are the quotations?
• MCDM (Multiple-criteria decision-making) or MEAT analysis.
• Evaluation of each vendor.
• Vendor interviews & discussion on any issues raised.
• Post-interview evaluation & key findings for each firm.
• How to respond to/process conflicts and complaints.