Procurement Principles and Management in the Digital Age PDF

Procurement Principles and Management in the Digital Age Twelfth Edition Part 3 Applications Chapter 11 Project procurement Adapted by: Dr MSM Makaleng 2025...

Procurement Principles and Management in the Digital Age Twelfth Edition Part 3 Applications Chapter 11 Project procurement Adapted by: Dr MSM Makaleng 2025 © 2022 Pearson Education Limited. All Rights Reserved.  Objectives of this chapter To outline the key features of projects To understand how procurement adds value to project management To examine the issues of project planning To appreciate the importance of procurement within project control To consider the various types of contracts for major projects such as the Terminal 5 Building at Heathrow Airport © 2022 Pearson Education Limited. All Rights Reserved.  Objectives of this chapter (Continued) To appreciate the issues involved in subcontracting To introduce the benefits of Blockchain technology in project management © 2022 Pearson Education Limited. All Rights Reserved. PROJECT PROCUREMENT Definition of project ‘A specific, finite task to be accomplished combined with seven factors common to projects: importance, performance, finite due date, interdependence (between departments and competing projects), uniqueness, resources and conflict’. A project requires a clear and unambiguous statement that encompasses three aspects: Its objectives: The end result that the project is trying to achieve Its scope The exact range and responsibilities covered by project management Its strategy How the project management role will ensure that the objectives will be met  Introduction to projects A project is a set of activities which: Has a defined start point Has a defined end state Pursues a defined goal Uses a defined set of resources. © 2022 Pearson Education Limited. All Rights Reserved.  Introduction to projects (Continued) An objective – definable end result, output or product. Complexity – large number of different tasks. Uniqueness – projects are usually ‘one-offs’. Uncertainty – projects are planned before they are executed, hence they carry an element of risk. Temporary nature – defined beginning and end. Life cycle – resources needs change during the life of the project. © 2022 Pearson Education Limited. All Rights Reserved. PROJECT PROCUREMENT AND RISK MANAGEMENT Elements of a project plan How strategies should be formulated Representing how strategies are formulated  Mini case study – Wembley Stadium The completion of the £757 million Wembley stadium project faced many delays after claims by main contractor Multiplex that client Wembley National Stadium Ltd (WNSL) had not begun some of the works required to achieve practical completion. The delays by WNSL meant that Multiplex was unable to sign off the works for approval and reach practical completion. Wembley Stadium firmly rejected Multiplex’s statement and refuted any claims made against them. WNSL appeared to blame Multiplex 100 per cent for the delays. Multiplex strongly disputed the claims and replied that design changes from the client were partly to blame. Multiplex believed that the changes justified an extension of time. © 2022 Pearson Education Limited. All Rights Reserved.  Case study – A14 The project to upgrade the A14 developed mechanisms to encourage collaboration between the joint venture firms and the supply chain itself involving continuous improvement, changing behaviours and utilising collaborative ways of working, It achieved significant time and cost savings by deploying ‘blind tendering’ where proposals from existing and new suppliers were judged anonymously and selections made based on facts rather than pre-existing relationships thus introducing new contractors. It also implemented pre-project training as part of its supplier development programme being used to upskill and improve the supply chain partners’ knowledge on key sustainability issues. © 2022 Pearson Education Limited. All Rights Reserved. PROJECT PROCUREMENT AND RISK MANAGEMENT Activity Why is project planning important?  PROJECT PROCUREMENT AND RISK MANAGEMENT The importance of project planning It forces those involved to consider potential risks and vulnerabilities It identifies the deliverables, likely duration and cost of the project It determines the resources that will be required at each stage of the project It allows time for an examination of costs quoted, challenging of business need and over-specification and so on It identifies the tasks to be undertaken, the sequence and timing within which they need to be undertaken, and any dependencies between tasks It underpins control processes such as setting phases and milestones, defining responsibilities and requiring authorisations It provides for end-stage or gateway reviews It specifically establishes budgets, targets and timescales It provides tools and outputs which make project success factors, milestones and risks visible to all project participants and stakeholders. It supports management by exception It allows the needs, views and interests of project stakeholders to be taken into account in planning processes and deliverables PROJECT PROCUREMENT AND RISK MANAGEMENT Activity What are the issues of project planning? PROJECT PROCUREMENT AND RISK MANAGEMENT A Project lifecycle Project Supply market Soft market initiation research testing document Pre- Invitation to qualification of Tender analysis tender supplier Design and Finalise Negotiation Construction contract phase PROJECT PROCUREMENT AND RISK MANAGEMENT Homework Explain a project lifecycle, ideally using an example from your organisation or any organisation you can research from the internet?  PROJECT PROCUREMENT AND RISK MANAGEMENT Typical project management issues Failure to plan a project No defined goals or requirements No comprehensive list of risks No realistic or complete project budget Contracts did not include penalty clauses Project manager failed to attend all meetings Those evaluating tenders not having relevant experience  PROJECT PROCUREMENT AND RISK MANAGEMENT Project related risks The non-routine or once-off nature of projects creates a high degree of uncertainty (that is: risk) The long time-scale and planning horizon of major projects make them subject to contingencies The complexity of projects makes them vulnerable to risk, because of the difficulties of managing complexity The multiple stakeholders of projects create a range of risks Projects typically have defined time, cost and quality targets, and a key source of project risk is variance from plan and missed targets Projects are often subject to changes to client specifications and contracts over time PROJECT PROCUREMENT AND RISK MANAGEMENT Activity What is the importance of procurement within project control? Figure 11.2 Subcontracting © 2022 Pearson Education Limited. All Rights Reserved. PROJECT PROCUREMENT AND RISK MANAGEMENT Activity What are the issues involved in subcontracting? © 2022 Pearson Education Limited. All Rights Reserved.  Blockchain in project management Due to its ability to increase accountability, efficiency and innovation within teams, Blockchain is able to incur very significant cost reductions in projects, and projects that invest more energy into effective monitoring via Blockchain technology are able to have higher rates of success in terms of costs,scheduling and quality of outcomes. In fact, one in every six projects that were not using Blockchain technology overran their intended schedules by 70 per cent. © 2022 Pearson Education Limited. All Rights Reserved.  Benefits of Blockchain improved security of data; reduced risks; reduced mistakes; improved efficiency; improved control for the project manager; improved flexibility when changes are required. © 2022 Pearson Education Limited. All Rights Reserved.  Self-assessment task 1. Outline the five stages of the project management process. © 2022 Pearson Education Limited. All Rights Reserved.