Project Procurement Planning Process

Project Procurement Planning Process

The procurement planning process for a project involves numerous activities. The main goal is to ensure that the raw materials are sourced and purchased efficiently from the various suppliers. The process begins with the determination of the precise needs and standard definition. The needs guide the procurement officers to the respective suppliers who are involved in the provision of the necessary goods and services. The standards that accompany each need require specifications that highlight details such as amount, quantity, quality, size, among other features. The next step in planning is sourcing the goods and services. This step involves identifying the various suppliers and conducting research to establish their viability, reliability, and costs. The costs of the different suppliers allow for the proper analysis of value. The procurement strategy is then developed, either compete or non-compete (Lindstrom, 2014).

The financial resources are then located to facilitate the negotiation processes. Once the various requirements are clearly spelt out and agreed upon, the purchasing contract is then executed. The contract is then administered to the concerned parties to guide the process of supply. Management of stores and inventory is also considered at this point to ensure that the procurement process does not exceed the required raw materials. For planning to undergo this process, the project managers must first define the beginning, identify the unique service or product, point out the interdependence of activities, and clearly define the end (Lindstrom, 2014).

The most valuable output of the plan procurement process is the procurement management plan. The procurement plan is essential to the success of a project’s procurement. It details the costs, stakeholders and the products/services. The plan highlights the activities that should take place during the project’s lifetime. It is possible for any individual to follow through with the procurement management plan because the details are clear. The figure below details the different steps in the plan.

Source; (Islamic Development Bank, 2019)

The procurement plan ensures that the project maximizes the economic opportunities and efficiencies. It also promotes competition among suppliers. The project managers can ensure that the project’s procedures are fair and observe integrity through heightened accountability and transparency. As a result, the confidence of the public in the procedures increases significantly. The procurement plan promotes local suppliers and develops the economy (Islamic Development Bank, 2019). For the team, the plan establishes the goals and direction, provides a monitoring and reviewing framework, and provides primary information necessary for the management of contracts. It also provides a reliable source of reference from the initial stages; most importantly, the plan highlights the skills, qualifications, and knowledge. The plan, upon compilation, can be used to seek financial resources from credit resources. Therefore, the plan is critical because it holds the entire project and can provide access to critical resources for project completion.

Contract types

The project managers have access to various types of contracts. The fixed-price contracts feature an agreed price at which the supplier is obliged to honour their obligation. Other aspects, such as quality, amount, and delivery time, are detailed. The main risk affects the buyers because the project can change and lead to price alterations that are usually very high. To mitigate this risk, it is necessary to include multiple suppliers, which ensures bargaining power. The scope of work should also be detailed enough to reduce the project’s changes (Lindstrom, 2014).

The fixed-price contract with price adjustment is commonly used for projects that last for years. Inflation is used to determine the price of the project’s specifics. The client carries the greatest risk because of inflation, which leads to price increases. To avoid extensive changes, the contract can include a clause that allows prices to be adjusted based on costs. The fixed-price contract with an incentive fee operates on rewards for the contractor if they exceed the set expectations. The contract also includes a penalty if the contractor fails to deliver as agreed. The risk in this contract is borne by the contractor. Cost-reimbursable contracts require the client to pay the contractor the cost incurred when providing goods and materials. The contractor bears reduced risks due to reimbursement. The client bears significant risk because the contractor lacks the motivation to reduce the costs of project completion (Schwalbe, 2013). To reduce the risk, it is necessary to provide an accurate estimate of the costs to manage the available financial resources.

Monitoring Process, Selection, and Ethics

The monitoring process will begin with the collection of performance data, which is compared to the expected performance. Performance evaluations of vendors that have been selected to supply the required materials. It is necessary to make any changes that are identified during the monitoring process to ensure that the goals of the project are fulfilled. The selection criterion when considering sources should highlight the costs, quality, reliability, and viability. Since multiple suppliers can provide certain products and services necessary for the completion of the project, it is important to compare the vendors’ attributes (Lindstrom, 2014). Based on the project’s quality requirements, the vendors’ ability to meet these specifications, and supply capability in terms of quantities, reliability, and prices.

Ethical aspects should be observed during the selection process is important in ensuring the project’s integrity is maintained. It is important to consider the suppliers’ ethical activities as they pertain to the environment.  The supplier’s production mechanisms should be environmentally friendly to avoid extensive damage. The suppliers’ selection process should also be based on fairness and transparency (Kim, Colicchia, & Menachof, 2018). The company’s ethical policies should be observed at every point of the selection process. Such adherence to ethical policies projects the entire process as one filled with integrity.

Role of risk management in the procurement planning process

Every project involves substantial risk. The procurement planning process cannot be extremely free of any fault. Thus, it is necessary to conduct a risk assessment, which highlights the gaps that remain unaddressed and have the potential to cause negative effects in the future. The process of risk management allows project managers to not only identify these unaddressed elements but also find solutions for the hazards. These solutions are intended to mitigate the negative effects or eliminate them completely. Risk management plays a critical role in ensuring that the project proceeds as planned through proper procurement procedures. If the procurement plan has faults that can interfere with the supply of materials and services, the team addresses these by reviewing the entire plan or instituting policies and procedures that act as solutions.

References

Islamic Development Bank. (2019). Procurement Strategy And Procurement Plan (PS-PP). Retrieved from https://www.isdb.org/project-procurement/sites/pproc/files/documents/4.NPF%20Training-%20Procurement%20Strategy-Procurement%20Plan.pdf

Kim, S., Colicchia, C., & Menachof, D. (2018). Ethical Sourcing: An Analysis of the Literature and Implications for Future Research. Journal of Business Ethics, 152, 1033-1052.

Lindstrom, D. (2014). Procurement Project Management Success: Achieving a Higher Level of Effectiveness. J. Ross Publishing.

Schwalbe, K. (2013). Information Technology Project Management. Cengage Learning.

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Write a 1,050- to 1,400-word paper in which you do the following:

Describe the project procurement planning process.
Identify the most valuable output of the plan procurement process and explain why you believe it is most valuable.

Explain the various contract types and describe who—buyer or seller—has the most risk for each contract type.
Explain the methods that can be used to mitigate risks for each contract type.
Develop a project monitoring process to track procurement orders for the project.
Describe a source selection criterion that would be applicable to any project.
Analyze the ethical concerns that should be considered when identifying source selection criteria.
Explain the role of risk management in the procurement planning process.