Every project needs purchasing goods and services from external dealers. This process is referred to as procurement...
Every project needs purchasing goods and services from external dealers. This process is referred to as procurement. Procurement is vital in the pursuit of project goals and objectives. The task of undertaking procurement successfully is performed by the procurement management unit/department. The external dealers who supply goods and services to the project are called contractors. The agency undertaking the project, which in the context of procurement are the client, is called procuring entity. The contractors usually have extensive knowledge and experience in their fields and can provide quality service and goods. However, ensuring that the project achieves its goals is in the hands of the project management or project coordinator and their team. This, therefore, means they usually have a better vision of what should be delivered in the long run and hence, must monitor the contractors closely to ensure they remain on the scope (Alwaly, & Alawi, 2020). The contractors can, in some cases, apply subcontracting. This requires a proper understanding of the types of the contract involved and how to develop them.
The procurement process involve a request for proposals, an invitation to tender/bid, selection of the best bidder, awarding of the contract, signing the contract "agreement," and execution of the work to completion. Once the contractor completes the work and the client is satisfied, they are handed a letter of completion which they attach on invoice and delivery note and submit it to the client for payment processing (Huda & Maliki, 2019). However, the contract terms vary from one contract to another and one procuring entity to the other. These terms are also known as Terms of Reference. Sometimes, the procuring entity outsources developing the contracts from experts like lawyers, quantity surveyors, architects, engineers, etc.
Take an example of a project like: PROPOSED CONSTRUCTION AND EQUIPPING OF A MALE WARD IN MOUNT SINAI QUEENS HOSPITAL IN NEW YORK CITY, USA, where the project proponent is USAID, there will be several procurements to be done. To begin with, the project management team will need to contract a construction company to do the building, the contract another company to supply equipment need in the ward such as beds, seats/benches for the waiting bay, and other clinical equipment required, etc. The company contracted to do the building can decide to subcontract other firms/individuals to supply the construction materials, provide the labor, do the electrical wiring, do plumbing, install and test WIFI, etc.
These three steps in procurement;
Planning the Procurement Management
In this stage, the procurement needs of the project are determined and well defined. The statement of the course of work (Scope Statement or Terms of Reference) is developed for each supplier/vendor requires in the project. It is the statement of the work the contractor will do. The procurement documents, including a request for proposals, invitation to bid/tender, are prepared, with the terms of reference attached. The documents also include tender forms which aim at obtaining information about the tenderer (the bidders/contractors expressing interest in supplying the goods or services). In this stage, the boundaries/limits of each organization's work are clearly defined. The procedures to review bids and selection criteria are defined (Huda & Maliki, 2019). Identification of potential contractors is done, and some may be contacted.
The inputs in the planning the procurement management include; project chapter, business document (benefit management plan and business case), project management plan (the cope management, resource management, quality management, and scope baseline), project document (milestone statement, requirement, resource requirement, risk register, stakeholders, project team & tasks), enterprise environmental aspects and lastly, organization process assets (Amani, & Nazparvar, 2020). The tools and techniques required in this stage include; expert decision/judgment, data collection (market study), data analysis (make- or buy assessment), source selection assessment, and meetings.
The outputs in the planning for procurement management include; procurement management plan, strategy for procurement, tender documents, statement of work, selection criteria, buy- or –make a decision, cost projections, update of project documents (lessons learned, milestones, requirements, risk register and register of stakeholders) and lastly, organization possess assets.
In the case of the ward construction, USAID will first request proposals for the construction job. The scope of the work will be clearing the site, constructing the building to completion, with the guidance of the architectural & structural drawings, and the environmental, health, and safety issues as provident in the environmental impact assessment report. The scope will include painting, electric wiring, plumbing, and installation and testing of WIFI. In this case, the procuring entity is USAID, which will request proposals from interested companies and later invite vendors to submit bids or tenders on the construction work from shortlisted companies.
Conducting the Procurement
When identifying the project's procurement requirements and procedures involved are defined, the actual procurement is done (Huda, & Maliki, 2019). This consists of proposals, an invitation to bid, selection of the best bidder, and signing of the agreement. From there, the project management is updated with the new budget and timelines obtained from the contractor.
Inputs in conducting of the include; the procurement management plan (management of scope, communication management, requirement management procurement management, cost baseline & risk management), project documents (lessons learned, stakeholders, risk register, requirement documents & schedule of the project), documentations of the procumbent, bidder/ vendor proposals, organizational process assets and enterprise environmental aspects(Amani, & Nazparvar, 2020). The tool required in this phase includes; advertising, expert judgment/decisions, tenderers conference, proposal evaluation, and interpersonal skills in negotiation.
The output has; the selected bidders, agreements, updates of the project management (quality management, requirement management, risk management, scope, schedule, cost & communication), change of requests, updates of project documents (lessons, requirement documents, resources, stakeholder list, risk register requirement traceability) and lastly, organization process assets. USAID will use the mentioned inputs and tools to identify a suitable company for the construction work in this stage. The company will be handed the job, sign contracts (agreement), they take over the site. They will start executing the work immediately following all the guidelines provided in the terms of reference (scope).
Controlling of the Procurement
This is the final stage in the procurement process. This aims at ensuring that contracted vendors deliver on time and do the top-quality job within the budget. Poor management of the contracts can result in budget inconveniences and drain the project while everything else was appropriately implemented. During this phase, the project management team reviews the contractor's agreement, updates the progress, and the performance to ensure that the contractors are on the right track to meet the timelines and deliver quality work with the budget (Huda & Maliki, 2019). The assumption that the contactors are proficient with their work and will provide appropriately, hence leaving them to work without monitoring, is not encouraged. If the contactors mess up with their work, both parties (the contractor and the procuring entity) lose. Therefore, the project management team must be aware of the contractor's work and make the appropriate updates on the project management plan on time.
Close monitoring of the progress also helps ensure that the contractors deliver as per the terms of reference. With close monitoring, the project management team will detect any errors on time and make corrections are done on time. For instance, imagine the contractor is contracted to build the ward (which may be a three-story building). USAID leaves it upon the contractor to do the work without any supervision, only to realize, upon completion, that the contractor made a mistake on the first floor that affected the rest of the floors. This may lead to two things, either the contractor demolishes the whole building and rebuilds it, which is a loss for them, or the procuring entity (USAID in this case) accepts the building the way it is, which is a compromise to their goals. Therefore, the monitoring of the project in every stage of development is vital. The project management team should approve every step of the building before the contractor proceeds to the next one.
The inputs required in the controlling of the procumbent include; the procurement management plan (risk management, requirement managing, change in management, procurement management outline & schedule), project documents (lessons, assumption log, milestone, traceable requirement matrix, quality reports, risk register &stakeholder list), agreements, approved alterations, procurement documentation, work performance information, enterprise environmental aspects, and organizational process assets (Amani, & Nazparvar, 2020). The techniques and tools required include; expert assessment, information analysis (performance, trend, value earned), claims administration, auditing, and inspection.
The outputs in this phase include; closed procurement, procumbent document updates, change requests, work performance data, project management updates (risk management, cost, schedule & procurement management plan), project documents update (lessons, resources, risk list, requirement traceable matrix & stakeholder list) and finally, organization process assets updates.....
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