The Process of Procurement of Materials in the Implementation of a Project - Research Paper Example

Introduction: Procurement primarily involves the acquirement or getting hold of goods or services at the appropriate time of need. This process is mostly involved in the implementation of different projects in different fields of work related to production, manufacture or in the industry of construction. In the process various techniques are involved in the acquisition of the required materials or goods for the successful implementation of a project (Kovacs, 2004, p.6). The process of procurement can be realized to be an essential part of a project since it involves making arrangements of all the necessary elements that are required for the fulfillment of the project. In regard to the construction industry as well, the process holds good since the construction of buildings require various materials that are needed to be available at the right time. Thus the process and the management of the procurement techniques have the responsibility to ensure that the acquisition of the necessary materials occur at right times such that the work does not get halted for lack of materials. The current study focuses on the process of procurement, the strategy that is available for an efficient procurement policy, as well as learns about the different forms of contracts that are used in the implementation of a typical project. The study would thus make an understanding on the needs and policies of the procurement strategies that effectively get applied in the success of a project intended towards the satisfaction of the customer or the client. Procurement: Depending on the type of the project to be worked on, the process of procurement may be considered for direct goods, or indirect goods, or tangible or intangible items. For example, in relation to the production and manufacturing industries, the procurement process occurs for direct or indirect goods, direct goods referring to the materials required directly in the manufacturing process, while indirect goods might not have a direct need, yet have an indirect influence on the process as a whole. An example of tangible item that might be needed for procurement is the software for a computer. In the cases of other services, the procurement is needed for designing of a project, the manufacturing process, the installation techniques as well as the maintenance of the work done. Thus projects that are based on contracts generally involve the procurement strategies and techniques (Kovacs, 2004, pp.7-8). Project Procurement and Project Management: Project procurement is considered as an intricate and difficult process of making purchase of the necessary equipments for different needs in different industries. Thus suitable personnel are required for the achievement of this work. The management of the project involves setting up appropriate measures to distribute the roles and responsibilities of the staff in the different parts of the procurement process for a particular project. The items for procurements would vary with different industries. While the selection of the materials to be procured is considered, it is of utmost significance that the materials are essential and match with the requirements of the respective projects (Kovacs, 2004, pp.8-28). It is not only important to select and procure the correct components for the projects, but focus needs to be put on the quality of the item as well. Quality is highly significant since it offers to satisfy the customers that can be expected to increase the primary demand, primary demand referring to the demand for a product or good that arises in the minds of the customers, and needs to be realized. This implies that the primary demand needs to be converted into procurement demand facilitating the success of the project and gaining customer satisfaction. Further the procurement process involves the conversion of the procurement demand in to a language that determines an understanding between the project makers and the customers who are the receivers (Kovacs, 2004, pp.28-32). Procurement also involves the suitable pricing of the materials (Kovacs, 2004, p.34). This implies that the procurement of different items are dependent on a maximum level of price that the project management is ready to pay, above which the offer might not be prevalent or existent. The techniques used in the procurement measures by different project companies might also enhance the competitive advantages for particular companies. It also builds up enhanced relationships with the customers if they are satisfied to the great extents. Moreover the environment in relation to political, social, and economical aspects also influences the items to be procured (Kovacs, 2004, p.46). It can thus be realized that procurement is a very essential part of a project since without the appropriate procurement of the materials necessary for a manufacture of a product, good, a building or for the delivery of any service and involves proper management as well as financial and other managerial aspects involved in the process. Procurement: The Strategy: With the advancement in measures of technology and companies involved in greater level of expenditure on necessary products or goods, the procurement strategies have become essential for the success of a business organization. Such strategies based on the cost factors for the company tend to provide a company with proper guidance on the measures that can enhance the process and help the company to achieve greater success accompanied by customer satisfaction. In settling on the appropriate strategy, a company needs to focus on the total cost of its business and should also take in to account any further possibilities of modifications affecting the costs. One of the essential strategy or practice that procurement process of a company might follow is the proper maintenance of relationships with the suppliers of the required items. In the current competitive world, it has been observed that selection of a few best suppliers, who provide materials at reasonable prices as well as good quality, and maintaining relationships with them prove to be more beneficial for the companies (Procurement Best Practices, 2010). Another strategy that a company might follow in this respect is the optimum use of the technology. It has been found that only the implementation of advanced technology and dismissing personnel do not facilitate the operations. Rather it is essential to use the technology in accordance with the needs and supply policies of the company. Another important strategy needed to be followed is associated with the gain of support from the top management of the company involved in the process of procurement for projects. The management can prove to be beneficial by providing any required adequate funds in the process. Also, the management takes active part in determining the needs for personnel and other related necessities and can make arrangements accordingly for the successful implementation of the project (Procurement Best Practices, 2010). Another significant strategy with respect to procurement involves team work. By this it is implies that the process of procurement of materials should not be the responsibility of the operations department only. Rather the entire organization should participate as a team towards the achievement. In the process every individual associated with the organization and the project gets involved and has the opportunity to take part in the process performing their individual responsibilities (Procurement Best Practices, 2010). Thus, it can be realized that since the procurement is an essential part of a project implementation, the appropriate use of strategy is equally essential in the process. In regard to the construction industry, different strategies available include contracting based on fixed price; the strategy of building, operating, owning and transferring; designing and constructing; use of contractor in the management of construction and project, and similar such measures (Walker & Hampson, 2003, pp.13-19). Thus the different strategies available for the enhancement of the procurement measures provide with an understanding that these practices are available for the need of the process. Without these strategies, it might be difficult for a company to gain competitive advantage over other competitors. The strategies are primarily essential to make the procurement process effective such that the project can get benefits out of the advanced strategies followed by the project management. Forms of Contracts used in a Typical Project: A contract is referred to a formal agreement that is performed between two or more parties where one party has the obligation to give something to the other party. In the context of the procurements, the contracts are meant to make agreements between companies and the suppliers for the supply of the necessary products or materials required for the project. Contracts are more essential since such procurements are made external to an organization and involve outsiders in the process. Such contracts are fulfilled under the law of offer and acceptance (Heldman, 2011). Two primary forms of contracts that are used in the implementation of a project are: (i) Fixed Price or Lump sum, and (ii) Cost Reimbursable: Fixed Price or Lump Sum: These contracts are based on particular fixed prices as prevalent in the market. In case excess deliveries occur, incentives might be available. However, these contracts may prove to be risky in cases where there are chances of the project not getting the desired or planned success. On the other hand, if the scope of the project is good, these contracts might prove to be highly beneficial. Uncertainties regarding cost and quality of the goods are also reduced by the use of such contracts. Apart from the fixed prices or the incentive schemes, another adjustment is also allowed through these contracts that are based on the changes in the economy in the industry (Heldman, 2011). Cost Reimbursable Contracts: In these contracts the seller takes the charges of all the expenditures of the procurements, which after the supplies are covered, are reimbursed by the buyer or the customer. However since the costs are uncertain in such situations, it creates high risk for the customer. In case of any problems the buyer might have to lose more funds to take corrective measures. Generally these contracts are used when the concerned projects are associated with uncertainties. The seller remains safe through such contracts since whatever they spend on the procurements would be reimbursed by the buyer. Thus the responsibility of the buyer in this regard is at a high level (Heldman, 2011). Other Statements for Procurement: Apart from the above mentioned forms of contracts there are other statements of work that are utilized in the process of procurement. Such statements are used to keep records of the materials that are procured, and other details associated with the item. Collective bargaining agreements that deal with the contracts of agreements between the organizations and the personnel are also involved in the process of procurement. This is essential since the employees are the significant performers of the entire process (Heldman, 2011). Thus the forms of contracts have been found to have significant importance in the process of procurements of materials particularly since the procurements take place external to the organization. The contracts also have been observed to have importance in relation to the internal relations for active performance of work and responsibilities. Conclusion: The study has been focused on the process of procurement of materials and reflected on the importance the process has in the implementation of a project. This has been observed to have significance in different industries including the manufacturing industries as well as in civil engineering companies or in the delivery of any other product, goods or services. The study clearly emphasized on the necessity of the different strategies of procurements that are capable of enabling the companies handling different projects to gain advancements in their processes as well as competitive advantages over the competitors that are prevalent in the industry and world of competition. The different forms of contracts have also been studied that focused on the agreements between the buyer and the supplier of the products. This can be realized to have a significant importance to keep the level of certainty and security higher. Thus the overall study has presented a clear understanding of the entire process and need of procurements. References 1) Heldman, K. (2011), PMP Project Management Professional Exam Study Guide, New Jersey: John Wiley & Sons 2) Kovacs, A. (2004), Enhancing Procurement Practices: Comprehensive Approach to Acquiring Complex Facilities and Projects, London: Springer 3) Procurement Best Practices (2010), epiqtech, available at: http://www.epiqtech.com/Purchase-Procurement-Best-Practices.htm (accessed on December 1, 2011) 4) Walker, D.H.T. & K. Hampson (2003), Procurement strategies: a relationship-based approach, New Jersey: John Wiley & Sons Read More