Evaluation of a Procurement Plan for Use in a Project-Based Organization: Concept of Planning Purchases - Assignment Example

The Evaluation of a Procurement Plan for Use in a Project Based Organization The Concept of Planning Purchases The concept of planning purchases includes the processes of selecting the most appropriate sellers for supplying the required resources for successfully completing a project (Kerzner 2009). It also includes the activities of externally buying products and services from sellers beyond the business (Heldman 2011). A project can also utilize resources that are within its environment in ensuring that the project carries on according to the projects team budgeted costs and time constraints. During the process of planning for purchases, the project manager has to evaluate the different alternatives before making any purchases. He or she then has to decide which of them he will buy or abstain from buying (Kerzner 2009). The manager in charge of a project also has to decide the right quantities and their quality before making any purchases. Different types of projects require diverse types of requirements before the project implementation can begin. Legal requirements such as permits and licenses may also have to be acquired before a project commences. These requirements have costs associated with them, which a manager should include in the process of planning purchases. The decision concerning when a project manager should make a purchase is usually affected by the projects schedule (Dinsmore and Cabanis-Brewin 2010). There are also other significant financial considerations that should be taken into account, which include the utilization of capital that could have been used for other purposes. The process of planning the purchases within a project environment also includes various risks that the manager should consider. This becomes an area that the planning process should provide details for the purpose of guiding the managers on the acquisitions that they intend to make in executing a project. The evaluation of the risks involved also encompasses carrying out reviews on the types of contracts that the project team will be involved in and the mitigation of the exposures involved in the risks (Stadtler and Kilger 2005). The project manager has to ensure that appropriate inputs into the process of planning purchases are incorporated during its implementation (Kendrick 2010). These include inputs such as organizational process advantages, business environmental factors, their projects scope statements and their breakdown structure for the duties to be performed (Stadtler and Kilger 2005). The other inputs that could be applicable in a project include project management plans and a list of the vital tasks in completing a project (Dinsmore and Cabanis-Brewin 2010). The different tools that are applicable in the process of planning purchases include the use of expert judgments, analysis of whether to buy or make and the different types of contracts that have been availed for the provision of the commodities and services (Kendrick 2010). The analysis of whether to buy or make a commodity is usually utilized in determining whether a project team has the capacity of developing instead of purchasing a commodity (Heldman 2011). The decision is made to ensure that the project’s cost budget is maintained while ensuring the projects execution does not stall. This analysis is performed on the direct and indirect costs for the purpose of ensuring that the final decisions adopted have their basis on equal comparisons (Kerzner 2009). Considerations of whether the commodities to be purchased will be able to be used severally within a project execution will also be carried out. The utilization of expert judgment can come from within the project or external sources. It is very useful in analyzing the information available before making a decision on whether to make a purchase. The General Purpose of a Procurement Plan A procurement plan is used for the purpose of giving the details of the steps involved in the procurement process of a project. The plan is prepared by all the key parties that are involved in executing a project (Kerzner 2009). It identifies issues such as the procurements process goals and objectives, the prospective service providers, the duration of a contract and the approaches to be utilized in the process (Kendrick 2010). It also identifies the scope of required services, the monitoring along with evaluation activities to be instigated, the format for tendering and the evaluation of tenders (Heldman 2011). Finally, it presents information on the schedules to be used in procuring and an estimation of the costs to be involved. The procurement plans within a project enable the project manager to make the most appropriate decisions concerning the purchasing of the right products required and at the right prices (Dinsmore and Cabanis-Brewin 2010). The procurement plans used in a project are important in the definition of the requirements that will be used in the project and which ones require to be procured (Stadtler and Kilger 2005). They also assist in the creation of justifications that are sound for making purchases of the commodities and services in question. In addition, the procurement plans also help a project manager and his team in listing all the duties that are required to be fulfilled when procuring products for their project. It helps the manager and his team in the creation of a schedule for the tasks to be performed by enabling them to allocate timeframes for each activity and the required resources (Stadtler and Kilger 2005). The procurement plans that are being utilized in a project can enable the team and their manager to create a tough process of procurement process for their needs. Good procurement plans provide a definition of the commodities and services that a project team will require to procure (Kendrick 2010). It also describes the processes that a project team will go through before appointing the appropriate sellers to supply them with their requirements (Kerzner 2009). The procurement is essential when defining requirements, identifying prospective suppliers, entering into appropriate contracts with them and managing them to ensure efficient delivery (Dinsmore and Cabanis-Brewin 2010). They are additionally essential for the successful completion of any type of project as they assist the teams in quickly and easily accomplishing their tasks. The procurement plans provide the project team with structural processes that ensure a project team achieves their desired goals along with objectives (Stadtler and Kilger 2005). They also help in accessing the fiscal and technical capacities of the sellers the team members and manager intend to procure commodities and services from. It determines the type of approaches that a project team intends to utilize in the execution of the project (Kendrick 2010). The approaches adopted could either be competitive or procuring from sole sources outside a projects environment (Dinsmore and Cabanis-Brewin 2010). The use of a procurement plan within a project helps the team in keeping to the required time limits as it assists in setting the time limits for the completion of the activities to be carried out. It also stipulates the types of payment approaches to be utilized by the project team in paying for the commodities they have procured or are in the process of procuring (Heldman 2011). The project manager can opt to use the fixed, unit, labor contract or performance based pricing methods. Procurement plans state the required services in a project, the estimated workloads involved, standards of performance required and the place of delivering the procured items (Kendrick 2010). The process of defining the formats of the tenders to be used helps bidders in responding and eases the process of evaluating the tender documents they forward. Definition of the evaluation criteria to be utilized in the tendering process additionally helps in easing assessment of the tenders brought forward by the prospective suppliers (Kerzner 2009). Three Key Components of a Typical Procurement Plan The major components of a procurement plan for a project team comprises the procurement’s plan purpose, its definition and the approvals made by the parties concerned in the procurement process (Heldman 2011). The major reason for having the plan’s purpose is to provide knowledge and information concerning the purchasing of the commodities and services that are required for the successful completion of a project (Kendrick 2010). It dictates how the sellers will be selected, the types of contacts that will be entered into, the management of seller operations and the parties to be involved at various stages of the process (Stadtler and Kilger 2005). It also stipulates that the process of procurement should be approved by all the parties involved before any operations can commence (Heldman 2011). The procurement plan also contains its definition which includes the procurement statement, the estimated costs of the process, vendor selection portion, procurement description, selection processes and criteria and the members forming the procurement team (Dinsmore and Cabanis-Brewin 2010). The section additionally contains a section for the contract types entered into and the standards governing the performance of the contracts. The procurement statement describes the different types of commodities and services that are being procured along with the reasons for doing so (Kerzner 2009). An estimation of the costs to be incurred when executing the procuring materials is also availed in the plan. They also include confidence limits for the purpose of accommodating any unforeseen costs that may affect the successful implementation of a project (Stadtler and Kilger 2005). A description of the method, which the project manager and his team will use when selecting an appropriate vendor to supply the needs of a project, is also provided within this section. The definition of the items to be procured and the conditions for procuring is given under the procurement description heading of the plan. The plan additionally provides information concerning the process of selecting the appropriate criteria applicable and the analytical tools to be utilized in executing a project (Dinsmore and Cabanis-Brewin 2010). A list of all the project stakeholders involved in the process of procurement, their contact information and descriptions of their individual roles is also available in this section of the plan. The component also documents the types of contracts to be utilized in every procurement process that will be applicable to the project execution (Kerzner 2009). In addition, the procurement definition provides the documentation standards that will be required and used for every contract that the project team will enter into (Heldman 2011). The final component of the procurement plan is the approvals section. This section indicates the names of the individual responsible for preparing the procurement plan (Stadtler and Kilger 2005). It also indicates the names of the persons who have approved and sponsored the project, including the customers in the process of procurement. Finally, it also provides a date when the approvals were made for the procurement process (Dinsmore and Cabanis-Brewin 2010). Reference List Dinsmore, P. C., and J. Cabanis-Brewin. 2010. The AMA Handbook of Project Management. Washington: AMACOM. Heldman, K. 2011. Project Management Jumpstart. New York: John Wiley and Sons. Kerzner, H. 2009. Project Management: A Systems Approach To Planning, Scheduling And Controlling. New York: John Wiley & Sons. Kendrick, T. 2010. The Project Management Toolkit: 100 Tips and Techniques. New York: AMACOM. Stadtler, H., and C. Kilger. 2005. Supply Chain Management and Advanced Planning: Concepts, Models and Software and Case Studies. New York: Routledge. Read More