Procurement Plan Evaluation - Coursework Example

Procurement Plan Evaluation Student Name Institution Date Procurement Plan Evaluation Introduction A project requires the procurement of a large resource to carry out the robust project activities. An essential concern of a project manager is to identify and acquire goods and services needed to implement a project (JICS, 2009). Procurement, therefore, is the process by which goods, services and people are obtained. The process of procurement usually necessitates a written contact formulation. The contract is between the seller and the buyer. There is the need for a procurement plan to make any procurement successful. This article discusses the concept of planning purchases and the purpose and components of a procurement plan. A Review of the concept of Planning Purchases Planning purchases in procurement focuses on the purchases plan and acquisition model. It involves the establishment of the services and products that can be best acquired but not from the project team. According to Elyse (2007), the process of planning purchases requires for one to understand fully a project, for instance, constraints, objectives and deliverables. The process as well culminates giving a description of each service or product to be procured in a contract statement or specification1. The contract statement details of work are obtained from the scope statement of the project and the structure of work breakdown. Buy or make decisions determine if services or products are to be outsourced or in-house (Elyse, 2007). The sales growth slowdown was experienced by several companies during the 1970s in Western Europe. The slowdown led to an increased awareness about the relevance of measuring the operation performance of a company2. The performance was relative to the assurance of production interest as well as the performance of the competitors. Traditionally, reduction managers enjoy a status that is very low within the hierarchy of management3. This is however particularly true about the purchasing managers. Several industrial companies having manufacturing costs that are high realize that the cost of purchasing materials has beneficial and immediate impact on the profitability of the company4. The plan purchases concept is, therefore, to determine what to acquire or purchase and to determine, as well, how and when (Dobson & Shorrock, 1980). The concept also identifies the project needs that can be best met by acquiring or purchasing services, results or products outside the organization of a project. It also establishes the project needs that can rise during the execution of the project by the project team. The process involves reviewing the involved risks in every make-buy decision. It also involves reviewing the kind of planned contract meant to be used. The process targets risk mitigation and transferring risks to the seller. There are stipulated inputs that acquisition processes and plan purchases use. The inputs have foundations that determine when, how and what to purchase. The inputs include enterprise environmental factors, organizational process asset, project scope statement, work breakdown structure (WBS) Dictionary5 (Elyse, 2007). The general purpose of a procurement plan Procurement planning refers to the process of determining what to buy, from what source and when. During the process of procurement planning, the method of procurement is assigned. The procurement fulfilment expectations for procurement requirements are also determined. Procurement plans help individuals to procure services and products from external suppliers. The procurement plan provides a template for project procurement that is complete. Proper and careful planning for business procurement ensures that one buys the right products for their business. Procurement and tendering go hand in hand. At the tender time, consultants should refrain from proposal submission without an intention that is firm (Project Procurement Management Module 2, 1969). It is important that procurement plans go a step further giving descriptions of the processes one will follow when appointing suppliers contractually. Whether one is embarking on organizational procurement or a project procurement planning exercise, the steps always remain the same6. Definition of the items to be procured comes first. Definition of item acquisition process comes next. Finally, timeframes schedule for delivery follows. The products are bought at the right prices. Precisely, a procurement plan determines the method of procurement to be used, and the reason it should be used. It also establishes the specifications of the required services as well as the process of evaluation. Finally, the procurement plan also determines the criteria of evaluating and the response of each tender (Charles Darwin University, 2014). The structure of a procurement plan has the following headings: The identification that consists of the project name, star date and author (Charles Darwin University, 2014). It also has the contents page that consists of the actual structure and the page numbers. The plan has a background which consists of what is being procured, the proposed procurement method and why and the contractors of the suppliers that may have been invited or canvassed to tender. Deliverables look at the project deliverables and the approach that indicates the manner in which the procurement will be tackled. The timeframes stipulate the timeline including completion and start times for every project. Risk mitigation is the section that indicates how possible risks will be handled and is clearly indicated in the plan and finally the appendices of the procurement plan7 (Charles Darwin University, 2014). General purpose of a procurement plan According to the New Zealand Government (2011), the plan has a number of purposes. The important purpose of a procurement plan is ensuring that procurement function of an organisation operates according to the framework of the policy of the National Public Procurement. The plan offers support to the effective money purchasing value and at the same time ensuring accountability and transparency. The plan helps a firm decide what to be bought, when it should be bought and from what sources should it be bought. It also helps the planners to establish whether the expectations they have are realistic. This is in reference to the requesting entities expectations in particular. The plan offers a meeting opportunity for each involved stakeholder so as to discuss the particular requirements of procurement (New Zealand Government, 2011). The procurement planners are in a good position of estimating the required time of the procurement process completion. They hence give out contracts based on every requirement (Guyana, 2010). The plan helps in coming up with a procurement strategy. The strategy is useful and helps when procuring every requirement needed in the procurement plan. Such strategies include the strategy of the market as well as the determination of the procurement method that is applicable given the circumstances and requirement. A procurement plan makes it possible to assess the technical expertise need of developing technical specifications and scope of work for given requirements8. Finally, procurement planners are in a position of assessing the feasibility of dividing or combining the requirements of procurement into different packages of a contract. The procurement plan results from the process of procurement planning. It can, therefore, be developed for a specific project, a particular requirement or other requirements for public entities in the private or public sectors Guyana. (2010). Three key component of a typical procurement plan. The project procurement cycle gives a reflection of the procurement activities (SAI, 2009). This ranges from deciding to purchase the service or material through to bills payment and procurement contracts closure. The cycle has got key stages that constitute the components of the procurement plan. A key factor, however, in contract approach selection is to determine the party that is going to take most risk. The procurement, therefore, determines the risk level that the project will manage and the risks that may be transferred to contractors. The lifecycle of procurement separates the procurement plan into three key components (SAI, 2009). They include planning, managing and sourcing9. A procurement plan has got three fundamental components that include procurement definition and the type of contract that is supposed to be used, procurement risks and procurement costs. Procurement definition and the contract to be used The procurement definition has a purpose of defining the items that are supposed to be procured and stated conditions, in terms that are very specific (Piscopo, 2015). Sometimes the items that are supposed to be procured in a certain project can be internally made by an organization. In addition, the deadlines to procurement are always affected by the schedule of the project. The deadlines are as well always needed by stipulated times to ensure completion of the project in a manner that are timely10. The items are hence justified, listed, and conditions met in this section. Any technical information that is important is also included in this section. Individuals may as well be listed with the authority and power of approving purchases in the absence of or in addition to the project manager. Procurement definition also describes the contract type to be used. The function of the section of the kind of the contract to be used for the plan of procurement management is to describe the kind of contract being used. There are several various contracts types for instance time and materials (T&M), firm-fixed price, and cost-reimbursement11. Procurement risks Piscopo (2015), states that this component of procurement plan identifies any potential challenges and risks that are associated with the projects procurement12. Services or items being purchased, history of the vendor, depending on the type of contract could need more detailed mitigation and planning strategies. For example, there is always a situation when organizations have close relationships to particular vendors. However, there are chances that the vendors will not be able to provide services and goods needed any longer. Such circumstances represent a significant risk to the procurement activities of a project that have to be managed. Every procurement activity carries a potential for a risk that has to be managed to ensure the success of the project. Procurement could face unrealistic cost expectations and schedule for vendors. There are risks in line with the capacity of manufacturing capabilities of vendors. There are conflicts that come along with procurement. They are along vendor relationships and current contracts13 (Piscopo, 2015). Cost determination This component gives a description of how costs will be established and if they will be utilised as a section of the criteria for selection (Dominick, 2000). To seek the services and goods from outside vendors for procurement in response, costs are provided in response to RFQ-Request for Quote, RFB-Request for Bid and RFP-Request for Proposal. A vendor submits proposals, bid or quotes that give a description of the service or good to assist the customer in decision-making. Costs are often used as a section of decision criteria for procurement but could be prioritized in different ways depending on an organization (Dominick, 2000). Conclusion In conclusion, the managers of organizations have solemn obligation as far as the procurement is concerned. They have to ensure that the procurement team observes the stipulated procurement rules, laws and ethics. Procurement department is very essential in an organisation because it determine how the resources flow in and out of the organization. An effective procurement plan template should be established by the procurement committee to give guidelines on procurement procedures. References Charles Darwin University (2014). 2014 Procurement Plan. Retrieved April 22nd 2015 from < http://www.cdu.edu.au/sites/default/files/fas-docs/attachments/Procurement-Plan-Instructions-2014.pdf> Elyse. (2007). Plan Purchases and Acquisitions Process. Retrieved on 21st April 2015 from < http://www.anticlue.net/archives/000824.htm > Project Procurement Management: Module 1 (1969). Attached document. Project Procurement Management: Module 2 (1969). Attached document. Dobson, S.M & Shorrock, J. (1980) Planning and control of purchasing performance: A new concept. Long Range Planning, volume 13, issue 3, June, pages 30-34. New Zealand Government (2011) Mastering procurement, A structured approach to strategic procurement. Retrieved April 22nd 2015 from JICS. (2009). Procurement Concept. Retrieved April 22nd 2015 from < http://www.jics.or.jp/jics_html-e/tender/concept.html> Dominick, C. (2000). The Procurement Project Management Plan. Retrieved April 22nd 2015 from < http://www.nextlevelpurchasing.com/articles/procurement-project-management-plan.php> Piscopo, M. (2015). Procurement Management Plan. Retrieved April 22nd from < http://www.projectmanagementdocs.com/project-planning-templates/procurement-management-plan.html> Shared Application Infrastructure (SAI). (2009). Procurement plan. Retrieved April 22nd 2015 from < https://wiki.state.ma.us/confluence/download/attachments/74285118/Procurement+Plan+FINAL102010.doc> Guyana. (2010). Procurement Planning Manual. Retrieved April 22nd 2015 from < http://www.oas.org/juridico/PDFs/mesicic4_guy_proc10.pdf> Read More