The Concept of Procurement Planning Component and Rules - Essay Example

THE CONCEPT OF PROCUREMENT PLANNING COMPONENET AND RULES Procurement is the act of acquiring goods and services or works from an external qualified party. The external party to provide the services should meet certain preset requirements which do vary with each government or organization1. The processes often vary with corporations or government agencies which often define procedures that may enhance the environment of free and fair competition as they aim to eradicate any kind of fraud and canvassing in the process. Basically, the procedures should ensure the availability of the required services or goods at the right time, place, and condition and with utmost openness while on the other hand minimizing the costs involved in the whole process.2 Those should form the concept of procurement planning and by extend purchase planning. This article is going to look into procurement process including plan and components in a project based organization. Planning purchases According to United States postal service, effective purchase planning is necessary for the best interest of a given business and therefore should involve stakeholders at the earliest time so that the purchasing and planning may be a success.3 For a successful acquisition of a good or a service, there is a need to use the supply chain business practices. These may include proper background check of the source/potential supplier, planning of the available resources and then the urgency of the need of the services or good. Normally there is the preliminary planning and then the purchase planning. Preliminary planning This process normally begins at the budgeting stage. At this stage, an amount may get allocated to a certain project pending the approval of the respective people. After this stage, the plan goes to the purchase planning stage. Purchase planning concept. Procurement or even the purchasing is based on the idea that with a strict adherence to the laid down procedures governing this practice, then there will be so much achievement ranging from saving on cost, availability of the goods or services on time and at the right place. Purchase planning will help an organization in the following ways: the organization offering the tender will be able to do a market research as per the requirement of purchase planning. This will help the organization to know which organizations are available that can offer the project the needed services or the goods.4 The organization will also be able to get to sample the kind of services that are available at their current rate in the market. The same is true for goods. This will help them to know the trend in the industry making them to make informed decisions on when to offer the bid and what range of prices to quote and accept from parties bidding for the tender Purchase planning is based on the concept that centers on determination of whether the purchase is even required in the first place, and if so, what should be purchased, how to purchase them and when. Those are the pillars on which the organization’s purchase planning is based on, should be having the mission of the project in hand to help in the formulation of the steps required to make a clear and precise plan. It is based on the established objectives of the organization. This too will help to determine if the available services or goods that can meet the required needs of the organization.5 Normally this is done by a group that comprises the purchasing organization, the bidding company and the organization that may help to determine the right value. The next step would be the definition of the responsibilities of the parties with specifications of roles in purchase planning. According to United States postal service, these roles are divided amongst the parties and in details includes; The organization requesting the Purchase This party at this step should determine the required service or good, research the potential suppliers, make necessary arrangements to avail the financing/ funds for the project. After this, the project’s needed goods /services description should be made together with the cost estimates. The party should then at this point define the duration the project is expected to take including the deliveries. The organization will then help in coming up with criteria for choosing the right supplier given the preset requirements. The purchasing organization At this stage, this organization would want to gather data ant the right information regarding the required services/goods. This is done alongside the clear analysis of costs from different sources to determine and settle on the most reliable and cost effective source. The supplying organization may in their pricing put in consideration the freight charges in case of goods, transportation to the site and providing recommendations for the delivery of the goods and services. This may be done by the officer in charge of contracting but again this process may vary with organizations.6 Market research The next step is the Market Research. This step just like has been stated above, is critical to the purchasing plan as it helps in determining the available organizations that can offer the needed goods or services at a cost effective prices and time frame.7 The organization will also be able to sample the available services and the prevailing prices in the market. This will help them to know the market trend thereby helping the company to make informed decisions as to what to offer as the bid and what range of prices to quote and accept from parties bidding for the tender. Market research according United States postal services, may employ stepwise procedures that include but not limited to; i. Determining if the available products or services meet the project’s needs of the organization. ii. Checking the available technology and the extend of applicability iii. Conducting solicitation meetings to discuss the project’s needs and researching commercially available products and industry trends in a bid to determining the reliability of such products and services.8 iv. Surveying the history of the product’s purchase trend in the market from which adjustments of the competition prices. Individual purchase plan This planning effort is undertaken by whoever is in charge of the contracting. However, huge purchases may require the purchasing organization to know the tiny requirements of the customer after which it can then develop the plan. Such tiny details include the statement of work and a purchase request. This plan may include the purpose of the purchase, work statement like the product’s brief, availability of finance, delivery timetable, risk avoidance strategies, the type of contract, supplying company prequalification plans and their selection strategy, warranties, legal requirements and statement of possible conflict of interest.9 Purchase process This is also addressed by the purchase plan especially the method that will be adapted and describes the means in which the purchase will be carried. This decision should be consensual in most cases although the contracting officer may decide on the way forward in case of disagreements.10 Normally there are two types of purchase methods; Competitive method-this makes use of the market forces of demand and is attained by pure completion in terms price and other related factors proposals. Noncompetitive method- this however is subject to whether the business is a single source business, the interest of the business, excellent prior performance and others. Supplier selection This task is arrived at by first developing the best strategy of doing it. This strategy should also cover the performance evaluation criteria, and dictate the best characteristics that the purchase team should be looking for. This criterion again is advisable to be reached by consensus of the purchase team of the project although the leader here being the contracting officer may settle on a method if there is no agreement.11 The strategy however should explain how the price comparisons will be done and how the new promising suppliers will be considered.12 This may not be a must however it is a good business ethics. Evaluation team This team is advised to be comprised of purchase team although this is depended on the nature of the purchase and this would mean relative value and complexity of the purchase. This may even mean poaching for people outside the project to do the evaluation. This team reports to the purchasing team in a written report. Performance evaluation and cost/pricing factors Using proper and sound reason, the team will ensure the tender is awarded to the most qualified person. This involves many facets not just the low price but also the quality of work performed. In general, the procurement plan involves these basic steps; Selecting the contract approach, Soliciting the bids, Qualifying the bidders, Request for the quotes, Request for the proposal, Evaluating the bids, Awarding the contract, Planning the contract, Then contract management , Logistics and expediting in that order. It should also be noted that companies that bid on contracts are evaluated on past performance, their ability to supply the given materials/goods and that materials or services are inspected for quality.13 Purpose of the procurement plans It records all the materials expected to be procured with time. This is important as the organization is able to prioritize which materials to order faster meanwhile giving them time to plan for the rest. It is from this plan that time table for the procurement is developed. This details when a given material should be supplied and when the project should end. With this, it is possible to evaluate the actual performance against the expected one and make necessary adjustments thereby increasing the transparency.14 Components of a typical procurement plan Clarification and elaboration of requirements and specifications This is important to the bidders as it will form the basis for self-examination of the strengths and assessment to determine if they can meet the requirements or not. If there are any adjustments to be made to meet the requirements then they will be made. Applicable Rules Every game or task must always have rules. These are the rules that will govern the conduct of the parties and to ensure fair competition. The rules however should be equally applicable to all without favour or bias. Procurement methods selection These methods are arrived at by consensus among the individuals concerned. However, in case of no agreements, the contracting officer can always prevail. Provisional timeline and plan schedule This is what will govern the whole tendering and even the implementation. The project requirements must specify the time requirements for every phase or part of the project. This is what will be used to evaluate the overall performance against the preset time frame. Bibliography Chickksand, D, and A Cox. 2010. "Aligning marketing and sourcing strategies for competitive adavntage in the food industry." Delivering performance in food in food supply chain 150-185. Desheng, Wu, and David L Olson. 2008. "Supply chain risk, simulation and vendor selection." International journal of production economics. Easton, Liane, and David J Murphy. 2002. "Purchasing performance evaluation with data envelopment analysis." European Journal of purchasing and supply management. Lynch, Jorge. 2014. "The procurement planning and the procurement plan: Why are they important?" The procurement Classroom. 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