Kanoor Procurement Strategy and Contract Selection - Case Study Example

Project Management: Kanoor Procurement Strategy and Contract Selection Name Institution Table of Contents Table of Contents 2 Executive Summary 3 Introduction 4 Literature Review 5 Project 1: In Car and Handheld Mobile Devices 6 Project 2: Infrastructure partnership in UAE 9 Project 3: Emergency Service 11 Project 4: Qantas Network Redesign Project 13 Project 5: UNIPOWER CASMAC Project 16 Conclusion 17 References 18 Appendices 19 Executive Summary Kanoor is one of the leading construction Companies in the UAE. The company performs excellently as a contractor of oil in the Middle East. A number of procedures are put into consideration while taking into account the best procurement for any project. It is therefore essential to know the procedure required. This helps in getting competent and qualified service provider. The objectives as well as the constraints of the company are some the factors that are put into consideration. This paper carefully analyses the procedures followed in acquiring the best service provider for various tasks/projects to be undertaken in Kanoor Company. Time, cost and quality have been have been highlighted as important aspects. The project timeline has been stressed on because it determines when the project is accomplished so that the benefits are realized. The company’s financial capability determines the quality and quantity of the services to be provided. Kanoor’s financial base is strong enough to enable it get the best services. The paper highlights the importance of information technology during selection and procurement measures. Modern technology ensures that the current aspects are taken care of adequately. It is imperative that all the factors are put into consideration before settling on a specific supplier. This paper too looks at the literature that is based on the procurement procedures. This has provided adequate knowledge needed in selecting and best service providers within the market. Introduction Kanoor a constructing company, it is a leading Civil and Electro-Mechanical construction in over twenty years. The firm is known for its exemplary performance as a constructor for oil and Gas, industries and so forth. Kanoor constructing (LLC) was first established in UAE in 2001, with an objective of supplying local industrial, civil and electro mechanical industry. To select a suitable procurement for the construction project, there exist some issues which need to be considered. Before selecting the procurement strategy for public building projects whether at a strategic or detailed level, it is important to first identify factors that determine suitable procurements strategy for the identified project (Trish and Smith, 2009). These factors includes key objectives and constrains of the project, the risks that may arise during the delivery of project and how those risks might best be dealt with, while considering the level of complexity of the project. In addition, there are three main elements which affect the selection decision. These are time, cost and quality. All these three elements can be identified to the value of the money. In accordance with the state procurement policy, procurement strategy and contract selection for public or any other projects is required among other things to achieve value for the money. Often, the quality expected in these projects is reinforced by applicable project management framework, which notes the importance of value for money in setting the foundation for effective project management across all public sectors. Achieving value for money basically involves comparing alternatives for the supply of goods and services to get the best mix of quality and effectiveness for the lowest cost over the required term (Hollis, 2010). More importantly, this involves an appropriate allocation of risk, making the selection of a suitable procurement strategy and contract a critical factor in determining whether value for money is achieved. In order to select procurements strategy, for instance a government building project. The procurement selection plan is important for the accomplishment of any identified project. This report seeks to reveal best practices in procurement processes, identifying the needed structure in minimizing costs for all parties in accordance with standards of behavior requirements under the government procurement policy framework. Literature Review A wide spectra of reasons put forward for choosing a particular procurement method. According to Rowlinson and Newcombe (1984) research on the impact of procurement methods on performance, identified several elements that provides a general overview of the respective characteristics on types of contractual arrangement. The variable used in the selection process may include accountability, design input, dissatisfaction with previous process used, knowledge of the process predictable cost and so forth. In accordance with the capital works management Framework policy requirements department are required to complete a performance report for each constructor engaged through their system during and at the end of the contract or project. Contractor performance reports are required both at practical and final completion. For contracts that exceeds twenty construction weeks (generally these contracts exceeding $500,000 in value), reports are also required every thirteen construction weeks. Reports may also be undertaken at the request of the constructor or the sponsors of the project. The objective of this guideline is to provide guideline for publicly sponsored contracts. For instance, the constructor performance reporting associated with government building projects facilitates a consistent approach to such reporting. Nevertheless, performance reports have to be completed by government employees. It is particularly, important that this guideline provides information for those managing the contract such as superintendents, principals and so forth. They are required to prepare performance reports on identified contracts. The guidelines dwell on the purpose of the contract performance reports and the steps for completing a performance report. Project 1: In Car and Handheld Mobile Devices The project involves the implementation of a technology solution in improving the ability of the Abu Dhabi police to collect outstanding warrant and increase revenue sources in a more efficient manner. The essence of this business requirement appear to be provide better and more timely access to police officers on the road to registration, licensing details and warrants (Oxford Business group, 2010 ). Clients Abu Dhabi police service Abu Dhabi Transport Board Stakeholders Stakeholder Responsibility Role Abu Dhabi Police service Responsible for provision clients requirements and acceptance testing of the system A joint sponsor and client Abu Dhabi Transport Responsible for provision clients requirements A joint sponsor and client Abu Dhabi Transport staff and police officers Responsible for provision of business expertise to the project Business expert Treasury and Justice Not Identified Not Identified Telstra Responsible in provision of communication Communication service provider Commercial Arrangements The client provided project management services and Testra and Citec were engaged to providing systems integration services. User Group Representatives from Transport registration and integration Licensing ExQPS Officers Consultants Programmers Major Issues and Resolution New Technology The technology did not exist off-shelf. It had to be created from a mix of existing technologies. The UAE requirements particularly at Abu Dhabi were different compared to Europe, America among other regions. This was a considerable challenge as it required a close liaison with the manufacturers of equipment and a close look at how police forces around the world use IT. It also required development and implementation of stringent service level agreements with service providers Telstra and Citec. Introduction of this system was a complete change in work practice for the Abu Dhabi police service officers. This presented a risk to the project. Involvement of the users in development of the system and keeping the user interface simple went a long way to mitigating this risk. Joint Project The project appeared to be a joint project between two organizations each with a different perspective on the project. To effectively achieve the requirements of the project there has been a close alignment between Abu Dhabi police service and the transport as well as the government. Establishment of a joint project steering committee was critical (Defense Industry report, 1998). Findings and lessons from the project Close consultation with all stakeholders is important for the accomplishment of the project It is important to remain creative and not let technology limitations dictate the solution If everyone involved, for instance IT and business stakeholders work together with a clear aim, it remains possible that the project can be implemented. Access to integrated data resource has considerable advantages at the operational end. Project 2: Infrastructure partnership in UAE This is a regional peak infrastructure body. The body has a mission in advocating for the best solutions to the UAE’s infrastructure challenges equipping the nation with assets and services we needed to secure enduring and strong economic growth. Project Cost An estimated cost of about $ 400 billion is likely to be spent on infrastructure in this region in over the next decade. If PPPs were to be continued to account for a 10 – 15 percent share based on the finding of the study and the net bid costs, PPPs would generate approximately $6 billion in potential benefit to the community (Wildcat Publishing, 2010). With respect to the time over-runs, this is achieved on a value-weighted basis. It is established traditional projects were likely to be completed later than PPPs relative to the budget. For instance, signing of final contract and project achievement, PPPs were found to have completed 3.4 % way before time on average, while those that applied conventional methods projects were finished 23.5% behind time. The PPP framework imparts another form of competition for traditional procurement and lessons learned by governments participating in the PPP process with respect to risk analysis, rigorous structured project initiated through use of business cases among other tools have been partly transferred to the management of traditionally procured infrastructure projects (Defense Industry report, 1998). Project Process Overview Infrastructure partnership within UAE region engaged all stakeholders including businesses, learning institutions and governments in undertaking a study of the efficiency of public-private partnerships (PPPs) relative to Traditional procurement approaches in the provision of public infrastructure in: Testing the commonly held notion that more completion and greater alignment of incentives and constraints would result in PPPs providing infrastructure with reduced cost over-runs compared with traditional procurement Examine the factors that account for relative success or failure of PPPs Review the arrangements arguments and evidence for why the government’s cost of capital is not the risk free rate of interest and can be expected to be relatively similar to the private cost of capital in the market. The government’s relative cost of capital and risk allocation The idea that PPPs need to achieve massive cost savings to overcome the disadvantage of having a higher cost of capital than government funded projects continues to be raised in UAE member countries (Hsu, 2006). This issue was widely debated in 1990s, concluding that a much difference in the private and public cost of capital is apparent rather than real. While governments can borrow at risk free rate of interest, this is due to the fact that governments have taxing powers and as a result investors consider that the likelihood of default is minimal. Sample Selection The methodology applied in selecting the samples of PPP and Traditional projects is critical to establishing an unbiased test of the relative performances of these approaches. Project 3: Emergency Service This project involves implementation of a system to assist in dispatch of emergency services from the Abu Dhabi defense service. This is a computer-aided dispatch system charged with bringing faster and efficient ambulance response times. Project sponsors and stakeholders The structure given in the project is not entirely clear. However, there are some roles that appear evident these include: Sponsor- Abu Dhabi defense service Stakeholders’ role and responsibilities Stakeholder Responsibility Role Abu Dhabi defense Service Responsible for the provision client requirements and acceptance testing of the system. Client Ambulance officers Responsible for participating in the project as requested Business expert Unions Responsible for ensuring ambulance officer workers interests are protected in the workforce. Project management Service Provider Aspect Responsible for provision of project management services Project management services provider TriTech Responsible for provision of project management services Service provider for development and implementation of the system. Commercial Arrangements Aspect was engaged in providing project management services and TriTech provided for system integration services. Process Followed There is clear evidence of a highly structured approach to the project. The project being a government project it required a tendering process to be undertaken. This normally involved a highly structured approach to be followed (Hsu, 2006). There is evidence of following project management processes for instances stages like: Initiating- This was not evident Planning Scope planning and definition – inferred as year was spent putting a specification together. Procurement Planning – inferred as a tender process was involved. Executing Project plan execution inferred as project tasks were clearly undertaken Solicitation – A tender process was required Controlling Schedule control – this was necessary to move deadlines in order to satisfactorily complete testing. This is evidence of schedule control Integrated change control – a change management committee was established Closing No evidence Project Resolutions Training was critical to the success implementation and operation the system. More detailed training upfront may avert the industrial dispute experienced in this sector. Reference to past experiences of similar projects is an important ingredient to ensure mistakes witnessed in earlier projects are not repeated. Project implementation was helpful in ironing out early system problems Project 4: Qantas Network Redesign Project Project overview This project involves redesigning of the Qnatas Network to gain a new worldwide, fault tolerant and Y2k compliant fibre-optic network suitable for the integration of voice, fax data and capable of providing a technical establishment to make Qantas far more customer-focused (Trish and Smith, 2009). Project Sponsors Qantas project executive Project stakeholders Qantas Telstra Sita Qantas Staff Commercial Arrangements Project risk management group were engaged in providing the project management services and Telstra and Sita were engaged in provision of systems integration services for the network. Project Process There is evidence that the project structure was highly structured approach following the project management processes. Initiating – not so clear Planning - Scope planning and definition - Schedule development - Risk management planning - Resource planning - cost estimating - Project plan development -Risk Identifying and analysis Executing Project plan execution Team development Information distribution Contract administration Controlling Scope change control Schedule and cost control Risk monitoring and control Closing Administrative closure. Major Issues and Resolutions After the first twelve month, there were some concerns on the scheduling front of the project. The project management plan approach was aimed at creating a reliable project schedule; in addition create mechanisms for the tasks to be accurately tracked (Hollis, 2010). This enabled the project team to get a firm handle each site in the world was at and therefore to be able to apply necessary interventions to ensure the project stayed on track (Trish and Smith, 2009). Partnering Two external organizations were critical to the project, these are Telstra and Sita. The key issue was to ensure Telstra and Sita revel to Qantas exactly where they were to enable effective monitoring of project progress. The project management team was to foster a relationship with these two partners through a series of team bonding sessions which enabled them to work together in a coordinated, open and professional manner (Kung, 2007). Project 5: UNIPOWER CASMAC Project This project was developed to facilitate efficient and timely development of common computing systems for application by higher learning institutions across the UAE member countries. This project was basically introduced to provide higher learning institutions with efficiencies in software developed through sharing of knowledge and associated costs (Kung, 2007). Sponsor The identified sponsors were UAE Universities Vice- Chancellor’s Stakeholders Responsibilities Role UAE Universities Vice- Chancellor’s This group was responsible for leadership; they were engaged in overall project oversight and direction. Participating Institutions Responsible for participating in the project: providing input to system requirements and acceptance testing Business Experts Uni-Power Responsible for CASMAC project and for providing project management services Project management Service Provider CHA Computer Solutions Responsible for upgrading of and implementation of system required Systems integrator Project Manager – Uni-Power User group – there is no specified user group Project success factors Existence of proper detailed factors Proven project life-cycle Approval by project sponsors Sponsor stakeholder involvement and support Highly skilled team Top management support Project Resolutions Realized Savings A number of higher learning institutions were faced with upgrading their systems to solve common business problems. The cost of each institution going it alone may have been prohibitive (Hsu, 2006). The concept developed under the CASMAC aims to provide efficiencies in software development through sharing knowledge and costs. The benefits achieved include utilization of some software licenses at a lower cost and specification that formed the basis of subsequent tender documentation. Conclusion It is worth noting that following the right procedure in selecting a contractor leads to acquisition of quality services. It directly influences the outcome of the work. A project that has a clearly defined path brings about success upon its completion. Kanoor a constructing company has managed to achieve its set objectives due to its strict adherence to the set procedures. This can act as a good example to other projects that would be carried out during a later date. Failures during the process are noted so that the mistakes are not repeated. References Kung, D. (2007). e-Transformation: The Restructuring of Supply Chain of Mature Business Industry Via e-Technology and Strategic IT Deployment in Automobile Industry. New York: The Chinese American Scholars Association. Defense Industry report. (1998). Defence industry report. Dubai: Jane's Information Group. Rosemary H, (2010). Britain and the Middle East in the 9/11 era. London: John Wiley & Sons. Rowlinson S .M., and Newcombe, R. (1984). Comperison of procurement forms for industrial Buildings in the UK: The fourth International Symposium on organization and Management of Construction. . Toronto: university of ontario. Trish M and Smith K. (2009). Managing Project Delivery: Maintaining Control and Achieving Success. London: Butterworth-Heinemann. Oxford Business Group. (2007). The Report: Abu Dhabi 2007. Abu Dhabi: Oxford Business Group. HSu, D. (2006). From Project managent to Project Unlimited . Proceeding ISECON Conference , Vol. 23. Wildcat Publishing. (2010). The Oil & Gas Year Qatar 2010. London: Wildcat Publishing Inc. Appendices Procurement Selection Criteria Respondents were asked to indicate on the scale of 1 – 10 what they believed to be the degree of importance of procurement selection criteria mentioned earlier in this paper. The results can be revealed in the figure below showing the distribution of answers. This is based on accountability, design input, working relationships and previous dissatisfaction among other selection criteria. Dissatisfaction with previously used procurement methods is shown to be a major factor in selection of a subsequent procurement method. The criteria for selection of procurement methods were all significant except for transference of risk it seems improbable considering that the transference of risk is of such a low order and explanation may lay in the fact that the actual risk appointment under various procurement methods is not well understood. Thus this explains the importance of identifying the right procurement process for an identified project. Read More