Strategic Procurement Management Process - Assignment Example

Strategic Procurement Management Name: Tutor: Course: Date: QUESTION 3 (a) Discuss and evaluate the approach to risk taken by the Queensland State Government to procuring the Gold Coast 2018 Commonwealth Games Village. The Government of Gold Coast budgeted an estimated $1.483 billion inclusive of the annual escalation costs. With the changes in the Games village procurement, there is bound to be increased total costs and reduced upfront capital outlays. However, the bid budget excluded the cost of venue infrastructure and planning and delivery costs in the initial net cost estimate. The most significant procurement programs of the Queensland’s government are the redevelopment and construction of major infrastructure and operations. In this project, reputational and delivery risks are very significant given the level of involvement of volunteers, the private sector and a number of government agencies. Furthermore, the construction of the infrastructure and the Gold Coast Games itself are affected by geo-political, socio-economic and environmental conditions. Apart from that, the deadline is immovable. Nevertheless, this will not harm the financial and reputational position of the developer because no penalties were issued for missing on key milestone dates. The preliminary scope of works included provision of services for each functional area, and initial resource, procurement requirements and workforce, and accurate and detailed bottom up budgets. Yet, the revenues and costs failed to differentiate the private sector and the bid budget. In doing so, the state foregoes future revenues by transferring the financing, ownership and construction risks to the private sector through the public private partnership (PPP). This endears positive outcomes because non-PPPs always run short of accountability and transparency. The value for money incorporates productive efficiency in public projects. The Queensland government made a wise decision to involve the private sector into sharing the production and construction costs. Particularly, emphasis was made on financing, design, operations, construction and maintenance costs. Some of the foregone revenues are accommodation after games through a 10-year rental guarantee that helps in the staged release of properties to the market. The Games village has also underestimated the size of athletes and officials attending the games. It may be inadequate considering that the Glasgow Games had 7300 athletes and officials. Also, the contract signing process was not smooth given that the financial close and the contract was finalized after a delay of six-months in 2014. Although the contract between the Games village developer and the Queensland government did not delay the construction, it led to a slip in about 7 out of the 18 Games venues. Fortunately, the organizers have been able to get the construction schedule back on track without affecting the completion dates because the project activities were not on the critical path. Specifically, the areas of concern in the budget were overlay and contingencies being the total escalated budget for venues. Lessons have been taken to reduce the impact of risks from the capital budget for venues by learning from the just completed Gold Coast Aquatic Centre. On the other hand, the state of Queensland has been exposed to income support of private sector investors for a decade which could be higher than predicted. The commercial advisor of the state put a ceiling to the maximum exposure through no property sales and declaring a 100% vacancy for the rooms. (b) Discuss and evaluate alternative approaches to risk that the Queensland State Government could have taken to procuring the Gold Coast 2018 Commonwealth Games Village, including approaches to combining risk allocation and risk sharing The government of Queensland is financially constrained in hosting the Gold Coast Commonwealth Games. Nonetheless, this situation could easily increase capital and operating costs with limited revenue. To prevent the project from slipping into financial risks, the government of Queensland should hire expert consultants to prepare adequate budgets on construction costs based on scientific estimates and forecasts. The potential of missing out on all revenues and costs incurred by agencies is high. As such, the government of Queensland should undertake cost-benefit analysis to the value of land that will be used for the Games village. Some of the risks can be allocated to the respective government agencies. For example, the contribution of lands should be the responsibility of department of lands while infrastructure development should be left to the department of public works. Sharing the risk with private agencies and functions could easily cushion the state from being exposed to sales, development and financing risks and with inadequate construction and project contingencies, it is possible to include them into the project costs. This implies that the Queensland government decision to combine risk sharing of costs and revenues will reduce the impact of project failure in the mid and long-term. Similarly, it is important to avoid unrealistic estimates on the annual escalation rates of sales. Instead of excluding communications, and data, electrical reticulation and infrastructural costs, it is advisable to accept them as potential sources of risk. The project is also rigid to modification of athlete’s accommodation and refitting back to the original configuration. In reality, the project should be flexible to allow the ‘move in, move out’ approach through sharing of costs and revenues between the government and private owners of accommodation. Creation of prefabricated structures and movable accommodation may help ease the likelihood of congestion in accommodation. For example, use of alternative consultants can bring a balance between the overstated revenue of $7.1million for revenue for 50 plus student accommodation units and the $18.4million excluded budget for utility infrastructure costs. Risk scoring should be undertaken for all the risks with greater input given to developer base works and overlays as it carries the highest expenditure level. With the use of risk assessment matrix, the government of Queensland should identify the key risks, assess impact and likelihood as well as assign responsibility and chart possible course of action. Furthermore, cost forecasts should be undertaken for the years 2015, 2016, and 2017 to ensure that returns of investment (ROI) are clearly predicted and documented. Apart from increasing legacy outcomes by constructing permanent venues and facilities, it is important to seek expert advice on permanent solutions as an alternative to the temporary works. As well, the government can involve more investors from the real estate sector to build more Games village residential units and obtain proceeds from their investment for a period of 15 years rather than 10 years. The project manager should perform risk management using broad scientific risk management methods for construction projects. By identifying the impact and likelihood of the risks, the project phases can be managed by different government departments. Alternative approaches to risk management include transfer, avoidance, mitigation and acceptance. Potentially, serious project risks such as floods and typhoons which could cause serious damage to the project have been overlooked. Using the risk matrix table, the project can be able to identify the risks, check their levels of severity and frequencies of occurrences. Appropriate mitigation measures would then be applied. QUESTION 4 Q(4) Assess and justify the relative importance procurement versus other Project Management areas/dimensions that affect project outcomes. Project management areas include planning, scope management, implementation, monitoring and evaluation, procurement, communications and risk management. Procurement interfaces with the other project management areas through budget and financing of project requirements. With increased emphasis on quality and technical performance of public projects, scope, time and budget are essential. The procurement officers receive a list of requirements from the project planning department within a specified time. These include human resource, materials, machinery and expert consultancy. The goods and services are significant in increasing the confidence among project beneficiaries and communities. Without teamwork in obtaining the best workforce with excellent skills, qualifications and expertise, the project is bound to run into serious risks. Most materials and human labour are procured based on market prices and revised bill of quantities. To source sustainable products and services from suppliers, the project must adhere to quality and cooperation across the supply chain. The project manager is at the centre of the project life cycle; initiation, planning, delivery and finalization. The manager observes a purchasing policy and contracting guidelines to create value within the project. At a microeconomic level, the project manager performs cost-benefit analysis to find out whether benefits of the project outweigh its costs. Negotiation guidelines define the level of contract agreement and risk. At this point, the project manager follows defined criteria for tendering and selection process. This can be in form of works, human labor, equipment, materials, and machinery delivered within a given time and schedule. During project delivery, the procurement works is meshed with contract administration and performance specifications and the management of issues and variations in the contract. Alongside monitoring and evaluation of project schedule, costs and time, it is important to monitor and control suppliers and contractors. Suppliers and contractors follow defined quality and project scope guidelines to achieve specific outputs by testing and verifying requirements. The project manager will accept the project outcomes by conducting general acceptance and contract close-out reviews. Projects take heed of lessons and reviews to find out the state of contract performance if it conforms to the project objectives and goals. With amended procurement list, the project is able to minimize variations in prices and quantities of items. Procurement overlaps with scope definition, deliverables and milestones of a project so as to provide the desired procurement requirements. At this instance, the project team members will be involved in defining the project specifications and contracting. Work packages are assigned costs and schedule to be accomplished within a specific period. The procurement obligations involve legal services to make the contracts and supplier agreements binding. During project delivery, procurement function manages work packages and contains the likelihood of variation. The procedures for a close-out for contracted work packages in a business case affect the project outcomes because attainment of project objectives depends on it. Wrong or substandard procured items will align to the quality requirements of the project. For example, poor quality cement and other construction materials will lead to weak structures that may lead to future cracks and collapse. In construction, sourcing goods and services from competent contractors and suppliers engenders good quality project outputs. Consequently, the project benefits will run as anticipated, and furthermore, all the stakeholders involved in the project will be satisfied. Procurement plays a great role in project management and it is at this point that the project manager involves the expert knowledge of supply chain experts to increase the levels of negotiations and contract management. QUESTION 5 Assess the extent of congruence of theory and practice in other Project Management areas/dimensions and comment, in a critical way, on how far away you think the Project Management Discipline is from a Project Management Body of Scientific Knowledge. Project management concepts and theories borrow heavily from other management and leadership discourse. Theories of project management compliment practice through tested theories in planning, implementation and monitoring and evaluation. For example, the agile methodology supports the use of flexible and routine iterations in problem identification and solving. In practice, software development companies are exploiting the role of theory in advancing positive project outcomes in real projects. Furthermore, many projects use lessons and learning points to inform theory and use theory to chart appropriate methods to achieve project success. In getting the best and favorable corporate culture, the congruence model is a powerful tool to map out organizational arrangement and teamwork in a project. Right from business case development to project closure, projects rely on scientific studies and past project to offer guidance and direction as well as leadership. Projects are interplay of people, tasks, culture and structure and with higher congruence among these shows that project objectives and goals will be realized even more. Use of project matrix structure to manage people and tasks are less bureaucratic and agrees with the modern scientific project management methodologies. In this circumstance, the culture of a matrix organizational structure supports effective decision making among project managers and the project team. Project tasks require people with specific knowledge and skills who are in turn rewarded for completing their tasks within defined scope terms. The independencies between the tasks are in itself a scientific method of planning project activities and assigning resources. People work on tasks and are required to interact with various project team members and stakeholders. They should possess the necessary competencies, educations, experience and knowledge to drive to success the various project management areas including procurement. As a result, the project team should have commitment, recognition, progression and reward upon completion of critical tasks. Most management and leadership of projects follow scientific knowledge based on how the project is organized and structured. Congruence of project activities, people and tasks are guided by procedures, policies and rules especially if the project activities have been measured, rewarded and incentivized. The project culture is paramount in delivering the project outputs. For example, the attitude of the project manager and that of the sponsor should be similar in terms of motivation, commitment, beliefs, and attitudes. The project manager desires the work to be done within the triple constraints but additionally management the flow of information and offers leadership across the project. The challenges and risks that emerge midway in the project may be monumental if the project overlooks the role of congruence models between the different project elements. The project management discipline borrows a lot from the scientific body of project management work through planning of work activities and work breakdown schedule. Furthermore, planning is essentially scientific especially in the use of Gantt charts and project evaluation review techniques (PERT) which have been consistent in producing credible results in project planning. With tested procedures and techniques, project evaluation and monitoring also uses scientific data collection methods to find out the state of project progression and achievement of milestones. This implies that the project management discipline is close to the scientific body of management. Project management has over the last few decades taken more scientific approaches in planning, implementation and delivery to an extent that it has began to inform various theories. Significantly, project management continues to draw the expert knowledge of personnel and theorists who interact through ongoing and completed projects. As complex projects are engendered each year, new and suitable project methodologies follow suit. Read More