Procurement Management Plan
Introduction
In this concurrent world no firm can manufacture the materials required to complete a big project. Therefore, to fulfill this requirements companies prefer to purchase them from outside (Katikar, 2013).Finalization of any vendor for completing the specific task and evaluation of their performance plays important role to increase the efficiency of the project (Araujo, Alencar & Mota, 2017). To manage the above said project team focuses on “Project Procurement Plan”. This can also include the contract to be used and risk management issues.
Make or Buy Decisions & Desired outcomes.
Make-Buy is one of the Tools and Techniques in the Procurement Management knowledge area. This analyzing process we help project team and sponsors to figure out whether they should do the work by self or contracting the work.
Factors to consider deciding on Make or Buy –
Make decision
- Less Costly - It makes sense if the making of material in house cost less rather than procuring from supplier.
- Integration in system – If the material fit or integrate easily in the current system, then select make option.
- Unreliable Suppliers – Suppliers available in the industries are unable to serve the services or product and not of trustworthy.
- Resource Utilization – material manufacturing within the company will increase the use of many and other resources to their available bandwidth.
Buy Decision
- Less Costly
- Suppliers Skill-Having high skill to manufacturing the material.
- Vendor option-Get more than one vendor on board
- Learning platform – it creates reverse engineering opportunity for project team member and can learn more from supplier expertise.
Apart from the making and buying team can also consider renting or lease the material but this can be applicable only to heavy equipment especially if they are to be use only once in a project. Before finalizing the Make or Buy Decision a Project manager and his team should consider the impact of the constraints like scope, budget, schedule, and quality.
Here I would like to share my own experience, currently I am working in INFOSYS LTD. In Green initiative team as an Electrical Engineer. In 2018, me and my team were working on a Server room retrofitting project. Once we finalize the design of our project we proceed further on procurement. In IT company material are not manufacture therefore we didn’t have any other option left to buy goods and services from our available vendors. We ask multiple vendors to share their best quotation to us on the material. Our purchase team finalize the material rate and offer a purchase order to a vendor.
There are different types of project procurement request that a procurement personnel should understand –
- Request for Information (RFI)-Helps to determine the product’s information, services potential, and capability of seller.
- Request for Quotation (RFQ) – It includes prices of material and services and helps to select the bidder.
- Request for Proposal (RFP) – Used at initial stage of project to invite and inform bidder about project to submit a proposal to client.
The desired outcome of procurement plan is to increase the effectiveness, success, and transparency. Also helps us to proceed further in project to describes how products or services will be procured and how vendors management system needs to examine.
Balance of risk of the buyer and seller.
It is very essential to identify risk involves at each phase of project from buyer side as well as from seller side. Contracts can be used in planning stage to balance the risk, but it differs by the ways in which risk is distributed.
Following are the types of contracts and to balance the risk it is observed by seller or buyer-
- “Firm fixed price”-Seller
- “Fixed price incentive fee”-Seller
- “Fixed price economic price adjustment” -Both
- “Cost plus incentive fee” -Buyer
- “Cost plus award fee”- Buyer
- “Cost plus fixed fee”- Buyer
- “Time and material” - Buyer
Even in my organization most of the work are outsource only maintenance work is taken care by in house team. Therefore, our purchase and finance team always prepare a document called Purchase document in which each term related to project are Clearly mentioned for both the parties. After the agreements on every point this document is generated to both for signing it digitally.
Potential sellers of needed products and services.
To finalize the seller, first prepare the list of material required to finish the different work packages in work breakdown structure. Preparing list of requirements for outsourcing. Such list is integrated to RFP-Request for proposal (Yeow and Chua, 2012). This proposal is basically an invitation to all vender partner to share a document detailing how and at what cost vendor can complete the work. Project team members need to evaluate each vendor and their proposal. Evaluation can be based on below factors-
1. Innovation (Commitment and Responsiveness, Suitable technical capabilities, and skills & Provide ideas to buyers)
2. Quality (Compliance with buyer's requirements, Performance)
3. Support (Inform for any changes, respond to requirements, and Access expert advice)
4. Delivery (Material on time, Support supply chain and effective system utilization)
5. Cost (Prices competitive, Reduction and transparency in prices).
In conclusion I would like to say that all the evaluation, assignment, performance review plays an important role to select the potential suppliers for project.
References-
Araújo, Maria & Alencar, Luciana & Mota, Caroline. (2017). Project procurement management: A structured literature review. International Journal of Project Management. 35.
Katikar, Rajendra. (2013). COST ANALYSIS FOR 'MAKE-OR-BUY' DECISIONS FOR MANUFACTURING INDUSTRIES.
Yeow, Adrian & Chua, Cecil. (2012). Managing the RFP Process from a Discursive Perspective.
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