Procurement: Management and Risks, Essay Example

Abstract

A procurement management plan sets forth processes and guidelines that are to be followed to ensure satisfactory and measurable performance and activity against contractual obligations. This document illustrates the functions and activities needed for CFO and senior management groups to manage the project.

Identification

This is a procurement plan for the CFO and the senior management project that will help in the integration and the procurement of scope and risk template data in building a project management plan that will take into account all the prior activity work. The CFO and the senior management are trying to understand and possibly be able to quantify the impact that the procurement process will have on the overall project completion and success (Fleming, 2003).

Purpose

The purpose of this plan is to quantify the roles, processes, responsibility, personnel (experience), and tactical steps to be used in carrying out the project. The plan aims at categorizing what the project will procure, when the procurement will be made, the budgeting for each procurement, and the issues that may affect procurement. It also aims at analyzing how the management will support the project (Fleming, 2003).

Status And Schedule

No Periodic Updates Of These Documents Are Planned.

Managing Risk In Procurement Process

Procurement, especially in public sectors, demands the highest integrity. The slightest inconsistency or error in conducting procurement activities or processes leads to accusations that may lead to being unprofessional or be proved without merit. This can cause lasting and significant damage to the reputation of the procurement agency (Pride, W. M & Ferrell, O. C. 2010).

One of the most important steps that a procurement agency can take to carry out a risk assessment, within its processes and organization, is to identify areas of concern, i.e. areas of high risk or weakness in the procurement. Performing this analysis facilitates actions that have to be taken to correct deficiencies or other greater issues in the future (Blakeman, R. 2007).

One technique to handle this is to use and develop a checklist to analyze how well the agency is in compliance with the ethical and law standards  (Fleming, 2003). This checklist can be used to identify different unethical practices such as corruption, embezzlement of funds, and fraud, by guiding the staff throughout the procurement process in a more effective and transparent way while helping to report and detect different irregularities (Gregson, A. 2009).

With the use of this checklist the organization is in a position to identify any possible suspicious case, irregularities or difficulties in the procurement process.  The checklist should also include some of the agency’s rules and regulations, as well as the law itself. They are developed in different phases of the contractual cycle and they cover different risks that are involved in the process (Fleming, 2003).

Mapping Procurement Risks

The most important steps in the risk assessment is to map different risks associated with various categories of the procurement process, as well as different stages of the cycle (Blakeman, R. 2007). By this mapping, the areas with red flag should be taken seriously to make sure that detection is made in case of irregularities. Here is an example addressing the main phases of the process, together with the inquiries to determine unacceptable risks in each stage (Fleming, 2003).

Phase 1: Procurement function 

An analysis is done by looking at the legal basis for the operations and existence of the procurement agency, considering issues and elements such as (Gregson, A. 2009):

Are the procurement agency’s legal bases and operations in accordance with the law?

Are all the operations documented clearly and well-organized and in a fashion acceptable by law (Blakeman, R. 2007)?

Are all the financial procurements openly and clearly stated in accordance with the budgetary requirements, regulations and law?

Are all procurement activities done in a transparent manner and are well documented?

Is the procurement process monitored by the relevant bodies (Blakeman, R. 2007)?

Phase 2: Preparation of the procurement.

In order to prepare for procurement, it is necessary to take specific procedures to prepare the contract or purchase. Review the specific requirements of a contract of purchase from a financial and legal pint of view. Also take various elements to ensure fairness, transparency and accountability (Fleming, 2003). The questions to be addressed to are:

Are there special regulations available, especially if the finances are coming from restricted sources?

Are the tender documents transparent, comprehensive and free from conditions and restrictions?

Has the contract value been calculated accurately?

Are there provisions for alternative tenders (Blakeman, R. 2007)?

Is the description for the services or goods being acquired, adequate to needs and other legal requirements?

Phase 3: The choice of procedure

This phase evaluates whether the procedure is appropriate and correct for services and goods being acquired. Sometimes, agencies fail to weigh the difference between leasing and buying through cooperatives, which would result in saving the costs incurred. Some of the questions considered are: (Blakeman, R. 2007)

Were the alternative procedures weighed?

Did the public comment on the adequacy of the procurement procedure?

Did it ensure transparency and fair competition?

Categories Of The Procurement Management Plan

Purchases Of Shrubs, Bricks, And Tiles

In procurement, materials are purchased in reference to the cost of the contract. This is to ensure that very expensive contracts are not equipped with low quality items because they may be faulty or not up to the standard (Fleming, 2003).  Another reason is as a result of law and ethics. It is not ethical to purchase bricks worth $2.1 per piece while the records in the financial books show that the purchase was something different from that. That may lead to compromising the integrity of the procurement agency and thus making it loose its popularity. In the purchasing process, one should also be keen to avoid overspending, which would lead to losses to the part of the management (Gregson, A. 2009). With this knowledge, the management will be very cautious in dealing with purchases. The acceptability of the products by all parties should be ensured to facilitate fairness and satisfaction. “Buy or make analysis” should also be taken to make sure that the costs incurred are minimal (Blakeman, R. 2007).

When Procurements Will Be Made

The procurements are made after all the plans have been laid down and other subsequent analysis carried out to avoid deficiencies in the level of performance. Procurement management should not rush because the task is quite sensitive and would lead to loss of trust or otherwise may cause the agency to look unprofessional (Fleming, 2003).

Budgeting For Each Procurement

The budgeting process should be taken with a lot caution, putting in place different consideration, for instance, bulk purchase in case of a long term task to avoid the budget been constrained by changes in the economy (Gregson, A. 2009). The budget should be fair to avoid overspending or overallotment of resources. The process should be carried out by a financial analyst or consultant to ensure that everything runs smoothly and all the correct decisions are made. The management should also evaluate the ‘make or buy analysis’ to target cost minimization (Gregson, A. 2009).

Implications And Recommended Actions

In the implications ad recommendation section, one should look at the significant processes and controls weakness in the procurement management plan (Blakeman, R. 2007). Having calculated the level of expenditure, potential financial leakage, the impact on profitability as well as the risks associated with the supply of goods and other services, potential implications should be given more attention because they are very serious (Fleming, 2003).

The Senior Management Should Consider The Following

Carry out a transparent and comprehensive assessment of the procurement process to evaluate the managements’ capabilities to avoid entering into a task that is beyond their strengths (Gregson, A. 2009).

Identify the intermediate short-term steps to be addressed, and later put the necessary actions and resources behind those short-term actions (Blakeman, R. 2007).

Set clear, objective, strategic and operational performance and objective expectations for the firm’s procurement management process. Without such a vision or target, it is always difficult to carry out a task in procurement, as well as meeting the desired level of performance (Gregson, A. 2009).

Develop, design and implement strategies and detailed integrated action plans to meet the desired level of process maturity and performance.

Identify and analyze the executive management support to help in the process of making improvements as well as including actions in the plan to meet them and maintain that capability, and also help in the covering of immediate, short term, middle and long term horizons (Pride, W. M & Ferrell, O. C. 2010).

It is also necessary to take appropriate steps to meet the mid to long term investments in procurement management process while being cautious of the managements’ capabilities. These investments should be used to modify the policies, practices, strategies as well as organizational tools, and to upgrade the performance and other controls (Fleming, 2003).

Conclusions

Research provides convincing evidence that helps in the process of carrying out a task. Procurement management plan can do best if a detailed research is carried out on different factors that affect the process, that is, from financial resources to human resources and other factors in between (Gregson, A. 2009). A good plan is one that is within the capability of the parties involved. This ensures that a process has not begun and after a while, the finances turn out to be inadequate for meeting all the needs of the project, leading to poor quality output or incomplete projects (Blakeman, R. 2007).

Procurers should aim to be people of integrity as they are fully entrusted with the duty of purchasing and carrying out all other duties that revolve in and around contracts. They should ensure they meet the needs of their bosses to prove that they are professional in their duty (Gregson, A. 2009). This will reduce extra costs incurred in hiring more professional personnel or loss of reputation which is very crucial in their field. In the above management project, the management should ensure that all the steps are followed to achieve the targets. All the risks involved should be evaluated and solutions should be ruled out to ensure that all the objectives are met within the required time (Fleming, 2003).

References

Fleming, Q. W. (2003). Project Procurement Management Plan. London: Fmc  Pr.

Blakeman, R. (2007). Integrated Marketing Communication: Creative Strategy from Idea to Implementation. New York: Rowman & Littlefield Publishers.

Gregson, A. (2009). Pricing Strategies. London: Jaico Publishing House

Pride, W. M & Ferrell, O. C. (2010). Foundations of Marketing. New York: Cengage Learning