Procurement Process, Research Paper Example

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Research Paper

The project management lifecycle is the lifecycle of a temporary endeavor that provides a good or service.  The entire project requires multiple levels of control, planning and leading of resources to achieve the specific goals and objectives outlined through the scope of the project.    The typical lifecycle of a project goes through multiple phases which have specific entry and exit criteria.  These phases are initiating, planning, execution, monitoring and controlling then finally closing.  I am tasked with providing the guidance and project leadership for the procurement function of the project.  In order to fully understand the impact of procurement management it is imperative to understand where procurement activities reside as well as their impact throughout the project lifecycle.

The procurement management activities are vital to the success of this project.  The procurement process will determine which goods or services are wither purchased from an outside entity or provided internally by company resources.  Once a decision is made to either “make or buy” the product or service there are other areas that the project manager responsible for the procurement management portion of the project.  These include the vendor selection process, proposal management, contract negotiation, and contract award.  There are multiple decision points that occur from the outputs of other portions of the project management methodology.  The procurement management process takes the outputs of the initiation phase, such as the project definition, requirements and project charter (Cooper, Grey, Raymond & Walker, 2005).  The project lifecycle’s phases build off of each other so that each section supports critical decisions that will be made in latter parts of the project.  Understanding the requirements that were built in the beginning of the project will allow the procurement manager to communicate the needs of the business to the suppliers.  The procurement process will integrate into the rest of the project due to the simple fact that the outputs and work effort that was performed in the initiation phase directly correlates to the inputs needed to perform the procurement functions.  Once the procurement functions are completed this will result in a need for management and controlling of both internal work efforts and supplier product or service quality and delivery (Project Management Institute, 2008).  The management and controlling phase is the next phase of the project lifecycle and requires the outputs and actions of the procurement manager in order to obtain the goals and objects set forth for the project.

By following the proper project management methodology and utilizing the guidelines set forth there is a significant reduction in risk to the project’s success.  This is accomplished by ensuring that key actions are taken and removing the possibility of human error by utilizing a guideline with required inputs and outputs to progress through the lifecycle.  The benefits extend across the entire project by allowing a consistent project methodology across the different functions and allowing cohesion and communication between team members.  Without the structure of the project management methodology the project becomes an ad-hoc adventure without structure or clearly defined or achievable results.  Using a project management methodology will provide clear processes for managing the project which allows the expectations to be understood and the project member will understand what their efforts are being applied toward.  By using the methodologies the needs and outputs are clearly defined which allows the project members to understand what they are delivering and what the customer will receive at the completion of the project.

Project procurement management occurs in four out of the five process phases within the project lifecycle. Some of the inputs from the initiation phase which are needed include: the scope statement, requirements, cost estimates, risk documentation and project schedule.  This sets the stage for what type of goods or services will be procured.  The processes which will be utilized in this plan to purchase the new scheduling tool include: the “make-or-buy analysis”, creation of the procurement management plan, procurement documentation, source selection, and contract execution.  All of these processes are critical to conducting the procurement of the scheduling tool.  First the team must understand if the company should make the tool or source it out to another company.  Once that is decided the process kicks off the creation of the procurement management plan that brings together the entire procurement process and encapsulates the function in a document that will be used throughout the process (Fleming, 2003).  The contract negotiations and vendor selection require clearly defined requirements, understood deliverables and relationship management on the part of the procurement project manager. Contract negotiation and selection require skill and finesse to create the perfect balance between cost, quality and schedule.

In order to negotiate the right contract the initial contract type needs to be selected.  The scheduling tool has firm requirements and a known deadline for implementation.  In this project we would drive toward a firm fixed price contract or possibly a fixed price with an incentive fee.  The fixed price contract basically states the total amount of resources we are spending for a given set of requirements.  The responsibility falls directly on the buyer to clearly define the requirements and the seller for understanding the statement of work provided.  The risk is put on the seller if their product does not fully meet the defined requirements.  The advantage for a fixed price contract is that the cost is known from the very beginning.  The major disadvantage is as the project moves forward if costs start to exceed the sellers profit threshold they may take actions that are not in the best interest of the buyer.  If the risk is too high for the seller on this type of contract there is another option to limit some risk on both sides.  These types of contracts are called Time and Material.  This contract type is used when the level of effort to accomplish the tasks or requirements is unknown and the contract duration is brief.  The down side is that the seller does not have an incentive to control costs.  This is a good choice when you are hiring people to fulfill a certain need.  In this case we could hire programmers to create the scheduling tool based on our needs.

References

Cooper, D. F., Grey, S., Raymond, G., & Walker, P. (2005). Project risk management guidelines, managing risk in large projects and complex procurements. John Wiley & Sons.

Fleming, Q. W. (2003). Project procurement management: Contracting, subcontracting, teaming. (First ed.). Tustin: FMC Press.

Project Management Institute, P. M. (2008). A guide to the project management body of knowledge. (4th ed.). Newtown Square: Project Management Inst.

Turner, J. (2003). Project contract management and a theory of organization.  Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=370900

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