Procurement, Research Paper Example

There was no procurement or contract strategy plan and the project failed.

Case Study – The US Census Bureau

The US Census Bureau  faced over $2 billion in cost overruns on a major IT project that was aimed at replacing old data collection methods with new computerised hand held devices for the 2010 Census. The Bureau failed to implement or complete an overarching strategic plan. This subsequently leading to a failed project. The project identified significant procurement management problems but the lack of a properly formulated strategy was the prime cause of failure. Significant areas were pointed out as having failed i.e. A lack of proper cost analysis for the project, sensitivity analysis and the key drivers; a lack of understanding of procurement management and the associated risks.

A properly formulated strategy would have gone a long way in terms of formally structuring the management of the project and preventing hidden agendas and the management failing to implement the organizations basic mandate.  Subsequent analysis illustrated areas of incompetent management, conflicts of interest and poor decision making process.  It is clear that the lack of strategic planning failed to place the required internal controls to prevent the huge waste of surplus spend.

A significant proportion of the blame was levelled on the prime contractor – Harris Corp’n. They were awarded the $600 million contract to develop all of the handhelds and the software that supported them.  Nevertheless, the Census Bureau really only had themselves to blame for inadequate management and planning of the project.  Resulting failure causes the Census Bureau to abandon the project and resort to another paper census, thereby adding insult to injury and wasting even further money.  (Krigsman, M. 2012)

The procurement or contract strategy plan was inadequate and the project failed

Case Study – Maine’s Medicaid System

This project involved the transition from a legacy system to that of a new web based system that would process Medicaid claims. The piecemeal approach to both procurement and strategic planning caused the project to fail. This subsequently resulted in lack of compliance with the Health Insurance Portability and Accountability Act; thus Main is now the only State in the Union that has noncompliance with the Act. Further it created systems failures resulting in nearly 300,000 patients being denied medical treatment and ended up in diminishing Maine’s Credit Rating.

There was a whole catalogue of mistakes identified from the post mortem of the system implementation.  These included such items as : building a complete system from scratch without having proper technology or planning in place, lack of over-arching strategic planning guiding the management process, failure to meet deadlines, unrealistic procurement processes, hiring contractors with no experience in the business, lack of project management, inability to integrate merger considerations ( another strategic planning issue), lack of risk management and no disaster recovery procedures or back up plans in the event that a crisis happened.

The blame must really reside with the CEO and Senior Management team in allowing such a major and significant project to proceed without the overall adequate strategic planning in place. It creates the analogy of a ship without a rudder.  Planning is fundamental to the success of any project.  You need the required controls in place and the mechanisms for achieving the goals and objectives on time, within budget and within the scope that has been identified. (Mannas, J. 2012).

The procurement or contract strategy plan was inadequate and the project was eventually completed.

Case Study 1997 Leakage of Waste Containers, Kingman, Arizona

This related into an investigation conducted by the State of Nevada into low level radioactive waste spillage from leaking Department of Energy (DOE) transportation containers.  This being part of a project transportation contract shipping nuclear waste materials from Ohio to a test site in Arizona. The firm was criticised for its inability to handle the associated risks and potentially put people at risk from radiation exposure.

In the subsequent investigation it was the lack of an adequate procurement plan that came in for the most criticism. The lack of acquiring proper containers that were proven to be watertight for the transportation of this type of hazardous waste. They failed to follow the blueprint of the prototype for the required containers.  This was compounded by design flaws that were identified in the existing containers that were used. The DOE were also criticised for not understanding the nature of the substances being carried and taking adequate steps to prevent contamination or leakage.  Further the number of contractors came under scrutiny and were criticised for either lack of compliance to health and safety requirements.  This was compounded by the lack of safety protocols and measures to take action within DOE.

The report prepared by the Executive Director (Robert R. Lou) from the State of Nevada to the DOE was a damning indictment of inadequate planning and procurement procedures being put in place in a high risk environment.  The DOE were seen to be responsive to the investigations report and followed up with a series of corrective action statements. (Loux, R. 2012)

Conclusion

Many business organizations do not implement formal planning procedures. This often results in more rigid and inflexible processes and procedures. This practice in turn negates proper strategic planning and strategic thinking in the Executive decision making process. Fluctuating demands by key stakeholders have inserted a lack of direct control over resources and introduced a level of ambiguity over processes.  The concept of ambiguity effects on planning has not been well defined, with specific emphasis on commitment and legitimacy. The emphasis on the use of resources in planning is important because it adds both commitment and legitimacy to the strategy used for resource acquisition in planning. (Mitsuishi, M. 2008)

The distinction between legitimacy and commitment is that legitimacy is derived from that of external groups and institutions.  Individuals must view themselves as accepted participants in an organisation, if they are to accept the organisation and thus legitimise that organization.  The concept of commitment functions at the individual level.  The problem for Management is to meet the challenges of both concepts. Legitimacy acquisition requires goal and objective setting and therefore a formal planning framework in order to accomplish same.

Recent studies have illustrated that under 50% of business samples had little formal processes that extended beyond basic accounting procedures.  With those that failed to plan the business environment was perceived as irregular, haphazard and clumsy.  Effective strategic planning is considered of vital importance to non profits. Without proper planning procedures in place the organization will quickly become non viable.  The strategic plan provides the vision to the organization, the business plan outlines the goals and objectives and how these will be delivered. The operation plan demonstrates how well these services have been articulated and how the finding will be allocated in order to provide these services.

References

Krigsman, M. (2012, 7 12). Billion $ IT failure at Census Bureau. Retrieved from ZD Net: www.zdnet.coméblogéprojectfailuresébillion-dollar-it-failure-at-census-bureaué660

Loux, R. R. (2012, 7 12). Comments on DOE Strategic Plan. Retrieved from Office of the Governor, State of Nevada: http://www.state.nv.us/nucwaste/nts/loux02.htm

Mamoru Mitsuishi, K. U. (2008). Manufacturing Systems and Technologies for the New Frontier: . In K. U. Mamoru Mitsuishi, Manufacturing Systems and Technologies for the New Frontier: (p. 131). Tokyo: University of Tokyo.

Mannas, J. (2012, 7 12). Project Failure Case Study : Maine’s Medicaid System. Retrieved from PM Think: http://www.pmthink.com/2006/04/project-failure-case-study-maines.htm.