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20 MAY, 2019
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Manage IT Projects Research Report
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Manage IT Projects Research Report
INTRODUCTION:
Procurement management is a concept that is familiar to just about anyone who has worked in the
business environment. Procurement Management is one of the ten knowledge areas of project
management. Procurement Management plan involves managing the process of acquiring outside
project resources to produce project deliverables. procurement comprises all activities and processes
involved in acquiring needed goods and services from external parties. This may include everything
from office supplies, furniture, and facilities to heavy equipment, consulting services, and testing and
training. Failing to plan the procurement schedule or process is one of the most-costly mistakes that
can be made because the entire project can be brought to a halt if products or materials aren’t
available when needed. Successful projects required detailed scheduling and excellent timing to
maximize efficiency. The project manager will need to oversee the procurement planning process to
ensure that a purchasing failure isn’t responsible for harming the project.
PROCUREMENT PROCESS:
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Figure 2: Project Procurement Management: Six Distinct Processes
Project management for procurement purposes is an essential part of supply chain management.
The key steps for a successful process involve are listed below:
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necessary for ensuring smooth procurement processes. Over time, it may become necessary
to makes changes to procurement contracts as your needs shift.
Project manager is involved in this procurement, same as other aspect they control in project
management process. However, this is a process they might not own with the same authority as
other parts of the project.
While the project manager does have the authority to make agreements with contractors on behalf
of the company, the project manager is often not the person who administers that contract once in
place. Regardless, it’s important that the project manager is in the loop. That implies knowing the six
procedures with the project procurement management knowledge areas as outlined in the Project
Management Body of Knowledge (PMBOK).
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bidding for the goods or products requirements by the vendors in the market and use choice criteria
to select the best one from the lot.
The next step involves calling for bids and the different suppliers will provide their respective quotes.
This stage is quite like choosing projects, as the company needs to consider various and different
criteria’s, apart from just the cost, to finally select the supplier for the requirement of the goods and
products.
Aftermath the evaluation process, the company management can select and shortlist the best
supplier followed the next step of discussing the exact nature of the requirements and the related
terms and conditions such as payments, delivery timelines, and other crucial ones to avoid any sort
of discrepancies in the future.
It is important to maintain good relationship with supplier and formulate the agreement that meets
requirements and satisfaction levels of both parties. This step helps in the sustainability factor of the
businesses of both the parties involved.
PROCUREMENT METHODS
There are six procurement methods used by the procurement team in a company. The actual names
of these could vary depending on your company and industry, but the process remains the same. The
six times of procurement are open tendering, restricted tendering, request for proposal, two-stage
tendering, request for quotations and single-source procurement.
OPEN TENDERING:
Open tendering is shorthand for competitive bidding. It allows companies to bid on goods in
an open competition or open solicitation manner. This method encourages effective
competition to good value on money.
RESTRICTED TENDERING:
Unlike open tendering, restricted tendering only places a limit on the amount of request for
tenders that can be sent by a supplier or service provider. Because of this selective process,
restricted tendering is also sometimes referred to as selective tendering.
REQUEST FOR PROPOSALS (RFP):
Request for proposal is the term which is common in business world. Managers receive the
RFP from potential clients all the time when client is seeking a new position to be filled.
Similarly, in the procurement world, an RFP is a method used when suppliers or service
providers are proposing their good or service to a procurement team for review. If you’re a
supplier, understanding the ins and outs of quality service management is key to winning
your bid.
TWO STAGE TENDERING:
Two stage tendering are done under two process. Each one of the procurements has two
stage process. The first procedure is very similar to RFP method as discussed above. The
procurement team receives a proposal with two envelopes- one with proposal itself and one
with associated financial information.
The second type of procedure is also similar but instead of the bidder submitting a fully-
completed technical proposal, a partial proposal is submitted. the highest qualified bidder is
selected, they will be invited to submit a thorough technical proposal along with a financial
proposal. The technical proposal will be evaluated, and only then will the financial proposal
be opened. The combined score of both the technical proposal and the financial proposal are
the grounds on which a bidder is contracted.
REQUEST FOR QUOTATIONS:
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This is a least complex procurement method which is used for small-valued goods or
services. There is no proposal or draft needed which makes it fast procurement process. In
this method a procurement entity chooses three minimum suppliers or service providers
they wish to get a quote from. A comparison is of quotes is analyzed and best selection is
determined.
SINGLE -SOURCE:
Single source procurement is a non-competitive method that should only be used under
specific circumstances. This process occurs when entity intends to acquire goods or services
form a sole provider. The circumstances which call for this method are:
a) Emergencies
b) If only one supplier is available and qualified to fulfill the requirements
c) If the advantages of using a certain supplier are abundantly clear
d) If the procurer requires a certain product or service that is only available from one
supplier
e) For the continuation of work that cannot be reproduced by another supplier.
CONTRACTS
An agreement between the organization and an outside provider of a service or materials is a
contract. In the procurement contract there would always minimum two parties. One who request
for services, and the other who sell the services. To limit misunderstandings and make them more
legally binding, contracts are usually written documents that describe the obligations of both parties
and are signed by those with authority to represent the interests of the parties. The contract plan
characterizes the connection between the project and the subcontractors (supplier, merchant, or
accomplice) and furthermore characterizes a procedure for making changes in the consent to suit
changes that will happen on the project. This change management process is like the change
management process used with the project agreement with the project client.
The choice of contract type is a critical issue for both the buyer and seller. It is something which
should build on the consideration of many factors. Some of the more important issues to consider
would include the life cycle of the project, the known risks facing the project, technology challenges,
and of course, the ability of the project to describe what it wants to buy, without later changing
these requirements
The contracting plan of the project supports the procurement approach of the project. The following
are some factors to consider when selecting the type of contract:
The fixed-price contract is a legal agreement between the project organization and the contractor to
provide goods or services for a price which they both agreed on. The contract usually details the
quality of the goods or services, the timing needed to support the project, and the price for
delivering goods or services. The risk is higher on the seller as the seller needs to absorb any
omissions, reworks, inflation and other external risks. The buyer has the least cost risk, because the
scope is well-defined. A clearly defined scope of work complemented by competitive bidders helps
control pricing. Sellers base their bids on the procurement statement of work (SOW).
However, there are few types of fixed price contracts that vary a little from this definition based on
the nature of the requirement of contract:
In a cost-reimbursable contract, the organization agrees to pay the contractor for the cost of
performing the service or providing the goods. Cost-reimbursable contracts are also known as
cost-plus contracts. The risk is higher on the buyer as the buyer needs to bear the risk of over
budget. For example, completing the code for a new app. Although many apps have been
created before, there is not an absolute template on how long the it takes to create the correct
code.
Eventually in time and material contracts, the buyer pays for the seller labor cost as well as
additional cost for the material required in the project. This is a combination of fixed price
and cost reimbursable contracts. Let me explain how.
The time says that the buyer pays the seller for the cost of the labor. Meaning the buyer pays
for seller for the effort (number of hours) spent on the project.
The material part is about the all the non-manpower expenses in the project. The seller
provides invoices for these expense to the buyer to release the amount for the non-
manpower expenses. When both buyer and seller both are not have full clarity about the
scope, T&M contract will give better results.
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