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Project Management Lec 8 Procurement Management

This document provides an overview of procurement management for an MBA program project management course. It discusses understanding procurement, the procurement process in a project environment, developing a procurement management plan, the subcontract process, and managing procurement risks. The procurement process involves 5 cycles: requirement, requisition, solicitation, award, and contract administration. Key aspects of the procurement management plan include the project bidders list, identifying critical items, and interfaces with other stakeholders.

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Mohamed Ahmed
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136 views

Project Management Lec 8 Procurement Management

This document provides an overview of procurement management for an MBA program project management course. It discusses understanding procurement, the procurement process in a project environment, developing a procurement management plan, the subcontract process, and managing procurement risks. The procurement process involves 5 cycles: requirement, requisition, solicitation, award, and contract administration. Key aspects of the procurement management plan include the project bidders list, identifying critical items, and interfaces with other stakeholders.

Uploaded by

Mohamed Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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MBA Program

Project Management

Lectures Prepared by
Dr. Amr A. Elsharkawy

1
Safety Moment

2
Procurement
Management
Lecture 7

3
Learning Objectives
 Understanding Procurement

 Procurement in Project Environment

 Procurement Management Plan

 Procurement Process.

 Subcontract Process.

 Vendor & Supplier


4
Understating Procurement
 Procurement can be defined as the
acquisition of goods or services.
 Procurement (and contracting) is a process
that involves two parties with different
objectives who interact in a given market
segment.
 Good procurement practices can increase
corporate profitability by taking advantage of
quantity discounts, minimizing cash flow
problems, and seeking out quality suppliers. 5
Understating Procurements
 Because procurement contributes to
profitability, procurement is often
centralized, which results in standardized
practices and lower paperwork costs.

 Two basic procurement strategies:


- Corporate procurement strategy
- Project procurement strategy 6
Understating Procurements
 Procurement Planning usually involves
the selection of one of the following as the
primary objective :
1- Procure all goods/services from a single source.
2- Procure all goods/services from multiple sources.
3- Procure a small portion of the goods / services.

4- Procure none of the goods/services.

Make Or Buy decision !


7
Understating Procurements
Example:
Environment ( Macro / Micro ) is a critical aspect in
which procurement plan is decided.
Macro environment : includes the general external
variables that can influence how and when we do
procurement. i.e. , recessions, inflation,
unemployment. As an example, a foreign corporation
had undertaken a large project that involved the hiring
of several contractors. Because of the country’s high
unemployment rate, the decision was made to use only
domestic suppliers/contractors and to give first
preference to contractors in cities.(IKTVA) 8
Understating Procurements
Example:
Micro environment : includes the specific internal
variables with related to Organization / Project
conditions itself.

i.e. Cash Flow Management , Late requisitions shall


affect all project phases ( LL) , special equipment ,
shipping & transportations .

9
Procurement in Project
Environment

Purchasing

Logistics Expediting

Inspection Material mgmt.

10
Procurement in Project
Environment
 Purchase GOODS (equipment, materials,
services and associated information) at the
best conditions to the project :
Purchase
– Obtain quotes from suppliers.
– Make selection together with Technical team.
– Negotiation and contracting of suppliers.
– Post award activities: claims, close-out
Amr Elsharkawy 11
Procurement in Project
Environment
 Ensure on time delivery of ordered
GOODS Expediting

 Ensure a smooth materials flow Mat. Mgmt.

 Quality verification Inspection

 Timely transportation to the jobsite Logistics


12
Procurement in Project
Environment

 Transport know how !

Amr Elsharkawy 13
Procurement Process
 This includes the procurement/contracting
system, which contains 5 cycles:
1- Requirement cycle

2- Requisition cycle

3- Solicitation cycle

4- Award cycle.

5- Contract administration cycle


14
1- Requirement cycle
 Defining the need for the project
 Development of the statement of work,
specifications, and WBS .
 Performing a make or buy analysis
 Laying out the major milestones and the
timing/schedule
 Cost estimating, including life-cycle costing
 Obtaining authorization and approval to
proceed
Amr Elsharkawy 15
2- Requisition cycle (JEXM )
● Bid documents (usually standardized)

● Listing of qualified vendors (expected to bid)

● Proposal evaluation criteria

● Bidder conferences

● How change requests will be managed

● Supplier payment plan


Amr Elsharkawy 16
3- Solicitation cycle
● Request for information (RFI)

● Request for quotation (RFQ/MRQ)

● Request for purchase (RFP/MRP ….. PO)

RFQ STATUS REPORT


17
4- Award cycle
 The objective of the award cycle is to

negotiate a contract type and price that will result


in reasonable contractor risk and provide the
contractor with the greatest incentive for efficient
and economic performance.

 TBE

 CBE Tender Evaluation


18
5- Contract administration cycle
 Managing the subcontractor /vendor until
completion of the contract !

Amr Elsharkawy 19
Procurement Management plan

20
Procurement Management plan
 A documented Procurement strategy is
essential for a successful project execution

 Project Bidders List

 Identification of critical items (long Lead


and/or technical complex)

 Identification of key staff

 Interfaces with client and with other suppliers 21


Procurement Management plan
 Procurement Plan Template

22
How do we measure the added
value of Procurement Plan?
 Money: Cost savings, negotiation result

 Time: Requisition to Purchase Order cycle


time, On time delivery of GOODS

 Quality: No. of inspection remarks


No. of defects (shop or job site)

 Use KPIs Performance Indicators 23


Subcontract ( Contract)
Process

24
Vendor & Supplier
BASIS FOR VENDOR SUPPLIER
COMPARISON

Meaning Vendor is an individual or Supplier is the one whose


entity, who sells goods and work is to provide the good
services for a price to the or service required by
customers. the business.

Business B2C B2B


Relationship
Supply chain link Last First

Objective To sell the goods to the To make the goods available


final consumer. to the people who need it.
Purpose of sale Use Resale

Quantity Small Bulk


provided
25
Procurement Risk Management
 Schedule risks
- Progress payments against completed milestones
- Expediting and progress reporting.

 Quality risks
– Quality and consistency of Requisitions
/specifications
- Inspection and monitoring of supplier/product

quality
26
Procurement Risk Management
 Performance risks
– Liquidated Damages (LDs)
– Performance Bonds / Warranty

 Financial Risks
- Bank Guarantees included in Purchase Order.
- Cash flow management (in/out Payment )

 Logistics Risks
27

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