Wk 3 - Procurement Planning Paper
Qiana.Reynolds
Procurement_Planning_ProcessSample.docx
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The goals of this procurement planning process information paper are to describe the project procurement planning process. Some of the goals are to identify the most valuable output of the plan procurement process and explain why I believe it is most valuable. It will explain the various contract types and describe who, buyer, or seller has the most risk for each contract type. Also, it will explain methods that can be used to mitigate the risks for each contract type. Another goal for this procurement planning process information paper is to develop a project monitoring process to track procurement orders for a project. This procurement planning process information paper will describe a source selection criterion that would be applicable to any project. Analyzing the ethical concerns that should be considered when identifying source selection criteria will further be included in this procurement planning process information paper. The final goal is to explain the role of risk management in the procurement planning process.
The procurement planning process is essential to a project and key phase in project planning. “The project manager is tasked with developing a plan for obtaining everything required to carry out project work activities and in doing this, needs to make several decisions on how to best use available organizational resources” (Wilson, 2015, "4.2 Project Procurement Requirements"). Procurement planning should be developed at the same time of creating a project’s preliminary budget, which is established during the planning phase of the procurement process. “Another important element in evaluating procurement requirements are the details of each requirement” (Wilson, 2015, "4.2 Project Procurement Requirements"). Project managers usually make mistakes when evaluating details of each requirement. This is vital not only in the initial phase of any project, but throughout all phases. Sometimes the resources required for an organization’s project are employees of the organization. An organization’s employees are great resources because they may possess the necessary experience, knowledge, and skill in order to support the project development. Also, company employees who have the necessary skillset for assisting in project development will alleviate the additional cost to pay external resources to perform the same work on the project.
The most valuable output of the plan procurement process is creating and establishing a project management plan (PMP). In this phase of project development, it is vital to assess the requirements of a business’ future endeavor. It is the responsibility of the project manager to identify project particulars, which will reflect provisions, essential plan fundamentals, skillset requirements of a specific resource, and whether it is better to employ company internal resources versus spend additional funding obtaining external resources.
It is my opinion; the most valuable output of the plan procurement process is to establish and implement a PMP. A PMP has many components. “It is a document that defines how a project is executed, monitored, and controlled; it is much more than a schedule chart” (Simplilearn, 2020, para. 1). Information in the PMP is critical for a successful project to fully accomplish the objectives and goals of the organization investors’ deliverables and meet their expectations on the agreed upon schedule. A project charter, work breakdown structure (WBS), and a project statement of work (SOW) are necessary areas of the PMP. Additional areas of the PMP are a customer specification document, activity information checklist, network diagram, and bill of materials (BOM). The project charter should be established in the initial phase of a project. It defines the objective and will outline specific information regarding project requirements of its deliverables. A customer specification document is the key foundation of information for project development. It lists all components of the project’s deliverables in a sequenced WBS. It is crucial to review this document with its stakeholders for clarity and verification of their expectation of deliverables. The project SOW document should be created in the initial phase of a project as well. It defines specific project deliverables. The SOW is “used as a primary source of procurement information if a customer specification was not available. The project manager should take caution and ensure that the SOW has been developed and interpreted correctly to reduce the chance of error in procurements” (Wilson, 2015, "4.2 Project Procurement Requirements"). The WBS is a hierarchical reflection of all the work requirements in a project in terms of deliverables. Work requirements of a project must be performed in order to produce these deliverables. When developing a WBS, it is vital for the project manager to start at the highest level with all product necessities. An activity information checklist are specifics of the overall work, essential resources, calendar necessities, and budget estimates to include the identified potential project risks. The network diagram follows a WBS and activity information checklist. “This is important because in many cases activities can be done simultaneously or in parallel, and some activities have to be completed before the next activity can start” (Wilson, 2015, "4.2 Project Procurement Requirements"). Finally, the BOM document is created as a defined project deliverable list to use during execution of a project. This document is important because it discloses to the project manager all required procurement materials that are warranted and justified.
There are various contract types utilized in project management prior to the start of a project development. Contracts differ in scope and intricacy. All entities invested are known to have their legal advisors review the contract because of the legalities of contract jargon as it is a legal, binding document. Contracts are implemented to ensure all parties involved understand the project requirements and expected deliverables of the investors, resources and materials required, specific and special requests, and equipment needed to begin and complete a project. According to Wilson (2015), “there are three primary categories of how contracts can be structured; fixed price, cost reimbursable, and time and material” ("4.4 Contract Strategies"). Two of these contract categories have three add-on subcontract categories; time and material contracts are stand-alone. The primary contract categories are fixed price contracts, cost-reimbursable contracts, and time and material contracts. Fixed price contracts are fixed total price contracts. “The seller needs to calculate all of the time, resources, and materials required to fulfill the requirements of a deliverable outlined in the contract as well as any profit margins and risk contingency monies that would normally be factored in to establish a single fixed price. The seller is obligated to perform all the duties outlined in the contract for the fixed price regardless of any inaccuracies in the seller’s estimates. The buyer is at an advantage because he obtains the product or service at a fixed price under the terms of the contract and can factor both the cost and schedule of this procurement into a project plan” (Wilson, 2015, "4.4 Contract Strategies"). Cost reimbursable contracts are exactly how they are titled. “the seller wants to be reimbursed for any actual costs incurred in fulfilling contract objective obligations. It additionally includes incentive and award fees as add-ons for measurable performance. Sellers typically use this type of contract because products or services incur large sums of financial outlay; the seller wants to manage cash flow and immediately reimbursement. The seller will not commit to a fixed price because the risk is too high for the seller to cover any errors in cost estimating without enough information on critical purchases or special orders. Time and material contracts consent to seller reimbursement of cost incurred on materials. It requires the buyer to pay a pre-negotiated rate for time incurred in completing the contract objective. Subcontractors keep track of all time worked and bill the buyer as materials are being purchased. Contractors prefer this type of contract, as it shifts most of the risk to the buyer, allowing the seller full reimbursement on materials and a seemingly open-ended schedule for completion” (Wilson, 2015, "4.4 Contract Strategies").
Methods that can be used to mitigate the risks for each contract type are to establish the related risks to each item and create a response plan fitting for each risk item. A strategy response should be jointly developed by the project manager and the procurement department. A strategy response summarizes all mandatory acquisitions and agreements.
The purpose of a project monitoring process to track procurement orders is to avoid procurement acquisition wastefulness in addition to overseeing and monitoring purchases. This process is done by identifying procurement requirements for all project planning, which entails project purchasing agents are aware and understand the exact specifications of the necessary supplies, equipment, and tools listed on a procurement requisition form. Additionally, project managers should create and implement cautionary prompts regarding possible problems of procurement data that can delay project development due to incorrect procurement purchases.
Source selection criteria will consist of supplier abilities, size, delivery, pricing, lifespan warranty, and technical knowledge of a project contract. A source selection criterion that would be applicable to any project would be the management approach. The management approach criteria describe if the seller is reliable to establish and produce management methods, which will guarantee successful project deliverables.
In my professional experience, analyzing the ethical concerns that should be considered when identifying source selection criteria are imperative because violations are known to happen and exist with project acquisition contracts. Some areas to identify are fraud, conflict of interest, and exploitation. One particular violation is personal gain, which is considered a conflict of interest. This means awarding a contract to a company or having personal involvement with the awardee for personal financial gain.
The role of risk management in the procurement planning process is to minimize supplier selection risks. Risk management in the procurement planning process assists businesses by assuring the purchasing and supply operations are steady and consistent. According to "Importance of Risk Management in Procurement"(2019), “it also contributes to the resilience of a supply chain as a whole and to business continuity” (Why Is Understanding Risk Important).
In summary, the procurement planning process is just as vital and significant in project developments. There are procurement risks, which require the project manager and an organization’s supply, budget, or procurement department’s attention to have the necessary skillsets when submitting the project requisition forms purchases. One of the most important aspects of a contract to an organization is the ethical behavior of their entrusted employees because lack of ethics will ruin an employee, but will also cause project delays.
References
Importance of Risk Management in Procurement (2019). Retrieved from https://precoro.com/blog/importance-of-risk-management-in-procurement/#:~:text=Risk%20affects%20many%20aspects%20of,guiding%20consideration%20when%20selecting%20suppliers.&text=Risk%20management%20helps%20companies%20ensure,whole%20and%20to%20business%20continuity.
Simplilearn. (2020, February). What Is a Project Management Plan? Simplilearn, (1). Retrieved from https://www.simplilearn.com/what-is-a-project-management-plan-article
Wilson, R. (2015). Mastering Risk and Procurement in Project Management: A Guide to Planning, Controlling, and Resolving Unexpected Problems. Retrieved from https://phoenix.vitalsource.com/?utm_channel=affiliate&utm_source=CJ&utm_medium=Ebates+Performance+Marketing%2C+Inc.+dba+Rakuten+Rewards&utm_campaign=Free+Tools+at+VitalSource&utm_term=&utm_content=800703657283440682%3A2MOZZy9HH3rI&cjevent=1178899bae9b11ea819d02a10a24060e#/books/9781323471821/?utm_channel=affiliate&utm_source=CJ&utm_medium=Ebates+Performance+Marketing%2C+Inc.+dba+Rakuten+Rewards&utm_campaign=Free+Tools+at+VitalSource&utm_term=&utm_content=800703657283440682%3A2MOZZy9HH3rI&cjevent=1178899bae9b11ea819d02a10a24060ecfi/6/24!/4/14@0:58.3.
