Project Procurement

June 22, 2016
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Project Procurement

Project procurement essentially comprises the acquisition of all resources and/or equipment. There are a number of steps and decision points in the procurement process to consider, relating to what is purchased (finished goods or raw materials), how these things are sourced (tendering, quoting) and what form of agreements are required (contract, purchase order or credit card). The process of actually sourcing the items is sometimes termed solicitation. The overarching aim of project procurement is the timely and cost effective provision of all resources and/or equipment necessary.

First Consideration
Often one of the first considerations is the decision to make or buy an item. When identifying the appropriate course of action, consideration needs to be given to:

  • Relative economics
  • In-house capacity/available
  • The need for control or secrecy
  • Advantages of access to supplier knowledge and skill
  • An opportunity to maintenance a robust supplier
  • The relative risks involved and
  • Capital investment versus expense for tax purposes

Second Consideration
The second decision may be one about contracts and whether there will be only one procurement contract or several overlapping
Benefits of multiple contracts include:

  • Possible saving in time (i.e. “fast-tracking”)
  • Greater visibility and control
  • Greater flexibility in making changes if the requirements are likely to be “fluid”

The disadvantages of multiple contracts include:

  • Increased management and supervision for coordination and oversight
  • Liability to other contractors for failure to coordinate
  • Diffusion of accountability for results

The solicitation planning process includes many activities including

  • Market analysis
  • Establishing the degree of uncertainty in scope
  • Documenting time and cost objectives
  • Documenting assumptions and constraints

During the solicitation planning period, two results should be the aim:

  1. A summary of contract requirements
  2. Or a Preliminary Project Procurement Plan

After these milestones are reached it is time to get the procurement people involved and identify the responsible contract officer or buyer to start developing a “model” contract for the project
This model contract will include compatible sections for:

  • General conditions
  • Special conditions
  • Technical specifications

Issues to be decided

  • When is the procurement package needed by the project?
  • When will the Request for Proposal go out?
  • Who are the potential sellers for the work?
  • What type of contract will be used?

Solicitation planning may be further expanded by the following activities

  • Prepare and issue a request for information (RFI) (but only if needed)
  • Analyse and summarise feedback from requests for information

Resulting in an RFI response summary document
The next steps are to:

  • Recommend the best contracting strategy
  • Recommend the most suitable form of contract including most appropriate form of commercial terms
  • Recommend the submission evaluation criteria for screening and weighting
  • Assemble and recommend list of “approved” suppliers for the work contemplated in the contract

Exner Group