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Procurement Management Plan

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Table of Contents-

  1. Planning Procurement 3
  2. Market Analysis. 5
  3. Planning to procure. 6
  4. Contract Administration Planning. 7
  5. Establishing Procurement Processes. 8
  6. Evaluation Criteria. 9
  7. Tender Selection Process. 10
  8. Contracts. 12
  9. Reviewing Contracting and Procurement 14

Reference List 15

 1. Planning Procurement-

1.1 Listing the main policies and procedures that are relevant to planning in organization

Policies

Procedures

External audition policy

Procurement cost levels

Confidential information policy

Purchase requisitions

Supplier selection policy

Ethical codes

Compliance policy

Standard agreement

Environmental policy

Value for money

 

Tendering

 

E-procurement

1.2 Identifying the policy gaps and suggesting an action required to fill the gaps

As per the view of Mwikali and Kavale (2012), it is very essential to identify the policy gaps in procurement. The early identification of policy gaps help in planning an appropriate action that enhance the procurement management. Following are the identified policy gaps:

Policy Gaps

Action

Supplier Selection Policy – Suppliers fails in having good bonds with the team member of the company or client company.

It is require to do a proper research of the suppliers prior to the selection for the business and maintain a healthy and effective communication with them. In order to ensure the healthy and effective communication it is require organizing regular meetings to discuss the problems and prepare an appropriate solution with mutual understanding.

Environmental Policy – It is important that the supplier company must comply with the mandatory environmental requirements of the government. Even if the supplier company comply with the mandatory environmental requirement and fulfil all the essential needs but does not fulfil minimum requirement of health safety and dignity of workers then it should be discarded.

It is require ensuring that the supplier company follows the mandatory environmental policies and this can be done by checking the policy documents or licences that the company acquires by ensuring to comply with environmental requirements. Similar to the environmental certification the companies also gets and ISO Certification for its ethical business operations. Thus, partnership or doing business with suppliers that holds the ISO Certificate helps in overcoming the environmental policy gaps. 

1.3 Explaining the method to plan acquiring the required products and services for completing the project. Who holds the decision to order them and when? Listing the documents required as reference and mentioning the consequences of the early and late arrival of the products and services.

As opined by Baily (2017), in the procurement management it is important to have a better idea that what and how to acquire the product and services in order to complete the project. The procurement management initiate different methods in the plan of acquiring the required products and services.

The most basic method is to make a list of products and services that are required. Thereafter, planning that when and how to acquire the required products. It is important to include the step of deciding which project needs can be met by purchasing the products and services from outside and which one by project execution into the plan. This helps in decreasing the expenses of the company and ensure the better utilization of the resources.

The decision of ordering the required products and services is in the hand of procurement management. The management can be either democratic or autocratic in nature and may include more than one people or only one person. The procurement management use different tools and techniques such as make or buy analysis, expert judgement, contract types, review, fixed price contracts review etc.

In this process of acquiring the required products and services, various documents are required. The basic documents that are required includes organization policy and procedure, and project scope statement.

As stated by Giannakis (2012), the delay in arrival of the required products affects the business. Thus, the delivery of the required products play an effective role in the procurement.

As per the view of Masterman and Masterman (2013), early delivery of the required products and services contribute to excess inventory holding costs. On the other hand, the late deliveries of the required products and services contribute to production stoppage costs, lost sales and loss of goods.

2. Market Analysis-

2.1 Delegating the responsibility of conducting a market analysis for a product or service as required in the project to one of the project team members and asking to source at least three potential suppliers. Thereafter, conducting a critique of the person’s performance.

(a) Stating the product and services that was sourced

The products that were sourced are 20 pieces of laptops and 5 pieces of printers. The market analysis was done to choose best suppliers. The following is the table that represent the market analysis.

Company Name

Price

Location

Time delivery

Warranty

Reliability

Supplier Score

The Good Girls

$ 32.195

Melbourne

2 days

2 Years

95%

30

Bornes and Noble

$ 30.115

China

4 weeks

No

75%

10

Albris

$ 32.50

Sydney

2 weeks

2 Years

96%

20

(b) Assessing the performance of the team member in conducting the supplier analysis and mentioning the gaps.

The responsibility of conducting the supplier analysis was on Carol. The presentation of market analysis by the carol was very good and appreciative. However, the task of supplier analysis could have been much if Carol would have included local suppliers in the analysis.

Apart from the absent of local suppliers in the analysis the work of Carol very efficient and therefore the procurement management were able to identify the best option very early.

(c) Evaluating how the project team member could have performed the analysis better.

The project team member could have performed the analysis much better by including the local suppliers in the analysis. Apart from this, the project team member should have also included some other factors in the analysis such as financial strength of the supplier company and its policies.

Thus, project team member should also have included the factor of holding certificates in the analysis. This include checking that whether the supplier companies hold important such as environmental certificates, licences, ISO Certification and other important policy certificates.

3. Planning to procure

3.1 Describing the methods adopted to procure the products and services for a project. Listing the documents that were prepared to distribute to perspective sellers.

As mentioned by Walker and Brammer (2012), different methods are used in order to procure the products and services for any project. The example of methods adopted in order to procure the products and services for a project are open tendering and restricted tendering.

The both open tendering and restricted tendering have different characteristics. The open tendering makes the bidding more competitive, it allows the bidding companies to bid on goods and services in open competition. On the other hand, restricted tendering places limitation on the amount of request for the tenders that can be sent by suppliers.

3.2 Discussing the type and the need of the contract selected to procure the product or service for the project.

The type of the contract selected to procure the product and services for the project is Fixed Price Contract. The fixed price contract fits completely well to the needs of the company because the scope of the contract is clearly known.

The fixed price contract is needed because it will ensure that the seller or supplier has to complete the task within the agreed amount of money. This will also help the company to be ensure about the exact expenses for the procurement of the required products and services. The awareness of exact expenses for the procurement of products and services is beneficiary for the company in different ways.

4. Contract Administration Planning

4.1 Explaining the steps involved in the process of planning the contract administration process. Naming the person involved in the contract administration planning process from your team.

Four steps or phase involved in the process of planning the contract administration process.

Following are the four steps or phases:

  • Proponent phase – In this phase the needs for procurement are identified.
  • Approval phase – In the approval phase the negotiation on the products and services is done and approved. Thereafter, the contract draft is made in order to overview clearly each point of the negotiation.
  • Implementation Phase – In the implementation phase, the historical data is used in order to forecast compliances and quality provided by the selected supplier. Thereafter, the budget is set in order to acquire the goods that the company requires.
  • Completion Phase – Completion phase is the final phase or step in which all requirements for procurement of goods and services are set and signed.

The Procurement Management was involved in the contract administration planning process.

4.2 Discussing the key performance indicators developed by the project team for the contract and explaining the process involved in determining the contractor’s performance throughout the project. Listing the types of reports required in administering the contract.

The five key performance indicators developed by the project team are Price, Location, Delivery Time, Warranty and Reliability. The price plays an important role as it directly affects the budget of the project. The location of the supplier is also important as it affects the communication.

It is relatively easier to communicate with suppliers in close location than the suppliers in far location are. The delivery time of the products and services plays very important role in the business. The delay in delivery affects the business performance of the company.

Warranty and Reliability are also important performance indicators as the warranty and reliability of the products and services enhances the reputation and performance of the company in the market.

As opined by Sun, Zhao and Wang (2012), it is important to determine the performance of the contractor throughout the project. The three important evaluation criteria in order to determine the performances of the contractors are customer service, behaviour and attitude, and certification.

The customer service is very important evaluation criteria. In this criteria apart from the fact that how quickly the contractor response the other factors such as improvisation of the contractors in order to meet the requirement is also considered.

The next evaluation criteria that is behaviour and attitude is also important and it is monitored that how contractors behave with employees and others during the project. The last evaluation criteria is the certification in which it is investigated that whether the contractors have all the required and legal certificates that are essential for the business operations.

Following are the types of reports that are required in administering the contract:

  • Reference Check
  • Financial Status Check
  • Surge Capacity Availability
  • Indications of Supplier Quality
  • Ability to meet Specification

5. Establishing Procurement Processes

5.1 Documented procedures followed in organization for:

  • (a) Going to market with a request for tender –
  • (b) Evaluating responses –
  • (c) Selecting preferred contractors –
  • (d) Developing key performance indicators for a contract –
  • (e) Monitoring contract performance –
  • (f) Making changes to the procurement management plan –
  • (g) Conducting reviews of procurement activities –

5.2 Probable consequences in case of unavailability of documents

As opined by Den Butter (2012), the unavailability of documents can have different consequences. The basic probable consequences of unavailability of documents are the delay in procurement and delivery of improper products. The company can also get in legal trouble if the contractor or supplier does not hold the required certificate or licences that can rather be known as documents.

6. Evaluation Criteria

EVALUATION CRITERIA

Name of the product acquired: Apple Laptop (Macbook) [12 Quantities]  

Description of the product:

EVALUATION OF SUCCESSFUL CONTRACTOR:

  1. The ability of providing the specified products.
  2. Technical knowledge of the products, academic qualification or experience of relevant personnel.
  3. The ability of meeting the budget and timeline of the project.
  4. Innovation or an ability of adding values.

Comment on the clarity and usefulness of the set criteria. Also, mention the improvements if needed.

The criteria that is set is very clear and ensure the selection of most appropriate contractor for the project. The criteria ensure that the contractor must comply with the budget and timeline of the project. Thus, these criteria are very useful and ensure selecting better contractor. However, there is a need of improvements the criteria should also include the evaluation of measures taken by the contractor for ensuring the health and safety.

Developed by:

1. XYZ

2. ABC

Documents referred:

Contract

Delivery Agreement

Checklist of specifications

Seller responses

Key Comments:

The delivery should be on time.

The specifications of the product should match with the quotation.

7. Tender Selection Process

7.1 What were the key stages or milestones and the timeframe for the tender? Who was on the tender selection panel and why?

(a) Procurement Notice, prequalification and shortlisting

  • Invitation to tender
  • Interaction with bidders
  • Evaluation of tenders and contracts
  • Finalise contract
  • Conclude Financing agreements

(b) Timeframe (2 weeks)

(c) Tender Selection Panel

  • Provide and approve the tender documentation
  • Establish evaluation criteria that will be used to assess bids from suppliers
  • Determining whether tender will be released as open tender or close tender
  • Following the receipt of all compliant bid
  • Making final recommendation and sign off or selecting the supplier that has provided the bid that ensures delivering value for money outcome for the company.

7.2 What documentation was involved in the process from the organization seeking tenders and the tenderers?

Documents for the company

Documents for the tenderers

Letter of invitation to tender

Company profile and capability statement

Form of tender

Price of each products

Contract Conditions

Any conditions affecting the price

Budget Establishing

Delivery details and charges

Specifications

Proposed schedule indicating milestones or delivery date

7.3 What are the important things to consider while running a competitive tender? Mention the pitfalls that need to be avoid.

Following are the important thing to consider while running a competitive tender:

  • Value for money
  • Relative rate of proposal
  • Fitness for purpose
  • Performance history of supplier
  • All direct and indirect costs
  • Flexibility of proposal in order to adapt to possible changes

Following Pitfalls are to be avoided:

  • Tender cost are not as acceptable by the suppliers
  • Difficulty in understanding the tender properly
  • Breach of contract

8. Contracts

8.1 Outlining the important characteristics of a good contract and mentioning about the assistance required when writing contracts. What are the common problems that occur during the contract writing process?

As per the view of Crespin-Mazet and Dontenwill (2012), there are certain important characteristics that should be included in the contracts. Certain important characteristics of good contracts are that it includes clear mentioning of every important details of the contract.

The terms and conditions should be clearly mentioned in the contract. It is also important to mention the timeframe and budget on the contracts. In addition, the good contracts also includes ensuring that parties comply with all the policy to maintain the ethical business operations.

8.2 Providing an example of a contract handled previously.

Contract for providing technological equipment for the designing department of the company. The team members included in the contracts were Procurement Manager and Procurement Director. In this contract also the Contractor Performance Indicators were used that included the Price, location, time delivery, warranty, reliability and background check.

8.3 How was the contractor’s performance monitored? Also, state the positivity and the negativity in the contract.

The performance of the contractor was monitored by regular inspection of the work or process of the contractors. The involvement of the contractors in the business and their behaviour with others was also monitored.

Many positivity of the contract existed among which the most important is the completion of the procurement within the budget and limited timeframe. However,  the contract also includes certain negativity for an example the absent of mentioning the important documentations that are essential for the contractors.

8.4 Dispute with the contractor

Fortunately, there are no major dispute with the contractor. However, there was a minor dispute with the contractor on the delivery of the product.

  • Reason for the dispute: The reason for the dispute was the disagreement with the contractor on the delivery of the product. The contractor wanted to deliver the product in two instalments. However, the company wanted to get the delivery of all the products at once.
  • Policies and procedures available for the assistance in handling the dispute: As opined by Giannakis (2012), the proper policies and procedures assist in handling the dispute. In order to assist the identified dispute there was no need of any legal policies but well-planned and agreed procedures.

Actions taken by the project team members and its outcomes

Action

Outcome

They organised a meeting in order to communicate with the contractor.

This benefited in deciding a good procedure with the mutual understandings.

The decision of charging the installation process of the products from the contractor.

This decision was taken as the contractor wanted to make delivery in instalment. This resulted as paying an extra charge to the technician for the installation of the products. This action had a positive outcome as the contractor agreed to pay for the installation charges.

9. Reviewing Contracting and Procurement

9.1 Describing the methods used to review the contracting and procurement activities. What was the type of project?

The methods used to review the contracting and procurement activities are Procurement and Review Meetings.

Type of project – The type of project was RFQ as the company not only focused on the value for money but also adding value capacity that is vital for building good relationship between tender and contractor.

9.2 Issues and difficulties identified in the review process. How satisfactory was the contractor’s performance? Who was involved from the project team in the review process?

There are certain difficulties identified in the review process, while writing the contract there was a bit confusion about the candidate of compliance. However, in a meeting with Procurement Management and contractor all doubts got clarified and the company got the successful delivery of the required products.

The selected contractor for the project was an experience company and it provided an excellent customer service.

Procurement Management and Procurement director was involved in the review system. The reason for the involvement of procurement director was his knowledge about the specification of contracts and procurement.  

9.3 Outlining the recommendations made for future contracting and procurement activities.

It is recommended for the future contracting and procurement activities to add an occupational health and safety policy. It is also recommended to give more time for tenderers to ask any question and clear their doubts in order to avoid misunderstandings in the contract process.

Reference List

Baily, P., 2017. Procurement. In Contracting for Project Management (pp. 105-116). Routledge.

Crespin-Mazet, F. and Dontenwill, E., 2012. Sustainable procurement: Building legitimacy in the supply network. Journal of Purchasing and Supply Management18(4), pp.207-217.

Den Butter, F.A., 2012. The transaction management perspective on procurement in the era of globalisation. International Journal of Procurement Management5(2), pp.123-139.

Giannakis, M., 2012. The role of procurement in the management of supplier relationships. International Journal of Procurement Management5(3), pp.368-408.

Masterman, J. and Masterman, J.W., 2013. An introduction to building procurement systems. Routledge.

Mwikali, R. and Kavale, S., 2012. Factors affecting the selection of optimal suppliers in procurement management. International Journal of humanities and social science2(14), pp.189-193.

Sun, S.X., Zhao, J. and Wang, H., 2012. An agent based approach for exception handling in e-procurement management. Expert Systems with Applications39(1), pp.1174-1182.

Walker, H. and Brammer, S., 2012. The relationship between sustainable procurement and e-procurement in the public sector. International Journal of Production Economics140(1), pp.256-268.

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