Dr. Jana Jagodick Polytechnic of Namibia, 2012
Project Management
Chapter 11
Project Procurement Management
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement • “ acquisition of goods and/or services at
the best possible total cost of ownership in the right quantity and quality, at the right time, in the right place for the direct benefit or use of governments, corporations, or individuals”
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Project purchasing procedures4 different methods/approaches can be used for purchasing of goods and/or services in the public or private sector– contracts– quotations– petty cash– online procurement
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process (Contracts)• Information Gathering• Supplier Contact• Background Review• Negotiation• Fulfillment• Consumption, Maintenance and Disposal• Renewal
Very common in public sector and
in some private companies
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process
• Information Gathering: If the potential customer does not already have an established relationship with sales/ marketing functions of suppliers of needed products and services, it is necessary to search for suppliers who can satisfy the requirements
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process
Supplier Contact
When >1 suitable suppliers identified:
• Requests for Quotation (RFQ)
• Requests for Proposals (RFP)
• Requests for Information (RFI)
• Requests for Tender (RFT) may be advertised -…..or direct contact may be made with the suppliers
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process
Background Review• References for product/service quality
consulted• Requirements for follow-up services
including installation, maintenance, and warranty are investigated.
• Samples of products or services being considered may be examined, or trials undertaken
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process
Negotiation
• Negotiations are undertaken, and price, availability, and customisation possibilities are established
• Delivery schedules are negotiated, and a contract to acquire the products or services is completed
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process
Fulfillment
• Supplier preparation, shipment, delivery, and payment for the product and services completed, based on contract terms
• Installation and training may also be included
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process
Consumption, Maintenance and Disposal
• During this phase the company evaluates the performance of the products and services and any accompanying service support, as they are consumed
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Procurement Process
Renewal: • When products and services have been
consumed and/or disposed of, the contract expires
• Or product or service is to be re-ordered subject to company experience of the products/services
• If the products and services are to be re-ordered, the company determines whether to consider other suppliers or to continue with the same supplier
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Choosing sources of supplyTotal cost of ownership approach
Traditional view of purchasing, based on price alone, has changed
Modern approach is to focus on supply chain management with greater emphasis on the relationship between the buyers and the sellers,
New perspective emphasises continuous supply (JIT), inventory minimisation, improved quality, supplier development and lowest total cost.
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Example of TCO
Imagine you want to source some goods regularly for 8 months – and you can get them from various suppliers
South AfricaChinaGermanyZambia
$250/part$70/part$270/part$150/part
1 month6 months2 months1 month
flexibleSlightly flexibleinflexibleinfelxible
Which is best from a TCO viewpoint?
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Quotations
• For items budgeted for, but not available on contract
• Get written quotations and choose the best supplier
Dr. Jana Jagodick Polytechnic of Namibia, 2012
E-Procurement
• Electronic Procurement - purchase and sale of supplies and services through the Internet as well as other information and networking systems, such as electronic data interchange (EDI) and Enterprise Resource Planning (ERP)
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Planning-an Element of Project Procurement
– Planning is an element of project procurement
– Project managers and their teams must plan well in advance for the timely procurement of goods and services
– Goods not available (because of delays in the tendering process) can have serious implications for project managers
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Advantages of Good Procurement Planning
– Timely supply of goods and services
– Assists in improving the quality of suppliers
– Objectives of the project can be reached in time
– Contributes to improving the organisations’ purchasing system as a whole
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Strategic sourcing3 new strategies have emerged:• volume consolidation• supplier operational integration• value management
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