Procurement Planning Process

Procurement planning is the process of ascertaining and merging necessities as well as determining the timeframes for their procurement with the objective of having them as and when they are required (Bräkling & Oidtmann, 2012).

Five Major Processes in Project Procurement

There are five major processes in project procurement. These processes are listed below.

Order custom essay Procurement Planning Process with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

Specification involves the buying section interacting with the development manager to advance an approved list of the obtaining things essential for project enactment. The department specifies the accepted items to exterior dealers.

Assortment involves the department finding prospective dealers who can obtain the needed items in accordance with the specification. The department sets the dealer's selection criteria such as provision, service value, and price.

Contracting involves the section collaborating with the dealers on distribution dates and imbursement circumstances in order to guarantee on-time delivery of the well-arranged items within the stipulated task financial plan.

Control is achieved through positioning regular meetings with dealers, tracking transportation progress, appraising the ordered items alongside the agreed product stipulations as well as making the essential changes to the purchasing agreement. The aim is to ensure the successful accomplishments of the procurement process.

Measurement is the last step of the project procurement planning progression refers to exhausting a system of enactment pointers and measures for evaluating the efficiency and success of the entire course. Meetings are arranged to view key performance indicators, transitional results of staged delivery, the performance of purchasers, observance to merchandise provisions and communication with dealers.

The Most Valuable Output of a Plan Procurement Process

Procurement management plan because it gives guidelines on the ways of conducting all of the purchasing activities on the project. It guides the departments to make or buy decisions. Furthermore, the output of the purchasing management plan is the blueprint of all the other purchasing activities that may be conducted during the course of the project.

Types of Contracts and Their Risks to Buyers or Sellers

The Fixed price contract. In this case of this agreement, the purchaser knows how much payments to be done to the seller. Thus, the buyer obligation is permanent meaning that the purchaser has a very low charge of improbability. The seller may lose money and that he makes a profit if the contract is accomplished within the funds delivered by the purchaser.

Cost plus agreement where the vender knows that the purchaser will compensate all sincere charges. Furthermore, the vendor gets decided fees and that he is likely to make some proceeds in a pure cost-plus agreement. In this case, the vendor has a low doubt for making the profit.

Time and material agreement is a combination of fixed-price contract and cost price contract. Time and material agreement is based on a fixed rate which is pertinent for both the buyer and the seller. The client is facilitated with the ability to acquire services on the basis of hourly rates as listed in the contract and materials for this reason the purchaser and the vendor share the doubt in time and material agreements. Thus, the buyer does not know the length of the contract in terms of the time and how the materials will be needed to finish the project. So, the purchaser's cost may increase due to the mysteries. In this case, the buyers have some degree of cost uncertainty.

The vendor does not know how the cost of employment will vary over the life sequence of the agreement. This suggests that the labor cost may upsurge over the life series of the agreement. Seller’s profits may decrease per unit in that the vendor may even lose money if the prices go up considerably. In this case, the vendor has some unit of cost ambiguity deducing that both the purchaser and the vendor share the jeopardy.

Risk Mitigation Methods

Fixed price contract can be lessened by reacting to the level of indecision. If a project is determined to have a small level of doubt, the ideal strategy will be to progress pragmatically in order to upsurge the present value of the project by completing it as soon as possible. Alternatively, the seller may engage in risk avoidance to avoid any exposure to the risk whatsoever.

Cost plus contract can be mitigated by engaging in risk limitation. It allows the dealers to take some actions. The strategy applies a bit of risk recognition along with a bit of peril evasion or even both. The buyer can go for this type of risk mitigation so that he cannot be in a position of losing his profits.

Time and material contract can employ the risk acceptance mitigation measure since both the buyer and the seller may go at a loss. In this scenario, this strategy is more effective when the cost of other risk management selections may prevail over the cost of the peril itself. This approach is mostly applied by companies or dealers that do not want to use a lot of currency on evading risks that do not have a high likelihood of happening will use the risk acceptance strategy.

Project Monitoring Process

1. Monitor and control plan work and achieve combined change mechanism
2. Confirm and control the opportunity
3. Control program and price
4. Perform quality mechanism
5. Report performance
6. Control risk
7. Administer procurement

Risk selection criterion determines how much risk is embedded in the project and how much risk will be assigned to the selected seller.

Ethical Concerns in Selection Criterion.

The involved parties should not be in a position to favor a vendor for a personal reason by giving them the advantage of knowing more about the scope of work than the other vendors (Rajon & Charlat, 2018).

Any of the panel members should not provide misleading information to particular vendors because of personal issues with that vendor.

Role of Risk Management

Risk management is a vital and constant course that should be commenced, reviews and accomplished through the purchasing journey. Risk administration thus enables the stakeholders to identify the desired outcomes, risks as well as issues (Louth & Boden, 2014). Therefore, risk management contributes to the increased inevitability and less disbeliefs, better service provision. More effective controlling of change, more effectual use of assets, reduced wasted wastage as well as administration of depending and upkeep happenings.

Conclusion

In conclusion, it is vital for an individual to engage in procurement planning because it helps in deciding what suppliers should buy and from what sources and it also makes it easy for planners to determine whether the expectations are realistic (Bräkling & Oidtmann, 2012).

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer