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Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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Page 1: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

Dr. Jana Jagodick Polytechnic of Namibia, 2012

Project Management

Chapter 11

Project Procurement Management

Page 2: 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”

Page 3: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 4: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 5: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 6: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 7: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 8: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 9: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 10: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 11: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 12: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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.

Page 13: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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?

Page 14: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 15: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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)

Page 16: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 17: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

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

Page 18: Dr. Jana Jagodick Polytechnic of Namibia, 2012 Project Management Chapter 11 Project Procurement Management

Dr. Jana Jagodick Polytechnic of Namibia, 2012

Strategic sourcing3 new strategies have emerged:• volume consolidation• supplier operational integration• value management