Max Bögl Company’s Procurement Management

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Table of Contents

Procurement Contract Award
Procurement Risks
Procurement Management Process
Contract Administration Process
Change Control Process
Quality Control Plan
Performance Reporting Plan
Project Procurement Legal Rights and Responsibilities
Project Procurement Closeout
References

Procurement Contract Award

Once the proposals from the selected vendors are evaluated, Max Bögl takes a decision based on the quality of the presented project plans. According to the list of the vendors, the proposal by Anakletos is recommended to the company executives. The most successful contractor receives an award letter with the evaluation decision notice. The award letter means the beginning of the standstill stage in the process of procurement. Therefore, it should be composed properly to avoid legal risks and delaying the contract award.

An award letter to the successful bidder should not include any promises to offer a contract based on the proposal made by the vendor because it might lead to legally binding. To avoid a legal challenge, the company authorities should stress that this award notice is not a legal acceptance of the proposal. Still, it should be written in a positive manner to ensure encouragement of the successful vendor and contain information relevant to the proposed project plan. The letters to unsuccessful vendors should be sent at the same time as well.

Procurement Risks

Risks can be regarded as uncertain events, which have an impact on the performance of the project. It is stated that the main benefits of risk management are lowering overall costs, minimizing chaos during the work process, increasing chances to achieve success by triggering risk prevention plans, and effective project control (Kendrick, 2015). The vendor is usually concentrated on its responsibilities and obligations and might have risk management relating to its part of the work. Thus, it is necessary to detect potential risks from the company standpoint before awarding a contract.

The risk evaluation process showed that the performance of the procured work by Anakletos is associated with such risks as schedule, cost, technical, and labor. The list of the identified risks is provided in the following table where each risk factor is rated on a five-point scale according to the likelihood of its occurrence and potential impact on the project outcome. Potential costs of the risks are estimated as well.

Risk	Likelihood of Occurrence	Potential Impact	Potential Costs
Cost	4	5	$ 10 000
Technical	3	5	$ 5 000
Schedule	2	4	$ 3 000
Labor	2	4	$ 2 000

Table 1. Analysis of Risks.

The analysis of the risks is based on the vendor characteristics used for the source selection. The selected vendor might cause the increasing of project costs and changing technical requirements during the work. This contractor also might have problems with providing some of the required specialists and following the schedule. These factors cause such risks as delaying of project completion and lack of labor. It should be noted that the last two risks are the most common in working with the contractors.

The detailed discussion of the possible risks at the early stage of the project is recognized to be effective in finding the ways to prevent their occurrence. Such factors as project complexity, payment methods, and management approaches might influence the potential risks as well. Therefore, the mitigation strategy for prevention of such risks as schedule following and lack of labor should include timely payments and detailed discussions of each project stage with the vendor to evaluate potential delays. The strategy of mitigating such risks as cost increasing and technical problems should include encouraging of the dialogs with the vendor in case of any problems.

Procurement Management Process

The selection of the right vendor is crucial because it has an impact on the financial health of the company and its productivity (De Araújo, Alencar, & de Miranda Mota, 2017). It is necessary to update the existing schedule of the project and include the new tasks that will be performed by the procured workers. The schedule of Rugia Bridge project will be expanded by such extra tasks as project planning (analysis, calculation, quality insurance, and management), corrosion protection (surface preparation, landfilling, bridge coating/spraying, sanding, undercoat, and varnishing), and finishing activities (quality analysis, corrosion protection, layer evaluation and testing). Each of the tasks will have its time limits according to the approved dates of the activity.

The contingency budget of the project should also be updated to include the additional costs of risk resolving based on the results of the risk evaluation process. The potential costs of the indicated risks amounted $ 20 000. Thus, the budget will be increased by this sum.

The organization of an appropriate communication process with the vendor guarantees that the mutual interests and important issues related to the project completion will be discussed. The communication between Max Bögl and Anakletos should include weekly formal meetings based on current issues and schedule status information, as well as monthly reports provided by the vendor. It will ensure that the vendor will meet all the company requirements and follow the schedule. The vendor will also have a chance to discuss the difficulties occurred in the process of the work to eliminate potential unexpected risks.

Contract Administration Process

Contract administration process assists in meeting the objectives and goals of the project, following the schedule, and ensuring the appropriate work of the vendor. It is usually divided into pre-contract, execution, and post-award phases. During the pre-contract phase, the selected vendor is evaluated to meet the criteria of risk management and contingency budget limit. The communication process should also be determined at this stage to organize the activity on designing the contract strategy. During the pre-contract communication at the status meetings, the parties should come to the final agreement after determining the procedural rules and critical issues, establishing common goals, and selecting the appropriate behavioral rules.

Award contract activities include some checkpoints to ensure that both parties are aware of their responsibilities, secure the agreed process of contract administration, and distribute the knowledge from the vendor and company members to contract management team. At the stage of contract management, the changes of the agreement conditions are believed to be inevitable because it is an opportunity for the parties to improve the outputs of the contract. Still, construction contracts should be changed very carefully because even small editions might influence the cost of the project. Thus, if the changes take place, it is advisable to make a contract review before the final process of sign-offs.

The agreement with Anakletos vendor is a standard form of a fixed price model contract. Therefore, the pre-contract meetings should be limited to those that discuss the prevention of the potential risks. There will not be any changes in the contract structure, and it will be signed after its formal review at the common meeting. The vendor is obliged to perform a preliminary project planning, works on corrosion protection of the bridge, and quality testing and analysis. The buyer is obliged to pay the indicated sum to the vendor and ensure consultations during the stage of performing the works, as well as assist in troubleshooting. The vendor has the right to control the performance of the work at all stages. The problems should be resolved in a timely manner after the appropriate discussion of the possible decisions and selecting the most cost-effective one.

Change Control Process

It is noted that “construction project offers recurring challenges and uncertainty that test the competence of project managers” (Sunindijo, 2015, p. 68). Therefore, all the stages of the working process should be controlled and supervised. Change control process deals with the submissions of change requests from the vendor. Such requests guarantee that the contractor will not make anything without a buyer’s consent, keep the project on the schedule and within the approved budget. The goals of change management are to control each request and evaluate the impact of changes. Some small changes are usually acceptable in the project. The sample of a change request form is provided below.

Each change is submitted through its identifying, validating, and analyzing. The control over the review and approval process of the small changes is the responsibility of the project manager. There is a defined procedure of submitting big changes as most of them affect the schedule and budget. Such changes are reviewed by the Steering Committee which makes the final decision.

Quality Control Plan

A quality control plan is considered to be a crucial part of every project. It identifies the quality standards set by the customer and provides the methods of inspecting and verifying the procured work. The quality plan is essential to guarantee that the completed work will meet the requirements of the buyer.

The inspection and verification of the work performed by Anakletos vendor will be executed by the project manager and Max Bögl company authorities. It should be noted that the vendor is responsible for testing and quality analysis of the corrosion protection layer of the bridge. The company authorities will evaluate the performed quality analysis and testing and compare them with the results received by the third party representatives. If the results of the work will be rejected due to noncompliance with the requirements described in the contract, the vendor pays the penalty and is obliged to improve the quality of the performed work.

Performance Reporting Plan

Performance reporting deals with processing project information, assessing project progress, and estimating the current status of the works. It is based on the performance reports made both by the company and the vendor. Project management plan contains the information about project baselines such as scope, schedule, costs, as well as quality and technical parameters.

To track the performance of the vendor, the specific reports of the schedule progress and deliverables status will be produced. These reports should be provided monthly to the executives of the company by the representatives of the vendor. The mock-ups of the reports are provided below.

Figure 2. Schedule Progress Report Mock-Up.

Figure 2. Deliverable Status Report Mock-Up.

Project Procurement Legal Rights and Responsibilities

Legal aspects related to the management and closure of the contract include possible pitfalls, the arbitration process, contract design, provisions, as well as dispute resolution cases and claims. Alternative dispute resolution is used by the parties to come to the agreement in the cases of claims, disputes, and outstanding issues. It includes techniques and processes of dispute resolutions and usually is divided to the mediation of the case, its arbitration, and evaluation. The parties have the right to terminate the contract using such document as the notice of contract termination as a formal declaration to notify a party about the end of the agreement and indicate the date of termination.

Usually, procurement closure is performed at the end of the works after the quality analysis and testing were verified by the company. In such case, the vendor receives the formal acceptance notice about verification of the performed works that meet the requirements of the company. If the works are not completed, the parties still have to go through the process of contract closure procedure, and the vendor should be informed about contract termination.

Project Procurement Closeout

Closeout of a procurement project includes bill payment and closing the procurement contract. The project can be regarded as completed if all the works planed in the schedule were performed and the quality of the work meets the demands of the buyer. Final payments usually are big enough to motivate the contractor to give the closing project high priority and complete the final stage of work. When the work is completed, all the problems are resolved, and the necessary corrections are performed, the project team makes final signs-offs, and the contract is submitted to the accounting department for final payments.

The final documentation included in the contract closure package should include such main items as original budget, charter documents, change documents, scope statement, and project manager’s summary of the lessons learned. The lessons learned in the course of the project are described by using such techniques as categorization by the project area, problem description and its impact on the project, as well as provision of recommendations for the similar projects in future. This document might include the similar lessons from the previous projects.

References

De Araújo, M. C. B., Alencar, L. H., & de Miranda Mota, C. M. (2017). Project procurement management: A structured literature review. International Journal of Project Management, 1(8), 1-25.

Sunindijo, R. Y. (2015). Project manager skills for improving project performance. International Journal of Business Performance Management, 16(1), 67-83.

Kendrick, T. (2015). Identifying and managing project risk (3rd ed.). New-York, NY: American Management Association.

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