Procurement in Project Management

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Table of Contents

Introduction
Types of Procurement Systems
Delivery System- Single Contract Delivery System
Advantages
Disadvantages
Adversarial To Cooperative Relationships
Reference

Introduction

Procurement can be defined as the acquisition of services or goods in the right quality and quantity, at the best possible total cost of ownership, in the right place, at the right time. This is normally for the benefit of individuals, corporations or governments through a contract. When the procurement is simple, it involves repeat purchasing. When it is complex it involves getting co-destiny suppliers or finding long term partners. This paper is dealing with procurement systems currently used in project management. There is an explanation for the benefits and the disadvantages of each system both to the contractor and the client. This paper is also dealing with procurement systems and contracts (Arrowsmith and Arwel 1998).

Types of Procurement Systems

Procurement system is actually a means, contractual or non contractual through which the objectives of a residential project is achieved. There are various types of procurement systems that are used for Australian residential project development. An example is the delivery system.

Delivery System- Single Contract Delivery System

This is one of the systems that are commonly used in procurement of various projects. Within the delivery system there are various contracts. They include multiple contract, single contract etc. For instance in the process of selecting a procurement system, one can decide to adopt a single contract for the system. Research on procurement systems used in many nations shows that single contract delivery system has got advantages therein. This is because it actually provides an avenue for compression of time especially when early completion is a matter of importance in the project. This is implemented by the documentation of all the components of a particular project development (Alario, 1997).

Advantages

This system is of real benefit to contractors globally. This is because it gives a prospect for specialist contractors to be directly engaged. It also does away with the need of arrangements that are complex contractual in nature. In other words there is the simplifying of the entire contractual system. These complex contractual arrangements include the incorporation of nominated subcontractors who play a big role in complicating the whole process. There is also allowance for direct purchase of materials from suppliers.

It also enhances control of expenditure that the agency uses in the procurement. This system actually allows staging the prospect to accelerate various projects in a region. It however has the potential to delay the work too. This system provides an economical method of controlling budget costs. This is accomplished through omission of work in case the time or cost overrun is actually expected. It is implemented through reduction of standards in procurement. This method is also very simple in nature. It can also work through addition of work if work and funds allow (Baldwin, 1997).

The system works through the use of an agency carrying out direct selection of package contractors or trade hence providing better control of the finished product’s quality. When this system is used there is reduction of impact of work changes to work nature in the management of projects. There is also reduction of impact of project termination and restrictions of cash flow. It facilitates the project such it is in a position to meet requirements of funding. There is minimization of cost impacts of claims of delay since packages are progressively let.

Disadvantages

The disadvantage is that the agency carries interface and coordination risks. The preparation of administration and documentation needs many resources of agencies to be used. There is a likelihood of increase in costs if agency generates changes because of the system’s flexible nature. The system has the potential of increasing discrepancies amongst contract packages. The agency is normally committed to the project even before having the knowledge of the project’s bid price.

Adversarial To Cooperative Relationships

Procurement in project management involves various relationships between different parties. Clients in many sectors are expected to adopt a non-adversarial and cooperative approach in their business endeavors. This is expected at all the levels of interactions in business transactions. Suppliers, contractors and subcontractors should also incorporate a cooperative approach in every level of their business dealings. This is also expected of industry associations, employers and unions. This enhances smooth running of entire procurement process in the project management (Ashenfelder, 1997).

Reference

Arrowsmith, S. and Arwel D. (1998): Public Procurement; Global Revolution; London; Boston; Mass; Law International.

Ashenfelder, O. (1997): Contract Form and Procurement Costs; the Impact of Compulsory Multiple Contractor Laws in Construction; Rand Journal of Economics; 28, S5 – S16.

Alario, E. (1997): Project Agreements and Government Procurement; Journal of Labor Research; 18 (1), 17-30.

Baldwin, L. (1997): Procurement Systems in Australia; Journal of Economy, 105(4); 658-699.

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