Question

Describe the work involved in planning procurement for projects, including determining the proper type of contact to use and preparing a procurement management plan, statement of work, source selection criteria and make or buy analysis?

Answer 1

Any project consisting of the following stages i.e. Initiation, Planning, Execution, Monitoring & Controlling, Closing. Procurement Management Plan comes in the first stage i.e. Initiation. In this stage the objective of the Project is discussed and determined in a detailed way along with its outcome, duration, budget, location and end user.

At this stage only the make or buy analysis is done. Based on the past experience, market demand & supply of the product and other factors the Owner decides to go for contractor or inhouse execution. A complete analysis of the Rental Charges of machines and other resources are analysed. Decision is generally taken based on the opportunity cost analysis.

Every project generally consist of Client (who owns it) and Contractor (who works to complete the project). Depending on the following points generally the Client chooses the type of Contract ( based on which the contractor performs his part of work) and it is a two way process.

1. Type of the Project (based on the industry)
2. Technicality of the Project and its market availability.
3. Cost of the project
4. Location and the source of Resources (Man, Machine, Money, Materials) to complete the project
5. Professional competence of the Client

Based on the above details basically a Owner ask his C&P (Contract and Procurement) Team to select the Contract & Procurement Strategy. Source Selection Criteria is also set up to evaluate the right contractor based on some parameters like

• Past experience of the Contractor
• Last three projects performance summary of the contractor
• Technical ability of the contractor
• Managerial ability of the contractor
• Working capital of the contractor

The following stages generally occur as part of the Procurement Management Plan

1. Preparation of the Tender documents (Drawings, Statement of Works)
2. Preparation of request of Quotations (RFQ)
3. Preparation of request of Proposals (RFP)
4. Acceptance of RFQs & RFPs
5. Evaluation of the RFQs & RFPs
6. Award of the Contract.

There are different type of Contracting forms based on the clients choice and other factors, these are

1. Design & Build Contract
2. Item rate Contract
3. Lumpsum Contract
4. Cost Plus Contract
5. Labour Contract
6. Build Own Operate Transfer (BOOT)