9. Understand project procurement Flashcards
Explain two differences between a transactional and collaborative contractual
relationship
A first difference between a transactional and collaborative contractual relationship is that often in transactional relationships, the focus is on satisfying the terms as dictated by the contract. In comparison a collaborative relationship may be more willing to adjust expectations, to the benefit of the overarching relationship. Building relationships, working together and operating as a unit are much more important in
a collaborative contractual relationship.
A second difference is that collaborative contractual relationships will rely heavily on informal, discussion based approaches to resolving conflicts and solving problems. A transactional relationship will rely on
the contract, conditions, terms and wording to resolve disputes. Conflicts will be solved by what is formally documented, as opposed to in an informal approach as is the case with collaborative contractual relationships.
Learning Outcome Understand project procurement.
Question part (a) Explain two elements of a procurement strategy and why these are
important.
Marks 20 marks (10 marks each)
Question part (b) Explain three steps in the supplier selection process for a project.
Marks 30 marks (10 marks each)
Question 3 part (a)
Two elements to a successful procurement strategy include:
1) Contractual decisions:
It is important for the project’s procurement strategy that the type of contract used when acquiring suppliers for project work is the most appropriate for the work/project circumstances. For example, the project manager could decide to use a comprehensive contract which means that only one supplier will be selected to undertake the work, however this could also mean that the PM puts all eggs in one basket. Alternatively, the project manager could decide that it would be more appropriate to choose sequence contracts or parallel contracts. This choice is paramount for the project schedule, budget and plans as the different types of contracts will impact the project timeline/quality in different ways – the comprehensive contract may be cheaper but take much longer to complete as there is only one supplier whereas a sequenced/parallel contract might faster but will cost more due to acquiring two suppliers.
2) Supplier selection process:
The supplier selection process is also extremely important as it is the foundation for which suppliers are selected to undertake the project work. It is a rigorous process and needs the attentions of multiple stakeholders as well as the PM. In order for a project to be successful, the PM must ensure that the correct (most appropriate) suppliers are chosen for the work otherwise it could have detrimental impacts on the quality of work, cost and timelines. E.g. if a supplier who is not suitable for the work is chosen (due to shortcutting the selection process) then this may cause delays in the schedule if the suppliers don’t know how to undertake the work properly and this could cause quality and cost implications to amend if rework is necessary. This illustrates the importance of having a strong selection process that all involved, abide to.
Question 3 part (b)
Three steps in the supplier selection process to ensure the most appropriate supplier is chosen for the project are:
1) Tender – once the initial research and pre-qualifying stages are complete, the shortlist of potential suppliers are then put forward to complete a project tender/bid where they will provide documentation on their capabilities and how this matches the scope of the project. The suppliers will also provide a quote for the work they will undertake as well as any other commercial information for the project manager and stakeholders to use as a basis to select a suitable supplier.
2) Evaluation/Scoring – This is the point within the selection process where multiple stakeholders (including the sponsor and project manager) will look to analyse the data and information that they have been given by the suppliers who have submitted tenders. This stage involves the project manager and other key stakeholders combing through the submitted tenders and allocating scores for each supplier against the project scope criteria (this may be weighted according to the importance of certain criteria areas). This will result in a supplier (or multiple depending on which type of contract is being used) being selected to undertake the project work.
3) Award – This stage of the procurement strategy is where the negotiations and awarding take places. The project manager/procurement team/sponsor will look to negotiate with the supplier to gain the best price for the work. This could be in the form of negotiating a lower day rate for a resource or providing some materials for a discounted price to the project team. Once the commercially sensitive information has been discussed, negotiated and finalised the supplier will be awarded with the project work and then it the work will commence on the selected date.
