LO9 Understand Project Procurement Flashcards
9.4 Supplier Selection Process
What are the steps?
What are the steps?
- Research - Identifying the providers that have the required capability. WCC have different Procurement frameworks which provide a list of contractors already vetted. Standard research route will take longer as each contractor will need to go through the qualification process
- Pre-qualification - Seeks to reduce the list of providers. Pre qualification questionnaire sent out gathering information. Questionnaire may include requests for references of similar work, production capacity of provider, financial stability, ETC
- Tender - Providers will be asked to provide a full bid against a defined set of requirements/Specification. PM needs to ensure specification is clear and providers are given an equal chance of success. Risk analysis carried out on potential challenges by unsuccessful providers. Reserve provider should be identified
- Award - involves the negotiation and agreement of a contract to supply goods and services
- Manage - relationship between project and provider is actively managed
- Close - PM to ensure all financial agreements have been honoured, all challenges to the contractor have been accounted for, maintenance support may need to be set up to support,
Purpose of a procurement strategy
Typical content of a procurement strategy
Why a procurement strategy is important to a project
Purpose of a procurement strategy
Procurement - the process by which products and services are acquired from an external provider for incorporation into the project
Procurement strategy - sets out the high level approach for securing EXTERNAL goods and services to satisfy project needs. Developed by decisions made on strategic sourcing.
Questions to ask sponsor and wider governance when creating the procurement strategy:
How much risk should we retain in the project VS how much is shared with the supplier?
What type of relationship do we want with our supplier? Transactional or collaborative?
Typical content of a procurement strategy
Make or buy decision - Key factor is internal capacity in terms of skills, functions and capabilities. Parts that cannot be delivered internally will be sourced within the market place
Use of single, integrated or multiple suppliers -
Single supplier: One supplier chosen to supply all requirements for a particular commodity of the project. ADVANTAGES: Strong relationship. NEGATIVE: All eggs in one basket approach
Multiple suppliers: Reduces the risk of disruption using multiple suppliers. NEGATIVE: price leverage to volume benefit gained from single supplier can be replaced by creating competition between suppliers
integrated suppliers: Member of the supplier organisation could sit in the project team alongside those who are delivering the project. ADVANTAGES: immediate contact with supplier, problems can be discussed directly, supplier gets an inside view of the project which can gain more knowledge and improve delivery DISADVANTAGES: Too close for comfort
conditions and forms of contract
methods of supplier reimbursement
Fixed Price
Cost plus fee: Customer agrees to pay fee PLUS an agreed fee or percentage. High risk to the customer as they agree the cost within knowing what the final cost will be
Time and material/per unit cost: Agreed price for unit quantity, material or time. High risk to the customer, as the cost will not be apparent until the end of the contract. Costs can be reduce by employing robust contract management to keep track of costs as they are incurred.
Target cost: Sum of money is agreed in advance by both parties. If final cost is less then target then surplus is shared and similarly if the cost is greater then the cost is shared
types of contractual relationships
One comprehensive contract: One supplier is responsible for everything in the project. DISADVANTAGES: entire project depends on the performance of one supplier.
Sequential contract: sequential use of 2 or more contractors during a project. WCC: Use of Effectable to cover FED automations and Oakray to cover communal Door automations
Parallel contract: Similar scope of works is given to 2 or more suppliers who work in parallel to deliver the complete project. WCC: Use of Effectable carrying out installation works and MS carrying out drainage works to the stack pipe or Effectable to carry out WC repairs and Jarsens to carry out pest control
Sub-contracts: Effectable door Automations (Derek)
Supplier selection process
