Of the Concept of Planning Purchases - Literature review Example

Procurement Plan Details Procurement Plan Introduction This paper seeks to make an evaluation of a procurement plan for use in a project based organization. The paper will be subdivided into three main areas, in which every subdivision purposes to discuss a specific question in the evaluation. Essentially, the three areas that the paper purposes to discuss are: Review the concept of planning purchases, discuss the general purpose of procurement plan and to identify and analyze three key components of a typical procurement plan. Review of the Concept of Planning Purchases There are three most important aspects necessary for the delivery of a contract. The three aspects are an effective planning strategy that is done at the initiation stage of the project, the process of quality evaluation and an effective post-contract management strategy. Fredrick and Kennedy (2009, 1) explain that, “the failure of one aspect in such a combination is likely to hinder the success of the other two aspects.” These aspects make up the process of procurement planning, which is the entire process of deciding on the items to be purchased, when to buy the items and the source of acquiring the items. Fredrick and Kennedy (2009, 5) state that the concept of planning purchases involves determining what items or goods are to be purchased or acquired, and when and how the items or goods will be purchased. The concept of planning purchases further identifies the main project needs that could be met by acquiring services, products or outcomes not within the organization of the project, and the specific project needs that are easily realizable by the main project team during the time specified for the execution of the project. One most common factors of planning purchases is the review of the risks involved in every make-or-buy option taken. Ultimately, the target of planning purchases is to mitigate all the risks involved and to transfer the risks to the seller. The process of planning purchases is a determinant to the final success of a project. Franklin and Galle (2008, 3) agree that this “could be attributed to the fact that an unplanned purchasing process may end up either derailing the start of the project,” or prolong the time stipulated for the execution of the project. Moreover, the presumption and target of planning purchases to mitigate all the risks involved and transferring them to the seller makes the whole process appear to be dishonest and fraudulent. The make-or-buy decisions or options in the planning purchases process of a procurement plan is the collection and comparison process of all threats and opportunities that are evoked by the solution to make, and the solution to buy (Franklin and Galle 2008, 3). Additionally, expert judgment during the planning purchases is used in evaluating all the possible solutions to the risks likely to face the project. The general purpose of a procurement plan Before formulation of the procurement plan, there is need to carry out a needs analysis. The needs analysis identifies and fully defines the desire by a community or group of people and relates it to the actual activity (Franklin and Galle 2008, 3). Failure to correctly identify the need may result to procurement of assets that do not fully meet the expectations of the people involved and hence resulting in wastage of funds, time and such related resources. Similarly, an unreliable formulation of the need may result to procurement of sub-standard assets. A risk management plan identifies all the risks that are likely to face the project before, during or after execution. Risks would include the wider environmental, community and government contexts. Once a decision is made to construct a given asset, the procurement process is then initiated. This starts by defining the scope of the project. Usually, a stakeholder, preliminary risk management, preliminary procurement strategy and change management plans are first formulated. According to Pautz (2009, 39-64), justification of the investment decision is done depending on the procurement value. Thereafter, all relevant information is used to develop the business case in which all aspects such as scope of the project, financial impact, economic appraisal and potential suppliers of the necessary items. The stakeholder and change management plans are necessary in managing the general expectations of the project team, the communities targeted and the government (Pautz 2009, 39-64). All plans developed are updated time to time, since they are essential for monitoring and managing the project, all through its lifetime. Project funding may be done by private entities or the state/national budget. Irrespective of the source of the funding, the decision to make the investment must be justified based on a cost benefit assessment. The approval for funding is then done depending on the justification done, including the need, size and cost of the project. National projects are approved the respective government departments or agencies, while internal agency or entity procedures could approve small scope projects. Other aspects such as schedule for the project, methods for acquiring items and management methods solely depend on the scope of the project. A procurement plan is an essential component of any project. It describes the key stages of a project and stipulates the procedures of managing it. The procurement plan must be in consistence and should be closely correlation with the business case or intension initiated at the planning stage. However, the plan must be obtained before any confirmations are done on the available funds and other related resources for the management of the project. Additionally, a procurement plan defines any other deviations that are made on the initial business case. Mohamed and Jeremy (2012, 16) state that a procurement plan further outlines the basic procurement approach or strategy and the market approach, the tendering process or method and the project brief. The procurement plan must stick to the initial business case or intent as well as the investment justification. This includes the management framework that is used during the tendering process and managing of the contract after it is issued out. Furthermore, Mohamed and Jeremy (2012, 16) explain that a “procurement plan proposes the selection framework for the tendering process.” This means that a procurement plan outlines how the process for tendering will be managed, and the specific persons that will be responsible for the management of the tender. The outline includes the evaluation of the tender and the various procedures necessary for negotiations where necessary. Pautz (2009, 48) attests that “the other key components of a procurement plan are the key indicators of the performance of the contract and other strategies.” For example, the government would be intending to construct a new modernized medical facility or hospital in an area that is densely populated, but with very few medical services. In this case, the need is medical services (Mohamed and Jeremy, 2012, 16). Once the relevant government ministry approves the need to construct the medical facility, construction agencies, (tenderers) will be allowed to send in their Requests for Tender (RFT) documentations. The successful construction agency that meets the stipulations of the project, including the schedule and financial ability and competitiveness, will be allowed to start the construction. Three key components of a typical procurement plan. A typical procurement plan is made up of various key components. This is because the plan is an extensive undertaking that takes into account various aspects. This segment of the paper will identify and analyze three key components of a typical procurement plan. Firstly, a procurement plan must have an analysis of the need, which is done in the initial stages of the procurement plan. This is the initial catalyst for the procurement of a specific asset. A justification must be made on the decision to make the procurement and to satisfy that the procurement will serve as the most approachable solution to the need. The analysis of the need could also involve the need to reply to a specific opportunity. This component of a procurement plan includes the following: (a). The need to enter into collaboration with other agencies, (b). Using the already existing resources within the area, (c). Formulating a reliable management, (d). The realization of the procurement. Secondly, a typical procurement must have defined terms and conditions. As previously stated in prior segments of this paper, Lawrence and Slocum(2000, 8) refer to a procurement plan as “an extensive undertaking that involves various entities.” The terms and conditions of a procurement plan are meant to provide guidelines and any other information that a tenderer is supposed to understand and meet regarding the process of awarding the tender, the criteria for evaluation and all other contract requirements. Terms and conditions vary from one procurement plan to another. Nonetheless, all terms and conditions must be consistent to the specific procurement plan. Willinsky (2006, 21) states that the terms and conditions of a procurement plan must be clearly explained before interested parties start presenting their Requests for Tender (RFT) documentations. Willinsky (2006, 21) defines RFT documentations as “the materials meant to indicate an expression of interest.” Therefore, the persons seeking the tenders must have read, understood and promised to adhere to all the terms and conditions of the procurement plan. Terms and conditions of a procurement plan must be clear, logical and very precise. Moreover, terms and conditions are intended to stipulate the consequences of a breach once the contract is awarded. A breach could include failure to meet the schedules, ethical and professional malpractices as well as financial jurisdictions (Willinsky 2006, 21). Thirdly, a procurement plan must have a clearly defined schedule. The process of schedule development involves the analytical stage in which all sequences, resource requirement and activities as well as constraints are created on a schedule. A schedule, therefore, defines the start of the procurement plan to its end, and all the resources required. According to Willinsky (2006, 21), after the approval of the defined need, the contact is finally awarded to the most befitting tenderer. This could be done by simply notifying the successful tenderer. A successful tenderer must prove to be in a position to fulfill or meet the expectations of the procurement plan within the time stipulated in the schedule. Moreover, it is important that all the unsuccessful tenderers are advised in time on the reasons that led to their failure. The outcomes of the project are usually evaluated against the schedule previously prepared for the project. Time to time analysis on the progress of the project is also done with reference to the schedule for the project. Therefore, the performance of the procurement plan is usually measured against the schedule (Cross and Parker 2004, 30-61). However, deviations on the schedule may occur due to unavoidable circumstances. All deviations are usually defined in the procurement plan. A properly designed schedule is likely to successfully meet the expectations of all the stakeholders involved directly or indirectly in the project. On the contrary, a poorly designed schedule is likely to drag the activities undertaken during the execution stage of the project (Cross and Parker 2004, 30-61). In general, by putting together all the project components, the project team is able to come up with an effective order of all the tasks and the needed resources durance. A schedule, as explained by Cross and Parker (2004, 49), is “able to predetermine the success or failure of a project.” A schedule should be substantively networked. This means that the schedule should be able to touch on all the areas of the project. This is intended to meet the expectations of the project as a whole or as a single entity. Conclusion In conclusion, the success of a project depends on the collaboration, flexibility and strategic commitment of all stakeholders. This paper has reviewed, discussed, identified and analyzed the various components of a typical procurement plan. The various academic sources referenced in the paper have proven resourceful in meeting the purposes of the paper. There is need to carry out extensive economical research on the procurement procedures and impacts of contracted projects to all stakeholders. These researches are likely to ascertain on the need to involve all the stakeholders and the need to use two or more service providers or contractors on one project. The identified and analyzed components of a typical procurement plan discussed in the paper have shown a correlation in which one component is likely to draw reference from the other. This is an indication that the procurement plan of a project is indivisible. Bibliography Franklin, A., and Galle. D. 2008. Bans on Short Selling in Europe. Journal Arbitrage Short Sales and Financial Innovation 34(2): 2-5. Covington, F., and Paprock. K. 2002. Distance Learning: The Essential Guide. California, CA: Sage Publications. Willinsky. J. 2006. The access principle: The Case for Open Access to Research And Scholarship. Cambridge, MA: MIT Press. Lawrence, J., and Slocum, J. 2000. Comment: Organization Does Not Cognize. Ariff, M., and Jeremy, F. 2012. Regulatory Failure and the Global Financial Crisis: An Australian Perspective. Cheltenham: Edward Elgar Publishing. Pautz, M. 2009. Synchronizing Meanings and Other Day Laborer Organizing Strategies. Labor Studies Journal 34 (1): 39-64. Cross, R., and Parker, A. 2004. Using Social Analysis to Improve Communities of Practice. California Management Review 49(1): 30-61. Read More