Projects and procurement

Procurement Acquiring hardware, software, materials, services, spare parts, skills, workforce etc. which are necessary for the project. It is more than purchasing. Organisation of: Transport Arrangement of accommodation for staff away from home Hiring specialists or consultants Renting (building, equipment etc.) Documentation

Procurement (or acquisition) is… vital for projects concerned with a hardware product. The commitment for materials, goods and services should be made before their use in the project. Procurement can set the course of the project.

Responsibility on procurement Project manager: for the most important actions and for supervision Procurement executive or procurement office: Operative planning and operative tasks Other: Legal experts (contracts), experts of special machinery and activities etc. If special skill are needed If previous project experience is needed

Autonomy of the procurement group is often limited Of the various functions used in projects, it fits least easily. Possible sources of problems: Significant capital investment (decision is above the project manager) Supply needed only by the project (the mother organization is not prepared) Availability of the resources can be difficult Procurement from different (esp. new) sources needs various experience and knowledge Sometimes two procurement group is needed: One at the HQ, one at the project site

Sources of information Design/engineering departments specify the material required. Quality of these specifications will affect the quality of the project product and processes. The project team itself. Project plans, scheduling etc. Finance department: Availability of money and financial stability of potential suppliers.

Tasks of the procurement executive/group Finding and approving suppliers Ensuring the availability and use of adequate specifications Purchasing at least total cost Vendor surveillance: ensuring delivery time Warning all concerned if delivery specifications are not going to be met Secure storage and accurate control of material Organising all discussions with actual and potential suppliers Advising on prices Acting as a window on the world Post-project disposal of unrequired material and equipment

Organising all discussions with actual and potential suppliers Different specialist project team members often have to meet with the suppliers. Attendance on these meetings is also advisable. Do always update the contact lists.

Window on the world Through contacting suppliers, information can be collected on many areas: Materials used Processes Equipment Price level etc.

Finding and approving suppliers Goods or services Technical capabilities: quality & financial stability: supporting the contract Choosing between alternative suppliers: weighted average of measures like: Design competence Technical competence Previous experience (even with projects) Financial stability Perceived quality Delivery promise Price Terms of payment

Ensuring the availability and use of adequate specifications Use of appropriate standards International National Company or project

Purchasing at least total cost Tendering Weighted average of many factors: price of the resource is only one of them Other factors can affect other types of costs (Product) Life-cycle costing is a possibility Target price is an important basis Caution on too low offers

Vendor surveillance Orders need to be chased (progressed) Telephone, e-mail Personal visit (manufacturing progress) Ask for help from specialists

Warning all concerned if delivery specifications are not going to be met Informing the project manager on every significant change is obligatory Changes (delays) can have an impact on other activities. Early delivery is unwanted, too (storage costs, risk).

Reading Textbook chapter 6