Projects and procurement

(lecture)

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 accomodation for staff away from

home– Hiring specialists or consultatnts– Rentin (building, equipment etc.)– Documentation

Procurement (or acquisition) is…

• vital for projects concerned with a hardware product.

• Tha commitment for materials, goods and servces 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 expert (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. Pssible sources of problems:– Significant capital investment

(decision is above the project manager)– Supply needed only by the project

(the mother organisation is not prepared)– Availability of the resources can be diffuicult– 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 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 meeting is also advisable.

• 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 experice (even is projects)– Fianncial 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– Other factors can affect other types of costs

• 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 (dalays) can have an impact on other

activities.• Early delivery is unvanted, too (storage costs,

risk).

Reading

• Textbook chapter 6