Module 8 – Making Procurement Work
If time, cost, and quality are key ingredients of projects and linked to determine the successful outcome (deliverables) of the project, then Procurement is a major factor. The purchasing (also described as acquisition or procurement) of materials, equipment, facilities, staff, consultants, sub-contractors, information systems, supplies, and the myriad of other resources that may be required is a major function in ensuring time, cost and quality targets are met. Effective procurement not only enables cost requirements to be met, but affords real opportunities to reduce costs, improve quality (performance), and save time in the project.
In the past, the procurement function was often regarded as a minor off-shoot to manufacturing or production in many organisations. Today, it is appreciated by most managers that procurement represents the major expense in operations and so efficiencies in arranging contracts for the supply of resources represent a major opportunity to reduce overall costs and improve profitability.
Procurement is a strategic function and a major logistic activity in both project and non-project-oriented organisations. Consider a not-for-profit organisation such as the Red Cross. Procurement of all the equipment, supplies, packaging and materials for the Blood Bank service is a major cost and an opportunity to reduce expenses. Inventory can be minimised through effective supply chain management and the adoption of just-in-time supply.
Similarly, a modern hospital procures a huge range of equipment, supplies, materials, disposables, and cleaning and sterilisation services. With tight budget limits and ever-growing demand for health services, the procurement function is key in ensuring that hospitals can carry out their role while meeting patient service targets.
In projects, the stages of procurement – identifying needs, agreeing on specifications, identifying suppliers, negotiating acceptable prices, arranging contracts, managing timely and accurate delivery of required items, ensuring minimum loss, wastage, shrinkage and theft and delivering the right goods and services in the right place, at the right time, in the right quantity, in the right condition, in the right quality, and at the right price – are critical to overall project performance.
Procurement management follows a logical order. First, you plan what you need to contract; then you plan how you’ll do it. Next, you send out your contract requirements to sellers. They bid for the chance to work with you. You pick the best one, and then you sign the contract with them. Once the work begins, you monitor it to make sure that the contract is being followed. When the work is done, you close out the contract and fill out all the paperwork.
You need to start with a plan for the whole project. Before doing anything else, you need to think about all of the work that you will contract out for your project. You will want to plan for any purchases a