Contract and Procurement Management Essay Example
July 30, 2018 Studying Tips
Procurement is one of the most important organizational processes. It is essentially concerned with the sourcing and buying of goods, services, and works from outside suppliers. These days, many organizations prefer to procure their basic infrastructures, goods, services, and works through a tendering process as opposed to buying directly from suppliers or sellers. The tendering process is a complex procedure governed by stringent legal procedures and procurement guidelines. All interested bidders or contractors are required to submit proposals to the clients interested in buying goods, services or works. Such proposals should specify the performance aspects of the goods, services, and works they purport to supply along with the associated installation, operational, and maintenance and replacement costs (Sollish & John 2007). Applicants are to be scrutinized thoroughly, thus ensuring that all minimum set standards are met and the most suitable ones are selected. The process also ensures that the selected bidders offer the most competitive terms to the organization so that the company can realize the value of the goods and services offered. After the tendering period elapses, a client evaluates the proposals and selects the one that best meets the needs and requirements at hand. The bidder who is successfully selected is awarded a contract to perform the work.
When a client has selected the most suitable contractor to perform the purported works, continuous reviews are necessary since some of the projects are extremely expensive and subject to high risks. Frequently, a client and a contractor may establish technical teams to review aspects of the project, particularly the costs. This becomes necessary when a contractor is likely to incur more costs than what was quoted in the contract, hence forcing a client to pay more than what was budgeted for in the project planning phase (Sollish & John 2007). In addition to all the relevant costs meant to cover all the phases from the initial one to the final phase, adequate reserves and contingencies need to be included. However, as a result of the many uncertainties and risks involved, the incurred expenditures may fall short of the budgeted amounts. This necessitates a project review. As such, project reviews are meant to generate information and feedback to help in the continuous improvement in the delivery of projects while minimizing additional costs and associated risks.
Project Review across Industries
Various industries are concerned with different projects with respect to costs, uncertainties, and risks. The paper will review the construction and the software and IT industries with the aim of comparing and contrasting the project reviews that are undertaken for the projects related to them.
The Construction Industry
Project reviews in the construction industry play a crucial role because they help to evaluate the past, review the present situations, and help to predict the future. Reviews act as a source of knowledge to project managers by enabling them to understand the real state of affairs. A project review also acts as a source of information to help in making decisions to determine whether a procurement contract should be halted or continued. Decisions may also be made regarding all potentially available sourcing alternatives that can be employed instead of the procurement projects (Cox & Mike 2009). This helps in saving money, time and labor. The costs of procuring materials in the building industry are likely to mismatch the planned budget because the industry’s environment is constantly changing (Craig 1999). For example, project reviews are a common scenario for Fluor Corporation, a global leader in the engineering and construction services. This company engages in frequent reviews with its global clients with the aim of reviewing project costs subject to changing conditions.
The Software and IT Industry
Procurement of goods and services in the software and IT industry may require project reviews from time to time. The market in this industry is highly dynamic and subject to constant changes. Some software is vulnerable because certain programmes have short life cycles. Because of the lengthy procurement procedure, a company procuring software may be forced to conduct reviews so as to keep up-to-date with the current trends. Every time software is upgraded and reintroduced to the market, there are chances of the rising of market prices. Also, there are risks that are a result of dynamic technology, highly regulated environment, and legal issues among others (Rainer & Casey 2009). A contracting company will need to conduct frequent reviews with the aims of evading risk and extra costs and reducing chances of project collapse. For example, CA Technologies enters the software and IT industry and aims at global contracts. Due to the dynamic environments that the company operates in, long-term contracts will require constant reviews to ensure the clients’ demands and expectations satisfaction.
Comparison of Project Reviews between the Construction Industry and the Software and IT Industry
Project reviews in the construction and the software and IT industry can be compared in that both seek to identify the likely risks in the procurement contracting for the goods, services, and works allied to these industries. After the risks have been identified, the review helps to devise strategies that can be employed in these industries to curb the risk while avoiding future uncertainties and extra costs rather than what is planned in the budget to fund the procurement process.
Contrasts of Project Reviews between the Construction Industry and the Software and IT Industry
Project reviews in the construction industry would be different from project reviews in the software and IT industry due to the differences in the extent of capital investments when procuring for the goods, services, and works and the scope of works performed. For instance, the scope of procurement procedures in Fluor Corporation is significantly different from the scope of the procurement procedures in CA Technologies. Fluor Corporation requires heavier investments in the procurement of building materials, equipment and machinery and other subassemblies. CA Technologies, on the other hand, is concerned with the procurement of patents, copyrights, and intellectual rights. Reviews in the construction industries may be influenced by variables such as meteorological conditions, changes in the costs of raw materials, economic conditions among others (Ndekugri & Michael 2014). On the other hand, reviews in the software and IT industries may analyze such aspects as dynamics of the technology, patents, software lifecycles, and stringent regulations (Rainer & Casey 2009). Each of these industries will use the conducted reviews to integrate procurement, risk management, and contractual obligations appropriately.