Master of Science in Project Management Module 5: Contracts and Procurement Module learning outcomes • • • • • Define the criteria for understanding project contracts; Discuss the fundamental concepts of procurement practices; Identify the legal and contractual obligations; Assess the importance of procurement to competitive business performance; Discuss how methods and techniques can be used in handling the extent of financial costing in projects. Week 3: Procurement management: part 1 Learning objectives for Week 3 • • Specifying requirements for procurement Developing a project procurement management plan Selecting and assessing suppliers Introduction This week, you will examine the development of a procurement management plan, requirements, and specifications. You will learn about bids and proposals and the process of selecting suppliers. You also will explore how you can plan for contracting. The recorded lecture begins by introducing you to the procurement management plan. The week concludes with a discussion on planning for contracting. You can play each section as many times as you like and also read the text version.
The textbook readings cover the key learning objectives at a reasonably challenging level. The PowerPoint slides at the end provide useful diagrams and summaries to help you review the main points you have covered during the week. For the assessment, you will discuss a question online and also complete a 1/14 Copyright – Laureate Online Education © All rights reserved, 2000 – 2009, The module, in all its parts: syllabus, guidelines, lectures, discussion questions, technical notes, images and any additional material is copyrighted by Laureate Online Education B.
V. Last update: August 10 Module 5: Contracts...
and Procurement Hand-in Assignment demonstrating that you can apply the techniques you have studied. Reading Textbooks Sollish, F. , Semanik, J. , Morris, P. W. G. ed. & Pinto, J. K. ed. 2011. Planning and administering project contracts and procurement. Laureate Education, Inc. , custom ed. Hoboken: John Wiley & Sons. Cavinato, J. L. , Flynn, A. E. & Kaufmann, R. G. (eds. ) (2006) Supply management handbook. 7th ed. New York: McGraw-Hill [Online]. Available from: http://site. ebrary. com. ezproxy. iv. ac. uk/lib/liverpool/docDetail. action? docID=10 155019 (Accessed: 19 February 2010). (Please note that the references to these readings can be found in the Weekly Notes text under the headings of the topics to which they relate. ) • Specifying requirements for procurement Section 13. 1 of the Sollish, Semanik, Morris & Pinto text explains various concepts related to successful planning and implementation of contracting and procurement strategies. This section highlights the importance of aligning procurement with organisational strategy.
This section also explains supply planning and management strategies. Pages 121–127 of the Cavinato, Flynn, & Kauffman text explain various sourcing models used for defining organisational needs, which help an organisation in effective supply management. • Selecting and assessing suppliers Section 1. 13 of the Sollish, Semanik, Morris & Pinto text explores the importance of information provided by suppliers in generating bids and proposals. This section also stresses the need to keep the confidentiality of supplier information to maintain sound business relationships.
Pages 127–141 of Cavinato, Flynn, & Kauffman text focus on the sourcing process and how suppliers are evaluated
and selected. These pages also suggest various approaches for measuring supplier performance. Supplemental readings Fellowes, Inc. (2010) The importance of records management [Online] Available from: 2/14 Copyright – Laureate Online Education © All rights reserved, 2000 – 2009, The module, in all its parts: syllabus, guidelines, lectures, discussion questions, technical notes, images and any additional material is copyrighted by Laureate Online Education B. V. Last update: August 10
Module 5: Contracts and Procurement http://www. fellowes. com/Fellowes/site/workspace/workspace_article_org_6. as px (Accessed: 22 April 2010). Office of Government Commerce (OGC) 1 HM Treasury (2009) A formula for success Procurement effectiveness in major project delivery. London: OCG [Online]. Available from: http://www. ogc. gov. uk/documents/A_Formula_for_Success%282%29. pdf (Accessed: 19 May 2010). Office of Government Commerce (OGC) 2 HM Treasury (2010) Contract management in long term or complex projects: Key commercial principles to help ensure value for money. London: OCG [Online].
Available from: http://www. ogc. gov. uk/documents/Contract_Management_in_Complex_Procu rement%281%29. pdf (Accessed: 19 May 2010). Project Management Institute (2008) A guide to the project management body of knowledge (PMBOK). 4th ed. Newton Square: Project Management Institute. 3/14 Copyright – Laureate Online Education © All rights reserved, 2000 – 2009, The module, in all its parts: syllabus, guidelines, lectures, discussion questions, technical notes, images and any additional material is copyrighted by Laureate Online Education B. V. Last update: August 10 Module 5: Contracts and Procurement
Week 3: Procurement management: part 1 Weekly Notes Week 3 introduction A very important development in project management during the past decade is the manner in which logistics and concern for supply chain functions affect the way projects are developed. This week you examine the components of a project procurement management plan with an emphasis on the importance of well-defined requirements and specifications. You analyse the complex organisational framework in which project managers must participate to ensure the procurement needs of the project will be addressed.
In all strategic projects, senior stakeholders will find considerable advantage in developing their policy and strategic thinking through business-to-business engagement of their potential suppliers—developing a stronger understanding of the art of the possible and preparing to better manage uncertainty (Office of Government Commerce 1 HM Treasury, 2009, p. 5). Specifying requirements for procurement Textbook reading (Sollish, Semanik, Morris & Pinto: Section 13. 1) Online reading (Cavinato, Flynn, & Kauffman: pp. 21–127) The project manager’s analysis of a project’s procurement requirements takes place within the larger organisational context where supply-planning and supply-management strategies stem from the long-term needs of the organisation as the organisation responds to external factors such as procurement trends and supply issues affecting goods or material required by the organisation. The Office of Government Commerce (OGC) suggests that defining procurement requirements in terms of outputs and outcomes not only allows for innovative proposals, but also accommodates the possibility of change (OGC, 2010, p. ). The OGC’s approach to requirements definition focusses on what needs to be produced or acquired—not on how the delivery will take place. Flynn (in Cavinato, Flynn, & Kauffman, 2007, p. 121) defines ‘sourcing’ as ‘the process of identifying potential sources that could provide needed products or services’. The author’s definition of ‘knowledge-based supply management’ emphasises the complex
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