Procurement Planning

A basic definition for the procurement is “the way the building is realised” and “involves assembling and organising the skills and services of a team of construction professionals”. (the Construction Round Table, 1995). More precisely, the construction industry describes procurement as “a system that establishes the roles and relationships which make up a project organisation”; hence the overall organisation and communication structure for the management, administration and control of a project is established by the procurement system. (D.C.H Coles, 2010)

In this assignment I will be writing a formal report that will explain a typical procurement process, I will outline a variety of methods of supplier reimbursement and contract relationships; I will also outline the pros and cons of each contract type. As well as this, I will explain a typical supplier selection process through the use of Carters 10 C’s and a typical selection process model.

| (TCO C) Compare and contrast a firm fixed-price contract with a cost-plus contract. When would each be appropriate for

A Fixed Price contract provides for a price which normally is not subject to any adjustment unless certain provisions are included in the agreement, such as contract change, economic pricing, or defective pricing. These contracts are negotiated usually where reasonably definite specifications are available, and costs can be estimated with reasonable accuracy. A

Manage the procurement process from start to finish, including the development of Requests for Information (RFI), Invitation for Bids (IFB) and Requests for Proposals (RFP) while strictly adhering to procurement policies, statutes and disclosures; evaluate proposals, prepare award recommendations, negotiate and execute Contract. Facilitate the integration of new or revised programs/contracts; prepare an impact analysis resulting from changes.

– Cost-plus fixed fee (CPFF): that contract provides a payment of approved costs plus a fixed fee. (Types of Government Contracts, 2012).

Procurement intends to explore supply market opportunities and to implement resourcing strategies that deliver the best possible supply outcome to the organization, its stakeholders and clients (Kidd, 2005). Therefore, construction procurement exists to purchase a construction project as requirement of firms or organizational entities to achieve its goals. However, the choice to use external resources is the part of firms’ decision-making

(3) Price, in terms of initial reasonableness and control of exigencies (i.e., changes and claims);

In this type of contract involving the contractor and the federal government, the contractor agrees to supply goods and services under the contract at a predetermined price. The price is fixed and it's not subject to any future price adjustments or alterations. It is upon the contractor

Procurement management process has also been explained to include purchase and acquisition planning, contracting planning, seller response request, seller selection, contract administration, and contract closure. Procurement management also covers relationship between sellers (or contractors, subcontractors, vendors, service provider, or suppliers) and buyers (client, customers, purchaser, service requestors). On the

There are several types of contract method and these methods generally fall under three categories: Fix price (FP) or lump sum (LS), guaranteed maximum price (GMP) and reimbursable contracts. These methods can be applied to any contracting for construction management.

For a long time, procurement has been looked at as negotiating to get better prices. Many organizations still view procurement as a way to influence spending to get discounts and lower costs from their suppliers. However, sustainability and the supply chain risks that companies face today call for procurement to be different now. Organizations can see real savings by looking at total cost of ownership, which can include a lot of the end-to-end supply chain costs. Disruptions are unavoidable and every decision involved in the procurement process has a risk factor to it. In order for procurement to influence and affect a company it must present a business case that it is a value added function. An organization can add value long term with its ability of purchasing within procurement.

Contractor is required to provide upfront for all risks and costs for performing to contract defined requirements; Contractor is responsible for cost and schedule overruns

As a Project manager it is critical to be on the forefront of technological changes and opportunities that will improve project procurements. The opportunity to reduce cost and improve the speed and accuracy of procurement can be found in Electronic Procurements (E-Procurement). The chance to reduce cost is very tempting; however, the risk associated with the opportunity must be considered as well. Project managers have an opportunity to conduct a procurement analysis, which takes a closer look at the advantages and challenges of this new method. “What we now call E-Business arose through the proliferation of the internet as a platform for inter-organizational systems (IOS) in the late 1990s and has had a particularly significant impact

Construction contracts are formulated in a number of ways which, for the purposes of this Standard, are classified as fixed price contracts and cost plus contracts. Some construction contracts may contain characteristics of both a fixed price contract and a cost plus contract, for example in the case of a cost plus contract with an agreed maximum price. In such circumstances, a contractor needs to consider all the conditions in paragraphs 23 and 24 in order to determine when to recognise contract revenue and expenses.