1.0 What is Project Procurement?
“Project Procurement” may be defined as a series of commercial and administrative activities (inputs, elements and outputs) which are managed in discrete packages and have a typical lifecycle through the course of a project.
The lifecycle of these packages or “procurement packages” can be broken down into phases which may include Setup of Procurement Tools, Strategic Sourcing, Supplier Prequalification, Preaward - (Tendering (RFT) or Quotation (RFQ)), Award, Expediting, Inspection, Field Procurement and Surplus Disposal.
As a component of the above “Milestone Tracking” activities are also required to monitor Equipment and Services (through various Procurement phases) to see whether they are tracking on schedule or are late.
The challenge in undertaking “Project Procurement” is managing the milestones and obligations to ensure all parties have complied with their deliverables internal parties and supplier’s/contractor’s.
Some typical Project Procurement activities include:
1.1 Setup of Procurement Tools
Procurement tools need to be developed for the project to take into account the Client’s Heads of Agreement, the Project Management Plan, Health and Safety and other sub-plan requirements.
Electronic Procurement tools may include Sourcing, Supplier Prequalification, Tendering/Quotation, Purchase Order commitment, Contract Deliverables, Milestone Tracking and Field Procurement databases. Field Procurement is an extension of the Quotation process used to manage the purchasing of onsite materials.
Electronic information tools are encouraged to provide information to authorised personnel on approved Procurement processes.
1.2 Strategic Sourcing
Undertake analysis of the market, Source potential company’s for Supplier Prequalification, Local content vs indent/offshore commodities.
1.3 Supplier Prequalification
Prepare and Issue Prequalification Questionaire, Receive response re: Prequalification questions, Evaluate responses, Determine what Supplier’s are prequalified or excluded from receiving an RFT.
1.4.1 Preaward - Tendering (RFT)
Prepare and Issue RFT, Manage Tender clarifications and Numbered Notices, Receipt Tenders, Distribute Tenders, Evaluate Tenders (Commercial), Prepare Bidtabs (Commercial), Negotiate with short listed Tenderer(s), Recommend a Tenderer(s) for Award, Seek approval for award.
OR
1.4.2 Preaward - Quotation (RFQ)
Prepare and Issue Budget Prices (if applicable), Prepare and Issue RFQ, Manage RFQ Queries, Receipt Quotations, Distribute Quotations, Evaluate Quotations (Commercial), Negotiate with short listed Supplier(s), Recommend a Supplier(s) for Award, Seek approval for award.
1.5 Award
Prepare LOI (If applicable), Prepare LOA (If applicable), Prepare conformed Purchase Order or Contract Agreement, Issue Purchase Order to successful Supplier, Issue Contract Agreement to successful Contractor, Issue unsuccessful Letters (Dear john).Undertake handover to Expediting and Inspection discipline.
* For consistency “Supplier” means a contracting party providing materials or equipment to a nominated delivery point.
** For consistency “Contractor” means a contracting party providing a combination of materials and services or services to the Purchaser. On and offsite work may be a part of their scope.
1.6 Expediting
Review Contract Deliverables following Award, Desk Expedite requirements from Suppliers, Undertake visits to Supplier’s facilities as required, Write Expediting Reports, Identify where Supplier’s do not meet their obligations and manage corrective actions.
1.7 Inspection
Review Contract Deliverables following Award, Physically inspect or engage a qualified 3rd party to inspect Equipment. Write Inspection Reports, Identify where Supplier’s do not meet their obligations and manage corrective actions.
1.8 Field Procurement
Draw down on Blanket Orders for Materials, Prepare and Issue field RFQ’s, Manage field RFQ Queries, Receipt Quotations, Distribute Quotations, Evaluate Quotations (Commercial), Recommend a Supplier for Award, Seek approval for award, Award field Purchase Orders or issue Blanket Order Release, Advise unsuccessful Supplier’s, Liase with Materials Management discipline materials received and for return.
1.9 Surplus Disposal
Prior to the completion of the Purchasers onsite scope of work review materials required for disposal (Surplus to requirements), Determine returns under warranty, Propose strategy for offering to the market the sale of surplus materials, Disposal of material ensuring maximum return for Purchaser.
The above list is by no means the entire scope of work carried out by Procurement on a project and is written as a general guide only.
2.0 Contracts and Materials Management
There is some debate in the industry where the Procurement activities end and Contracts and Materials Management activities start. Generally offsite Procurement activities cease after Expediting and Inspection activities are concluded. Although undertaken onsite “Field Procurement” and “Surplus Disposal” activities are considered Procurement related activities.
The Contract Administration or Post award maintenance of packages excluding Expediting and Inspection is considered “Contracts” type activities rather than Procurement work. The Materials Management activities start either from when the Equipment leaves the manufacturers works and/or arrives at the Purchasers nominated site or fabrication facility.
3.0 Project Procurement Plan
Where possible it is recommended that the Procurement Group be involved in a project at an early stage. This will assist in the adequate planning of a “fit for purpose” Procurement Plan where the necessary elements are brainstormed, documented, written, verified, married with key project documents and then approved for release by the Purchasers Management.
The writing of a well thought out Procurement Plan will also assist the project in applying the optimal Procurement resource, reducing possible rework, assist as a reference point, provide ongoing user training etc when undertaking the work relating to individual Procurement packages.
Prepared By Glenn Turley
Procurement Consultant
Phone: (042) 760 8741
05 March, 2008