Contracting and procurement - Revision history

Tkokotas at 17:03, 16 November 2018

2018-11-16T17:03:27Z

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			''Developed by Hildur Gudmundsdottir''


	==Abstract==		==Abstract==
	This article will present a review of the tendering phase and contract management of project procurement management. Decision factors and methods for a company's procurement division when selecting a supplier and negotiating a contract will be presented. All companies have to make a decision whether to produce in-house or outsource their goods or services. If companies are lacking capacity, skills or knowledge, other alternatives are explored. One alternative, outsourcing, and an in-house production will be weighed, introducing risk and benefits of both methods. When the needs have been determined a supplier is chosen. Multiple factors should be considered when selecting a supplier and selection criteria is prepared in procurement documents. When all requirements have been stated and suppliers evaluated, the company must decide between a pool of sellers, which they seek offers from, or choose to negotiate with a given seller. When the supplier has been chosen, a contract must be designed with some main objectives. When negotiating a contract, the main things to consider are to ensure that the buyer is able to meet their customers' demand and propose a system where the supplier and the buyer share risks and cost. The article will first introduce briefly the definition of procurement and contracting separately, and then explain the relationship between the two. The article will then be divided into five main parts; defining the problem, defining the buyers' needs, determining the qualification of a supplier, choosing a supplier, and finally the contract terms<ref name="Optimal Procurement Mechanisms"/><ref name="Supplier"/>.		This article will present a review of the tendering phase and contract management of project procurement management. Decision factors and methods for a company's procurement division when selecting a supplier and negotiating a contract will be presented. All companies have to make a decision whether to produce in-house or outsource their goods or services. If companies are lacking capacity, skills or knowledge, other alternatives are explored. One alternative, outsourcing, and an in-house production will be weighed, introducing risk and benefits of both methods. When the needs have been determined a supplier is chosen. Multiple factors should be considered when selecting a supplier and selection criteria is prepared in procurement documents. When all requirements have been stated and suppliers evaluated, the company must decide between a pool of sellers, which they seek offers from, or choose to negotiate with a given seller. When the supplier has been chosen, a contract must be designed with some main objectives. When negotiating a contract, the main things to consider are to ensure that the buyer is able to meet their customers' demand and propose a system where the supplier and the buyer share risks and cost. The article will first introduce briefly the definition of procurement and contracting separately, and then explain the relationship between the two. The article will then be divided into five main parts; defining the problem, defining the buyers' needs, determining the qualification of a supplier, choosing a supplier, and finally the contract terms<ref name="Optimal Procurement Mechanisms"/><ref name="Supplier"/>.

ErnaGudny at 20:33, 28 February 2018

2018-02-28T20:33:44Z

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	<ref name="Outsource">Buck-Lew, M. (1992). To Outsource or Not. Stephen M. International Journal of Information Management.</ref>		<ref name="Outsource">Buck-Lew, M. (1992). To Outsource or Not. Stephen M. International Journal of Information Management.</ref>

	<ref name="PMBOK">~~William R. Duncan~~. (~~2000~~). A Guide ~~to The~~ Project Management ~~Body of Knowledge~~. ~~Pages~~ 355-389.</ref>		<ref name="PMBOK">Project Management Institute. (2013). ''A guide to the project management body of knowledge (PMBOK® Guide)''. 5th ed. Pennsylvania: Project Management Institute, pp. 355-389. </ref>

	<ref name="Dict">C. Soanes, A. Stevenson. (2003). Oxford Dictionary of English.</ref>		<ref name="Dict">C. Soanes, A. Stevenson. (2003). Oxford Dictionary of English.</ref>

S172763: /* Contract Management */

2018-02-27T22:13:37Z

Contract Management

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	'''Fixed-price contracts''' contain a fixed total price for a specific product or service to be provided. This type of contract also often includes financial incentives regarding specific project objectives, that can be quantified and measured. Suppliers are legally obligated to fulfill fixed-price contracts, resulting in fees if requirements are not met.		'''Fixed-price contracts''' contain a fixed total price for a specific product or service to be provided. This type of contract also often includes financial incentives regarding specific project objectives, that can be quantified and measured. Suppliers are legally obligated to fulfill fixed-price contracts, resulting in fees if requirements are not met.
	Fixed-price contracts split into:<ref name="PMBOK"/>		Fixed-price contracts split into:<ref name="PMBOK"/>
	*'''Firm Fixed Price Contracts:''' The most common contract, with a set price for goods or services and not subject to change. If a cost increase occurs is responsible ~~by the supplier which~~ is bounded by contract to complete the task. In this type of contract the buyer is obligated to state specifically all products or serviced to be procured.		*'''Firm Fixed Price Contracts:''' The most common contract, with a set price for goods or services and not subject to change. If a cost increase occurs the supplier is responsible and is bounded by contract to complete the task. In this type of contract the buyer is obligated to state specifically all products or serviced to be procured.
	*'''Fixed Price Incentive Fee Contracts:''' This arrangement gives some flexibility that allows some deviation in performance from the supplier. Performance target is set before the production starts but the final contract price is decided after it has completed. In the beginning a price ceiling is set and any increase above that is the responsibility of the supplier.		*'''Fixed Price Incentive Fee Contracts:''' This arrangement gives some flexibility that allows some deviation in performance from the supplier. Performance target is set before the production starts but the final contract price is decided after it has completed. In the beginning a price ceiling is set and any increase above that is the responsibility of the supplier.
	*'''Fixed Price with Economic Price Adjustment Contracts:''' This arrangement is usually used for a long-term contract over a period of years, which has a fixed price, but is subject to changes such as inflation changes, or cost changes for s raw materials. This type of contract protects both the buyer and supplier from out-of-control conditions.		*'''Fixed Price with Economic Price Adjustment Contracts:''' This arrangement is usually used for a long-term contract over a period of years, which has a fixed price, but is subject to changes such as inflation changes, or cost changes for raw materials. This type of contract protects both the buyer and supplier from out-of-control conditions.

	'''Cost-reimbursable contracts''' involve cost reimbursements from the buyer to the seller for all actual costs that occur during the production, with a fee representing seller profit. It often includes financial incentives if the supplier does not meet preset targets for cost, schedule or technical performance.		'''Cost-reimbursable contracts''' involve cost reimbursements from the buyer to the seller for all actual costs that occur during the production, with a fee representing seller profit. It often includes financial incentives if the supplier does not meet preset targets for cost, schedule or technical performance.

S172763: /* Determining the Qualification of a Supplier */

2018-02-27T22:03:08Z

Determining the Qualification of a Supplier

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	*'''Proprietary right:''' For the work processes or services used.		*'''Proprietary right:''' For the work processes or services used.

	Each business must identify their own selection criteria, depending on complexity of the product or service. Pharmaceutical companies selling on the US market for example, must select a supplier approved by the FDA (Food and Drug ~~Authority~~) and the supplier must be audited to confirm they fulfill certain rules and regulations<ref name="PMBOK"/>.		Each business must identify their own selection criteria, depending on complexity of the product or service. Pharmaceutical companies selling on the US market for example, must select a supplier approved by the FDA (Food and Drug Administration) and the supplier must be audited to confirm they fulfill certain rules and regulations<ref name="PMBOK"/>.

	To verify a supplier's qualification buyers can take proactive steps. The buyer may ask previous customers for reference, and have them confirm a delivery performance and inform about any problems that arose. They may as well do financial status checks, and check if the supplier has access to more workforce or unused capacity of facilities in case of unexpected increase in demand. The buyer might have requirements of specific quality standards that need to be verified with the supplier, as well as request samples of supplier products and test them to see if they meet requirements<ref name="Select"/>.		To verify a supplier's qualification buyers can take proactive steps. The buyer may ask previous customers for reference, and have them confirm a delivery performance and inform about any problems that arose. They may as well do financial status checks, and check if the supplier has access to more workforce or unused capacity of facilities in case of unexpected increase in demand. The buyer might have requirements of specific quality standards that need to be verified with the supplier, as well as request samples of supplier products and test them to see if they meet requirements<ref name="Select"/>.

S172763: /* Annotated bibliography */

2018-02-27T21:14:16Z

Annotated bibliography

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	'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies. The guide provided a deeper insight in Procurement and Outsourcing Strategies in Chapter 9 which was used as reference in this article, to introduce the benefits and risks of in-house production and outsourcing. Further reading in this book gives the reader a better understanding of the whole supply chain and provides solution to important supply chain issues.		'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies. The guide provided a deeper insight in Procurement and Outsourcing Strategies in Chapter 9 which was used as reference in this article, to introduce the benefits and risks of in-house production and outsourcing. Further reading in this book gives the reader a better understanding of the whole supply chain and provides solution to important supply chain issues.

			'''Beil, D. (2009). Supplier Selection. Stephen M. Ross School of Business:''' The paper provides a detailed analysis of how to select a supplier. During a supplier selection companies identify, evaluate and make a contract with suppliers. When companies choose a supplier to compensate for a specific service, they expect significant benefits and high value deliverables. This paper describes steps of the process such as identifying suppliers, gathering information from suppliers, setting contract terms, evaluating and negotiating with suppliers. Further reading in this paper gives the reader a more detailed analysis of how to select a supplier.
	Supplier selection ~~is the process by which firms~~ identify, evaluate, and contract
	with suppliers. ~~The~~ supplier ~~selection process deploys~~ a ~~tremendous amount of a firm’s fi-~~
	~~nancial resources. In return~~, ~~firms~~ expect significant benefits ~~from contracting with suppliers~~
	~~offering~~ high value. This ~~article~~ describes ~~the typical~~ steps of ~~supplier selection processes:~~
	identifying suppliers, ~~soliciting~~ information from suppliers, setting contract terms, negotiating
	with ~~suppliers, and evaluating~~ suppliers. ~~It highlights why each step is important,~~
	~~how~~ the ~~steps are interrelated, and~~ how ~~the resulting complexity provides fertile ground for~~
	~~ORMS research~~.

	==References==		==References==

S172763: /* Annotated bibliography */

2018-02-27T21:09:07Z

Annotated bibliography

← Older revision		Revision as of 21:09, 27 February 2018
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	'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies. The guide provided a deeper insight in Procurement and Outsourcing Strategies in Chapter 9 which was used as reference in this article, to introduce the benefits and risks of in-house production and outsourcing. Further reading in this book gives the reader a better understanding of the whole supply chain and provides solution to important supply chain issues.		'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies. The guide provided a deeper insight in Procurement and Outsourcing Strategies in Chapter 9 which was used as reference in this article, to introduce the benefits and risks of in-house production and outsourcing. Further reading in this book gives the reader a better understanding of the whole supply chain and provides solution to important supply chain issues.


			Supplier selection is the process by which firms identify, evaluate, and contract
			with suppliers. The supplier selection process deploys a tremendous amount of a firm’s fi-
			nancial resources. In return, firms expect significant benefits from contracting with suppliers
			offering high value. This article describes the typical steps of supplier selection processes:
			identifying suppliers, soliciting information from suppliers, setting contract terms, negotiating
			with suppliers, and evaluating suppliers. It highlights why each step is important,
			how the steps are interrelated, and how the resulting complexity provides fertile ground for
			ORMS research.

	==References==		==References==

S172763: /* Annotated bibliography */

2018-02-27T21:08:10Z

Annotated bibliography

← Older revision		Revision as of 21:08, 27 February 2018
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	'''William R. Duncan. (2013). A Guide to The Project Management Body of Knowledge:''' The book provides a standard terminology and guidelines for project management. It gives a good understanding of various aspects of project, portfolio and program management. The guide provides guidelines of how to use and apply project management concepts and practices. The guide provides deeper insight into the topic of Project Procurement Management in Chapter 12 which was used as reference throughout the whole article. Further reading in this chapter gives the reader a even deeper understanding of project procurement management and contract management.		'''William R. Duncan. (2013). A Guide to The Project Management Body of Knowledge:''' The book provides a standard terminology and guidelines for project management. It gives a good understanding of various aspects of project, portfolio and program management. The guide provides guidelines of how to use and apply project management concepts and practices. The guide provides deeper insight into the topic of Project Procurement Management in Chapter 12 which was used as reference throughout the whole article. Further reading in this chapter gives the reader a even deeper understanding of project procurement management and contract management.


	'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies. The guide provided a deeper insight in Procurement and Outsourcing Strategies in Chapter 9 which was used as reference in this article, to introduce the benefits and risks of in-house production and outsourcing. Further reading in this book gives the reader a better understanding of the whole supply chain and provides solution to important supply chain issues.		'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies. The guide provided a deeper insight in Procurement and Outsourcing Strategies in Chapter 9 which was used as reference in this article, to introduce the benefits and risks of in-house production and outsourcing. Further reading in this book gives the reader a better understanding of the whole supply chain and provides solution to important supply chain issues.

S172763: /* Determining the Qualification of a Supplier */

2018-02-27T20:55:42Z

Determining the Qualification of a Supplier

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	Various factors to consider are:<ref name="PMBOK"/>		Various factors to consider are:<ref name="PMBOK"/>
	*'''Understanding of need:''' The supplier's responsiveness to the procurement statement of work.		*'''Understanding of need:''' The supplier's responsiveness to the procurement statement of work.
	*'''Overall or life-cycle cost:''' Total cost of ownership(purchase cost plus operating cost).		*'''Overall or life-cycle cost:''' Total cost of ownership (purchase cost plus operating cost).
	*'''Technical capability:''' The technical skill and knowledge.		*'''Technical capability:''' The technical skill and knowledge.
	*'''Risk:''' The risk included in the statement of work and the risk assigned to the supplier.		*'''Risk:''' The risk included in the statement of work and the risk assigned to the supplier.

S172763: /* Abstract */

2018-02-27T20:54:47Z

Abstract

← Older revision		Revision as of 20:54, 27 February 2018
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	==Abstract==		==Abstract==
	This article will present a review of the tendering phase and contract management of project procurement management. Decision factors and methods for a company's procurement division when selecting a supplier and negotiating a contract will be presented. All companies have to make a decision whether to produce in-house or outsource their goods or services. If companies are lacking capacity, skills or knowledge, other alternatives are explored. One alternative, outsourcing, and an in-house production will be weighed, introducing risk and benefits of both methods. When the needs have been determined a supplier is chosen. Multiple factors should be considered when selecting a supplier and selection criteria is prepared in procurement documents. When all requirements have been stated and suppliers evaluated, the company must decide between a pool of sellers, which they seek offers from, or choose to negotiate with a given seller. When the supplier has been chosen, a contract must be designed with some main objectives.When negotiating a contract, the main things to consider are to ensure that the buyer is able to meet their customers' demand and propose a system where the supplier and the buyer share risks and cost. The article will first introduce briefly the definition of procurement and contracting separately, and then explain the relationship between the two. The article will then be divided into five main parts; defining the problem, defining the buyers' needs, determining the qualification of a supplier, choosing a supplier, and finally the contract terms<ref name="Optimal Procurement Mechanisms"/><ref name="Supplier"/>.		This article will present a review of the tendering phase and contract management of project procurement management. Decision factors and methods for a company's procurement division when selecting a supplier and negotiating a contract will be presented. All companies have to make a decision whether to produce in-house or outsource their goods or services. If companies are lacking capacity, skills or knowledge, other alternatives are explored. One alternative, outsourcing, and an in-house production will be weighed, introducing risk and benefits of both methods. When the needs have been determined a supplier is chosen. Multiple factors should be considered when selecting a supplier and selection criteria is prepared in procurement documents. When all requirements have been stated and suppliers evaluated, the company must decide between a pool of sellers, which they seek offers from, or choose to negotiate with a given seller. When the supplier has been chosen, a contract must be designed with some main objectives. When negotiating a contract, the main things to consider are to ensure that the buyer is able to meet their customers' demand and propose a system where the supplier and the buyer share risks and cost. The article will first introduce briefly the definition of procurement and contracting separately, and then explain the relationship between the two. The article will then be divided into five main parts; defining the problem, defining the buyers' needs, determining the qualification of a supplier, choosing a supplier, and finally the contract terms<ref name="Optimal Procurement Mechanisms"/><ref name="Supplier"/>.

	==Contracting and Procurement==		==Contracting and Procurement==

S172763: /* Annotated bibliography */

2018-02-27T16:19:15Z

Annotated bibliography

← Older revision		Revision as of 16:19, 27 February 2018
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	==Annotated bibliography==		==Annotated bibliography==

	'''William R. Duncan. (2013). A Guide to The Project Management Body of Knowledge:''' The book provides a standard terminology and guidelines for project management. It gives a good understanding of various aspects of project, portfolio and program management. The guide provides guidelines of how to use and apply project management concepts and practices. The guide provides deeper insight into the topic of Project Procurement Management in Chapter 12 which was used as reference throughout the whole article. Further reading in this ~~book~~ gives the reader a even deeper understanding of project procurement management and contract management.		'''William R. Duncan. (2013). A Guide to The Project Management Body of Knowledge:''' The book provides a standard terminology and guidelines for project management. It gives a good understanding of various aspects of project, portfolio and program management. The guide provides guidelines of how to use and apply project management concepts and practices. The guide provides deeper insight into the topic of Project Procurement Management in Chapter 12 which was used as reference throughout the whole article. Further reading in this chapter gives the reader a even deeper understanding of project procurement management and contract management.


	'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies.		'''Simchi-Levi, D., Kaminsky, P., Simchi-Levi, E. (2003). Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies:''' The book covers important supply chain issues, and provides models, concepts, and solution methods to improve supply chain systems. It covers the design, control, operation and management within the supply chain and guides the reader through all steps through both theory and multiple case studies. The guide provided a deeper insight in Procurement and Outsourcing Strategies in Chapter 9 which was used as reference in this article, to introduce the benefits and risks of in-house production and outsourcing. Further reading in this book gives the reader a better understanding of the whole supply chain and provides solution to important supply chain issues.

	~~Provides models, concepts~~, and ~~solution methods that are important for~~ the ~~design, control, operation, and management~~ of supply chain ~~systems. This title emphasises on finding or developing effective frameworks that illustrate many~~ important supply chain issues.

	==References==		==References==