1.

Explain a project procurement management lifecycle, ideally using an example from

within your organization or one that you have researched on the Internet. (10 Marks)

Procurement isn't just one set-in-stone idea or methodology, and it’s also not something that
can be done overnight. It’s a dynamic process that can take any number of forms. It’s facilitated
by the individuals or entities that play a role in its operation and the factors that couple and
interact with each other throughout all the steps.

The following diagram illustrates the fundamental topics about the procurement cycle,
including:

The difference between purchasing and procurement

An overview of the procurement cycle
Steps of the procurement cycle
The procurement cycle steps and procedures in place may vary depending on your business
requirements and objectives. Typical procurement cycle steps include:

Identifying need

The procurement cycle starts with the business identifying a need for a product or service. The
process of identifying a need may be an existing product that simply needs to be reordered or
the introduction of a new product or service. Depending on the type of need, multiple
departments and management teams could be involved. Cross departmental discussions may
be needed to assess business necessity, research market requirements and to compile an audit
of competitors.
Outline a procurement plan

The next step within the procurement cycle is to develop an overall strategy to bring the
product or service to market. There are several considerations that can be included within your
procurement plan; each of them will be outlined from company policies and structures, and will
vary from business to business.

Within the procurement strategy it’s worth considering the type of supplier that you will use to
fulfill the delivery of the product or service you require. Depending on your position within the
market and the type of products or service you may want to explore local suppliers or large
international suppliers that can provide the most cost effective and efficient service.

Once the type of supplier has been decided you may want to consider the tendering process.
You can choose whether to entertain an auction tender, where suppliers will bid for your
business, or, alternatively, enter direct negotiations with a selection of potential partners.

Additional considerations could include testing the market to help identify buying cycles, trends
and market requirements. Additionally, time should also be spent creating the relevant
documentation that will be sent for tender. For example, the documentation could include
terms and conditions, product specifications, volumes and service agreements. Documenting
specifications will help your suppliers quote accordingly to fulfil your requirements.

Selecting suppliers and issuing RFQs

Once your procurement management plan has been set out, the next stage is to identify
relevant suppliers. Requesting for Information (RFI) provides you with the opportunity to gain
relevant information from suppliers including size, financials and resources. Including an RFI
within the procurement procedure and cross referencing the information received against your
preferred supplier requirements will help you to determine whether a supplier meets the
criteria to be included in the tender process.
Once the RFI stage is complete the next step is to issue a Request for Quotation (RFQ). An RFQ
is sent out to preferred suppliers and includes details on the product or service required,
volume and timescales. The RFQ stage can be initiated through a head to head auction or direct
negotiation.

Tender evaluation process

A tender evaluation process starts when a supplier has submitted its tender bid. The tender
evaluation includes assessing the supplier’s quality of products / service, fulfilment capabilities,
timescales and financial details. Additional considerations can include the overall costs and any
terms and conditions that may have been included.

Typically, a tender evaluation process includes:

 Price comparison
 Fulfillment capabilities
 Quality of product / service
 Reference checking
 Credit and financial checks
 Supplier audit
 Product / service sample or trial
 Cost evaluation

Procurement contract and supply chain management

After the tender evaluation stage and a preferred supplier have been selected, a procurement
contract will need to be arranged. The procurement contract will specify terms and conditions
including agreed timescales, costs and required stock levels to minimize risk.

The terms and conditions agreed within the procurement contract can be used as a marker
against KPIs which will enable you to manage supplier relationships and resolve any potential
issues that may arise during the procurement process. Maintaining a healthy relationship with
your key suppliers can play an important role with future procurement needs. Maintaining key
relationships can ensure continuity with your preferred products and services. It can also help
with being first to market with a new product or service to get ahead of the competition.

Warehouse and asset management

Additional considerations within the procurement cycle include managing warehouse

expectations and monitoring assets. The warehouse will have to consider fundamentals such as
storage, product codes, and delivery times and order processing. Assets will need to be
monitored and reported against sales and marketing trends to asses existing and future
business requirements for the product and services provided.

2. When suppliers are pre-qualifying to receive an Invitation to Tender, what six areas of
capability would you expect to probe as a project procurement specialist? (10 Marks)

I will check the following Steps in Supplier’s Prequalification

Establish Suppliers Prequalification Evaluation Criteria
1. Mandatory requirement (Legislative Requirement)
 Renewed trade license copy
 Registration to VAT (copy of VAT registration), If the firm is VAT Registered
 Tax identification (identification No, issued from concerned authority)
 Any other mandatory requirements

2. Financial capacity
 Financial capacity evidenced by registered capital and/or current year audited financial
statement and/or Bank statement registered in the name of supplier.

3. Human capacity (if applicable)

Evidence of human resources capability, in relation with key personnel and principals relevant
to the specific procurement:
 Qualifications
 Experience
  Training and development possessed and provided (brief CVs of key staff members may
be useful)
 the number of employees and managers;
 the ratio of temporary to permanent employees; and
 The organizational structure and position descriptions.
 the stability of the workforce
4. Past Experience from third party (if applicable)
Tangible evidence from external third party will be required to testify applicant as a dependable
and reliable supplier to deliver the goods, civil works and/or services as per schedule; it will be
based on demonstrated past experience and history of organization performed in that specific
Governmental, international and private organization
The contents of the evidence might include among others;
 the name of the client organization
 a description of the job and its key outcomes
 the standard of the work,
 Delivery time or length of the service
 value and size of the job
 Commitment of supplier to clients satisfaction
 Quality assurance and management system
 Occupational health, safety and rehabilitation program
 Environmental compliance (i.e. ISO 14000 Certification
 Compliance with code of practice and industry standards
 Evidence that shows history and how long the suppler has been in business suppler
familiarity and experience in particular business
 Registration to a board/professional body
 Best practice and achievement
5. Warranty
6. Delivery time
3. What should a Project Procurement Initiation Document include and why is it important?
(10 Marks)

The Project Procurement Initiation Documentation (PPID) is one of the most significant
artifacts in project management, which provides the foundation for the business project.

Specifying the importance of the project, Project Initiation Documentation identifies that it is
the contract between the project management and sponsor. The aim of PID understands the
premises of the project. The correct format of PID represents the understanding of the
background, objectives and benefits. A Project Initiation Document often contains the
following: -

Project Goals Organization and Governance

Scope Communication Plan
Project Background Quality Plan
Assumptions, Dependencies and Project Controls
Constraints Signoff / approval

A Project Charter could be created instead of a PID; the two document types are highly similar.
But a Project Charter is less detailed, which makes it more suitable for cases in which content
producers are less available.

Project Goals - The purpose/goal of the Project Initiation Document (PID) is to capture and
record basic information needed to correctly define and plan the project. The PID should
expand upon the Project Mandate and state what the project is aiming and planning to achieve
and the reason for the importance of meeting these aims. It also contains the list of people who
are participating in the project development from the very beginning until project closure,
along with their roles and responsibilities. The PID also includes the date when the document
was approved by the Project Board.
Scope - Project Scope Statement is the part where detailed idea and requirements about the
procurement, also it helps to avoid proliferating problems and questions in the project lifecycle.
That part of PID explaining in depth what the project is delivering for Stakeholders and
customers.
Proposed Solution explains what innovations, changes and aspects the project will bring within
the environment and the society and which changes and renewals it will cause.

Project Background - Project Background establish why and how the project was created. It is
rational way of make the specific project above others emphasizing the attention of
participation of most active candidate of a team. The result should be that the resources and
equipment are made available to you to ensure your project happens.

Assumptions, Dependencies and Constraints – these are details assuming ahead of the Project
Management Requirements and Business Requirements Specification being documented.
Project Constraints in the PID identifies the outer impact, such as unavailability of resources or
competitor (another project).

Organization and Governance – this part of the PID consist an organization chart. The
involvement of the different areas will vary as the project progresses of the initial project.

Communication Plan - During the whole process of creating the Project Initiation Document the
Project manager is aware that they will be attending meetings with Third Party Project
Managers.

Quality Plan – this part of the PID determines when the End Stage Assessment will be taking
place. These are basically check points during the life of the project which ensure that a Quality
product is being delivered. The completion assessment implies meetings where considering
Baseline Project Plan to ensure it is up to date and on schedule.
Project Controls - Project Controls include Budget Actuals and forecasts produced for each
financial period, Exceptions to be escalated to the Corporate Program Manager, Product
reviews from the Quality Plan, Project Tolerance, Risk Mitigation Plan, identifying project risks
and plans for their mitigation.

Signoff / Approval - In a situation when stakeholders decide to relocate project into Exception,
a detailed Exception Plan is needed to be introduced which will replace the versions of the
project/stage plans which were in use before the Exception. And on top of all this additional
paperwork, the Project Manager will also have to keep the project moving forward and ensure
their team is motivated. Once the PID is formally approved, it means that there is an additional
contingency to utilize before having to move into Exception.