Procurement and Contract Management: For a Long

Procurement and Contract Management:

For a long period of time, procurement has been considered as an aspect that deals with purchasing supplies and stationary. Notably, procurement is an absolutely fundamental function in any business and it's important for the success and profitability of the business, particularly with regards to the economic recession and downturns. Until recently, procurement was important but rarely celebrated component of many multinational corporations. Currently, procurement and contract management play vital roles in companies, especially global firms, in ways that the traditional managers could not have imagined. As a result, the procurement and contract management has risen to increased prominence and popularity in the highly competitive business environment. Through these components, companies have been able to strategize towards mitigating risks associated with the tightening of the supplies of critical commodities and increase in prices.

Definition and Importance of Procurement and Contract Management:

Procurement can be described as the process of acquiring goods in the right price, quantity, and quality. This concept involves working in partnerships with suppliers through establishing and ensuring long-term working relationship with them ("Defining Procurement," n.d.). The process also involves taking into consideration the storage implications and interruption of cash flow during the acquisition of goods. Traditionally, procurement meant purchasing goods in a hard line manner i.e. The sense that the buyer would attempt to knock down the supplier in relation to the established relationship and cost of products. In some cases, the buyer had the power as the supplier was forced to agree to seemingly harsh conditions of the procurement process.

However, this practice has changed since suppliers are considered as partners and procurement being regarded as a relationship that can be mutually beneficial. As a result, procurement also helps in keeping suppliers content and excited in the relationship in order to promote greater flexibility. This flexibility is defined as the ability to negotiate and an increasingly productive working arrangement in the procurement process.

Contract management is described as the process of methodically and effectively controlling of the creation, implementation, and evaluation of a contract in order to maximize operational and financial performance and lessening risk. While there are various descriptions of contract management, most of them refer to post-award activities. Notably, successful contract management is most efficient if pre-award and upstream activities are carried out efficiently. Contract management requires flexibility and partnerships on both sides of the negotiations and a readiness to adapt the contract terms to reflect the changing situations ("Contract Management Guide," n.d.).

Procurement and contract management have become important in the modern business world, especially because of their link to the success and profitability of a business. Procurement is an important process because it's a complex process that can assist businesses to become more effective since all the obtained goods and services that are purchased will be of right quality, price, and quantity. While procurement may not really produce the commodities that are sold, it can assist in increasing profits, usually dramatically.

Effective contract management has become important and beneficial to many organizations and the entire business world because organizations in the public and private sectors are experiencing increased pressure to lessen costs while enhancing operational and financial performance. As a result, contract management enables these organizations to minimize the costs without interfering with the business' operational and financial performance.

RFP Selection Tools:

The Request for Proposal document is regarded as one of the most significant, if not the most important document, in the process of selecting the vendor. The importance of RFP originates from the fact that the document is presented to providers to obtain a better understanding of their core competencies, willingness to develop a substantive business relationship, and solution delivery. In most cases, the inclusion of an effective pricing template or strategy in the RFP promotes assessment, contract negotiations, and contract management as the procurement relationship grows.

Request for Proposal selection tools consist of various sections that enable the achievement of their objectives in the contract negotiation and management process. These sections include the administrative, background and overview, statement of work, supplier qualification and references, supplier, pricing, contracts and licenses, and appendices sections. The administrative section consists of all of the managerial requirements and information that a supplier must comply with in order to present an acceptable proposal ("Request for Proposal," 2004). On the other hand, the background and overview section offers the suppliers with background information of the company and problem statement that will be resolved with the RFP and the overall objectives and goals.

While the Statement of Work (SOW) explains the technical and management requirements, the supplier qualification and references section necessitates suppliers to offer information about their firm. Supplier section enables suppliers to have a place in the document in which they can provide necessary information that was not requested. A detailed format for suppliers to comply with in the development of price proposals is contained in pricing whereas contracts and agreements from vendors are under contracts and licenses section. The final section of RFD selection tools contains detailed information that is quite lengthy for the body of RFP document.

The response to the Request for Proposal is the Proposal since the previously submitted documents by the vendor were not contractually binding. The proposal is then assessed in order to choose a solution to the specific problem, the proposed solution, and the terms and conditions that are contractually binding, which forms the basis of the contract. Request for Proposal selection tools are mainly used for choosing the most suitable vendor for a contract. The selection process of a vendor also involves the assessment of the presented proposals during contract negotiations. In the assessment process of a proposal, every document will undergo a thorough peer review process. Conducting a very thorough and transparent assessment of proposals is important in the determination of the most appropriate vendor in the contract.

The assessment of proposals begins after the presentation of documentation from the vendors. Some of the major steps for improving the assessment of the proposal include conducting three periodical vendor presentations, reviewing information from the presentations and summaries, and providing follow-up questions (Rumph, n.d.). The periodical vendor presentations provide unique and very educational information regarding the vendor's products and databases. On the contrary, the presentations and summaries are used to show the need for any clarifications whereas follow-up questions are developed in order to obtain any necessary clarifications.

Concept of Procurement Planning:

Procurement planning is a concept that is defined as the process with which companies or institutions to organize any purchasing activity for a particular period of time. The procurement planning process is usually carried out and completed during the process of budgeting. Actually, the first step in the procurement planning process is budgeting since every department is needed to request budget for every staff, purchases, and expenses annually. These budgets are then reviewed as the accountants spend time to identify the common requirement for purchasing. These departments work together with the central purchasing sector to merge the planned spending for certain commodities depending on the presented budgets.

Procurement planning process works effectively in organizations or businesses that are committed to minimizing costs since issues around date of delivery, customer service, and compliance with contract must be solved internally before the contracting. Generally, the basic concept of procurement is that advanced planning, preparation, and group purchasing will contribute to more effective business operations, cost savings, and increased profitability. Some of the major components of procurement planning include just-in-time delivery and bulk pricing and negotiating ("What is Procurement Planning?" n.d.).

In addition to procurement planning, the project management team should adopt various strategies that are necessary for the success of a project. Despite of the nature and kind of project, some of the various strategies that could help in project success include planning, validating, managing, adapting, resource, leverage experience, and auditing results. These strategies help in addressing the factors associated with the project in order to contribute to success and effectiveness.

Selecting the Most Qualified Vendor in a Proposal:

The process of selecting a vendor can be quite complicated and emotionally draining experience if a suitable approach is not adopted from the start of the process. This is despite of the fact that successful selection of the most appropriate vendor is crucial to the success of a project. Some of the most important steps in ensuring the successful selection of the most qualified vendor in a proposal include & #8230;

Analysis of Business Requirements:

It's important to assemble a team of individuals with vested interest in the specific vendor selection process before the collection of data or conducting any interviews. The first responsibility for the vendor selection team would involve defining the product and/or service that is required from the vendor. After identifying the required product or service, the vendor selection team should define the technical and business requirements and document the areas that are relevant to the selection process. The published document should basically incorporate the business requirements that form the basis of searching for the most qualified process.

Vendor Search:

Once the business and vendor requirements have been established, the selection team should start searching for the probable vendors who will be able to provide the material, product and/or service. In this process, the team should consider having a larger scope of vendors since the larger scope of the vendor selection process; the higher the probability of selecting the most qualified vendor. Actually, the number of vendors is also determined by the scope of the vendor selection process. The need for more vendors originates from the fact that not all vendors will meet the minimum requirements for the project.

The next step involves compiling a list of possible vendors to seek for more information from (Bucki, n.d.). This should be followed by writing a Request for Information and sending it to the selected vendors. Short listing is the next stage in the process, which is conducted through evaluating the responses of the vendors and selecting a small number of them.

RFP and RFQ:

The Request for Proposal and Request for Quotation are the next steps, which are very crucial to the selection of the most qualified vendor. These documents should contain submission details, introduction and executive summary, an overview and background of the business, detailed specifications, assumptions and constraints, terms and conditions, and selection criteria.

Evaluation of Proposal and Vendor Selection:

This phase is carried out to lessen human emotion and political positioning in order to make decisions that are in the best interest of the business. During this process, the selection team should be thorough in investigation and seek input from every stakeholder. In order to conduct a unified vendor selection decision, the team should conduct a preliminary evaluation of all vendor proposals, note business and vendor requirements, allocate importance and performance value for every requirement, calculate the total performance score, and select the winning vendor.

Contract Negotiation Strategies:

The process of selecting the most qualified vendor for a project requires suitable and effective contract negotiation strategies, which is the final step in the vendor selection process. This primarily involves developing a contract negotiation strategy and plan for the negotiations on the basis of establishing partnership with the vendor. An effective contract negotiation strategy should include list of priorities and alternatives, definition of constraints and benchmarks, and evaluation of probable liabilities and risks.

Contract Evaluation and Legal Aspects of Procurement:

As previously mentioned, the evaluation is an important step in contract management since contracts have become increasingly sophisticated, especially as more legislation continues to make the process more complex (Gandia, 2010). In most cases, contract evaluation is conducted in order to ensure adequate performance and avoid misunderstandings while preventing small mistakes from developing into major problems. Furthermore, contract evaluation help in ensuring that legal obligations are achieved while acceptable service levels are provided such as the standards of performance, efficiency, and effectiveness.

The process of evaluating contracts is usually carried out by the filed or line manager i.e. The individual who knows the project or service better than the other contracting officials. For the process to be effective, the evaluation of contracts can be considered as a similar process like employee evaluation. Notably, for the field or line manager to conduct a suitable evaluation of a contract, he/she should know the contract, user relationships, contractor relationships and reports, and keep thorough documentation and checklist.

The process of evaluating a contract is performed before the contract is awarded, in the process of delivery of the contract services, during inspections and observations, complaints, and contractor reports. This process should be done through inspecting the work on a weekly or monthly basis, ensuring that the required permits are obtained, and reviewing contractor invoices. The inspection should be followed with communication with the contractor and keeping the procurement in the loop.

Procurement in both the private and public sectors has become an issue of distinct area of law and directives. There are different public procurement laws that have been enacted in various countries in order to regulate the purchasing by organizations in the public sector and some utility sector bodies of contracts for goods and services ("Public Procurement Law," n.d.). These legislations are basically designed to open the public procurement market to competition and promote the free transfer of goods and services.

Public procurement laws cover some various aspects associated with the contracting process such as where contracts should be advertised, procedures for awarding contracts, process of selecting candidates, the basis of awarding contracts, and the number of candidates to be invited to tender. Therefore, these laws form the basis for legal aspects of procurement procedures that should be ignored during the contracting process. Actually, if the process is not done based on the law, there are various legal issues that are likely to arise in awarding the specific contract.

As a result, there is a huge need to assess the legal aspects of procurement during the process of awarding contracts in order to ensure that legal issues associated with the process are avoided. The failure to comply with the regulations governing procurement may result in legal action against the contracting institution, organization, or body. The assessment of the legal aspects help the contracting authority to be open and transparent, provide objective and equal treatment of vendors, and be consistent in the contracting process.

Critical Elements of a Contract:

In order for an agreement to be considered as a contract, it should contain some critical or essential elements that make it to be legally or contractually binding. The lack of these essential elements means that the agreement between the parties is not legally or contractually binding. Some of the major elements of a contract include a definite offer, acceptance, intention of legal consequences, and consideration ("Four Essential Elements of a Contract," n.d.). The offer must be definite as its clearly states the intentions to do something though it does not include requests for proposals, ball part approximations, letters of intent, and expressions of interest. Generally, the definite offer is valid until the acceptance time expires, it's withdrawn before acceptance, or after a reasonable period in the circumstances lapses.