Procurement Strategy and Contract Selection - Essay Example

ARABTECH Ltd Procurement Strategy and Contract Selection Name Institution Date Table of Contents Table of Contents 2 Executive Summary 3 Introduction 4 Criteria used for selecting suppliers and its appraisals 4 Financial Capability 6 Registration 6 Project 1: Supply of building materials 7 Project 2: Internet installation in the offices 10 Project 3: Supply of computers 12 Project 4: Supply of staff uniforms 14 Project 5: Office repair and maintenance 15 The work is usually carried out to satisfactory level since a good working relationship has been developed with the contractor. 17 Conclusion 17 References 18 Executive Summary The right service providers are always needed for any project to meet the required target. Arabtech Company needs qualified contractors to ensure that the projects to be carried succeed. Competency plays a greater role in determining the project outcome. In that connection, following the right channel in obtaining the right contractor has to be duly followed. This is the fundamental aspect that guarantees better results. The paper looks at the various projects that need to be carried out within the company and the suppliers chosen by the company to provide the necessary requirements. Comprehensive procedures to be followed in selecting the best service providers are clearly illustrated. The projects include: Supply of building materials, Internet installation in the offices, Purchase of computers, Purchase of staff uniforms, Office repair and maintenance. In fulfilling the project requirements, the description/nature of the project is put into consideration. The best supplier of the service is carefully identified. The duration of the project is determined giving details on when the specific tasks are to be accomplished. Financial capability is also a crucial aspect that has to be taken into consideration in the paper. It determines the quality of service to be received. Arabtech Company is capable of financing quality projects. In that connection, the service providers need to be well equipped in terms of quality service provision. Technical capability has also been highlighted in the paper as one of the major considerations. Due to the advancement in technology, the providers need to be well versed with the current technology. The best service provider has to fulfill the required expectations in all aspects. Introduction In order for any project to succeed, Arabtech limited will need to work with the right team. This will include the right contractor or supplier. The outcome of the project will be determined by the competence of the supplier or contractor to handle the project. The quality of the project will also determine the cost. In most cases when the contractor or supplier does a sub-standard job then the cost of the project will increase. This is due to the fact that frequent repairs and maintenance will be required. It is therefore advisable to use the best channel and procedures when selecting a contractor or a supplier. According to CHP Procurement Guide (2010), this forms the basis of the entire project and will determine its success or failure. Selection of a poorly qualified contractor will automatically lead to the failure of the project. This may lead to huge losses and penalties to a company. The essay will discuss the necessary procedures to be followed when selecting a contractor. The paper will provide a critical analysis of procedures and the essential requisites of a contractor and a comprehensive process involved in arriving at the most qualified contractor for a task to be undertaken (Mosey, 2009). According to ISO 2000 documents, before choosing a supplier factors to be considered includes; the quality of goods, cost, ability to supply, payment methods, delivery date and the relationship with the company. Criteria used for selecting suppliers and its appraisals Evaluation of the suppliers will be done using the following criteria; the relationship of the supplier with the company will be analyzed. This will depend on whether the supplier has worked with the company before. If the supplier has worked with the company before then how the supplier or suppliers handled the tender before will be of use. This will involve how competent the supplier was in handling the tender. Any supplier that did not perform their duty well will be noted at this point. The quality of the goods the suppliers has will also be analyzed at this point. This is to determine whether the goods meet the required standards or not. Quality being the most important priority for the company, any supplier whose goods do not meet the required standard is noted down (Marsh, 2000). The prices of the goods will then be compared with the tender sum. This is to determine whether the prices quoted by the supplier are reasonable or not. If the prices are way above the tender sum or way below the supplier is noted down. The reason for this is also considered. The right supplier should not be very expensive or too cheap. When the supplier quotes a very low price then the quality of the good should be carefully scrutinized. Incase the company will require more clarification concerning the prices or any other details the supplier is usually notified. The rate at which the supplier will respond to any clarification being sought is also taken into account. In the tender form the supplier usually fills in the dates they feel they can deliver the goods. This is also taken into account. The main reason being to avoid any delays that may jeopardize the project. Such delays may cause the company a bad reputation. This is because the company will be on the spot rather than the suppliers (Marshall & Tarnoff, 2006). Loftus (1999) notes that the payment method suggested by the supplier should also are taken into account. This will include the mode of payment or the time which the amount needs to be paid. Some suppliers will require payment in full after the goods has been delivered while some will require to be paid in installments. All this factors should be taken into consideration and compared to the mode of payment by the company. Any mode of payment suggested by the supplier but is not consistence with that of the company is noted. The last factor to be considered after all the factors discussed above have been considered is the ability of the supplier to supply the goods. Some suppliers may have the required goods but they may not be able to supply the required amount. This is a very important consideration since it may cause the project to stall. When the supplier is not able to maintain consistency in supplying the goods, then it means the project will have to stall at some point. This will not be good for the image and reputation of the company (Loftus, 1999). Financial Capability Financial capability is an important factor when selecting a supplier. A supplier should be financially stable to be able to handle any of the projects contracted to them. This is mainly to avoid losses. According to (Marsh, 2000). When a supplier does not have adequate finance in their company they may fail to supply the goods and be unable to refund the money to the company. Any supplier should thus provide recent bank statements to show their financial capabilities. The amount should be more than twice of the tender sum. Technical capability is a determining factor on how the contract will be implemented. In order for the contractor to carry out the contracted that may be awarded to them, they need to have technical capacity. Registration The contractor must have qualified staff that is registered by recognized professional bodies. Any contractor without proof of qualified personnel is not awarded the tender. Performance will determine the quality and outcome of the project. The supplier must posses a record showing completion of tenders if they had not previously worked for the company. If the supplier had previously worked with the company, then they should have displayed excellent working records. Any supplier with poor performance record will not be considered (Marshall & Tarnoff, 2006). Five projects the company has been involved in Recently the company was involved in several projects and different criteria were used to evaluate the projects. The five projects included: Supply of building materials. Internet installation in the offices. Purchase of computers. Purchase of staff uniforms. Office repair and maintenance. Project 1: Supply of building materials Project nature The company had been awarded a contract to build a five storey building. In order for it to fully accomplish the task, the company required a supplier capable of supplying building materials for the entire period of the project. A competent supplier was thus required. Project main characteristics Duration: January 2010-August 2010 Client’s priorities. Quality Building materials Overall cost. Timely supply. Time: The project was to last for one year but the materials were required on site one week before the commencement of the project. Quality: The materials required were of high quality and strength and could withstand high pressures. Environmental concern: All the materials should be environmentally friendly and should not be harmful to the workers. Cost: The cost of the materials should be reasonable and within the tender sum. Client: The chief quantity surveyor in the civil engineering department will provide the specification for the project. Sponsor: The Chief Engineer in the building and construction department. Process and criteria used to select suppliers The tender was advertised in the local press. It attracted ten suppliers. Most of them had never worked with the company before except three suppliers. The Chief Engineer evaluated the evaluated the suppliers and came up with three suppliers two were new while one had previously worked with the company. The following criteria were used by the Engineer: The previous working relationships The cost of the materials quoted by the supplier. Ability of the company to supply the required quantity of materials. Environmental effects of the materials. Quality of the materials Improvement opportunities After the review it was noted that the procedure should have been more competitive if adequate time was given for suppliers to apply. This is because the previous suppliers who had worked with the company had failed to supply standard materials. It was decided that in future the time to consider applications will be increased. Effects of the criteria on the process The selected supplier was quite competent and was able to supply materials of high quality and standards. This contributed greatly to the success of the project and a good working relationship was maintained. Project 2: Internet installation in the offices Project nature The company was in the process of upgrading its systems and there was need to install the internet through the wireless network. This was undertaken since most employees had been supplied with computers and the necessary technology was required to improve performance. Project main characteristics Duration: January 2005 Client priorities To have full wireless internet connection within one month in the office. A proper internet provision that will not be interrupted frequently. Internet connection at affordable cost. Client: The Company head office. Sponsor: Head of information technology department. Process and criteria used to select supplier The management came up with a tender committee headed by the head of information technology department. They hen drafted the list of suppliers and selected one who was the most qualified. A meeting was then held with the supplier and terms of agreement drafted and signed. The following criteria were used for selection: Overall cost of the service. Quality of the service. Time taken for the installation. Internet speed. Ease of use. Improvement opportunities The formation of the tendering committee was no necessary. This is because it slowed down the selection procedure due to difference in opinions concerning the supplier. In future the head of the information technology should handle the project. Effects of the criteria on the process Although the process was not competitive, the supplier was able to accomplish the task satisfactorily with no hitches reported. Project 3: Supply of computers Project nature The Company is in the process of modernizing its office equipment. It has thus been recommended that the computers which were of the old generation should be disposed off. The company therefore requires supply of the modern generation computers. Project main characteristics Duration: November 2008- December 2008 Client priorities Quality equipment is the major priority since the client requires modern generation computers. Overall cost. Timely supply. Client Information technology department Sponsor Head of information technology and human resource department Process and criteria used to select supplier The open tendering method was used in this project. The tender was posted on the company’s website and all potential suppliers were invited to apply. There were a total of fifteen suppliers and all of them were new. The head of the information technology department evaluated the documents and came up with a list of two suppliers who emerged the best. The following criterion was used: Quality of the goods was considered. The overall cost of purchasing the goods The type of computers. Improvement Opportunities The open tendering process was not the best to be used. A few selected suppliers could have made the process easier. This is because only new suppliers applied for the tender. Impacts on the project Although quality was the key factor in the supply contract, the open tendering was not the best option since it was quite involving as all of the applicants were new. Much resources and time was thus used during the process. However the supplier was able to supply the best computers in the market. Project 4: Supply of staff uniforms Project nature The company has been involved in several construction works in hazardous environment which could interfere with the health of the workers. The company therefore requires a supply of protective uniforms for the staff. Project main characteristics Duration: August 2009. Client priorities The protective clothing should be of the best quality to effectively protect the staff. Since the project is ongoing the supplier should be fast enough in implementing the tender. Client The stores department Sponsor Field supervisor Process and criteria used to select supplier Due to the urgency of the project, the field supervisor in consultation with the store keeper selected a list of previous suppliers. They came up with a list of three suppliers who were then advised to write their proposals. The best and most appropriate proposal was forwarded for approval. The criteria used to select the supplier were: Previous work experience. The relationship with the company. The quality of goods supplied. Ability to supply the required quantity. Improvement opportunities Since the suppliers had already worked with the company, their performance was already known. Therefore, the simplest method would have been direct selection to save on time and resources. Effects of the criteria on the process The company was able to obtain the best quality goods although some delays were made during the tendering process. Project 5: Office repair and maintenance Nature of the project The company usually renovates its offices every year. This is to make sure it keeps up with the modern styles and technique that makes the office attractive and hence comfortable to the customers and the staff. Project main characteristics Duration: September 2010- December 2010. Client priorities Skilled staff to carry out the work. Quality of the work is important since it has to attract the customers and staff. Overall cost. Client Building maintenance department Sponsor Caretaker Process and criteria used to select contractor Since the process is usually carried out on a yearly basis, the contractor is usually selected directly by the care taker. However the following criteria applies Working relationship with the company. The quality of the work to be carried out. Improvement opportunities Since only one contractor is usually selected over the years, a competitive process should be adapted to improve performance and bring about change. Effects of the criteria The work is usually carried out to satisfactory level since a good working relationship has been developed with the contractor. Conclusion According to the paper the various methods adopted for selecting a contractor or employee have a direct impact on the work. However they can be improvement to enhance the results incase the company will need to carry out the project next time. Selection of the best supplier should be done with utmost care as it determines the outcome of the final work. Several considerations are important to come up with the right supplier or contractor. The company has been following its set criteria in order to work with the right team and achieve its objectives. It is worth noting that in carrying out the five projects, Arabtech Ltd managed to fulfill the requirements. The company also ensures that the selected supplier or contractor will be able to meet all its priorities. According to the paper the company has successfully carried out several projects using the set methods of selecting a supplier. References CHP Procurement Guide (2010). Elements of an Effective Project Development Contract. Retrieved on November 24, 2011 from Mosey, D. (2009). Early Contractor Involvement in Building Procurement: Contracts, Partnering and Project Management. John Wiley and Sons, Loftus, J. (1999). Project management of multiple projects and contracts. Thomas Telford, Marsh P. D. V. (2000). Contracting for engineering and construction projects. Edition5, Gower Publishing, Ltd. Marshall K. R. & Tarnoff P. J. (2006). Guide to contracting ITS projects. Transportation Research Board. Read More