Project Procurement Management

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The modern concept of project procurement management is based on the idea of the project, in which the project acts not only as a management object with some specific properties but also as a general characteristic of the essence, as a basic property of project management. In this regard, the well-established term project procurement management does not accurately convey the essence of the phenomenon designated by it, since it clearly distinguishes management as some activity that, on the whole, does not differ from any other control, and the project as an object of this activity that is undergoing management. Given the above, the terms project and project procurement management should not be defined and disclosed separately, as has been the case recently, it is necessary to point out the organic connection of these two, essentially unified terms that form one concept. In order to achieve the most effective procurement process during project procurement management, a number of key factors need to be considered. These are project objectives, budget, deadlines, labor and resources, organizational structure, and these elements are can be properly executed by implementing a process-oriented approach.

Projects

Today there are a large number of definitions of the concept of a project. All of them are based on the main characteristics of the project, such as the presence of a unique goal, limited time, and the presence of resource limitations. However, there are two drawbacks – the lack of communication between the project as a pre-developed plan and the project as a process for the implementation of this plan, as well as the lack of communication between the project and project procurement management. A project is a systematic set of planning documents containing an integrated systemic model of actions aimed at achieving an original goal. That is, the project itself should not be understood as a special type of activity for managing something. A project procurement outline is a comprehensive plan, a complete model of action (Fleming, 2019). The project must be developed and implemented, which makes up the integrated content of project procurement management.

Project Management

Project procurement management is a special type of project management activity based on building strong networks with suppliers and vendors, which are relevant for the project and model implementation. The difference between the project and the production system is that the project is a one-time non-cyclical activity. Serial production does not have a predetermined end in time and depends only on the availability and magnitude of demand. When demand disappears, the production cycle ends, and pure production cycles are not projects. Recently, however, the project approach has increasingly been applied to processes oriented to continuous production (Fleming, 2019). For example, projects to increase output to a specified level over a certain period, based on a given budget, or to fulfill certain orders having contractual delivery dates.

A project as an activity system exists exactly as long as it takes to get the final result. The concept of the project, however, does not contradict the idea of the company or enterprise and is fully compatible with it. Moreover, the project often becomes the main form of activity of the company. From the point of view of a systematic approach, a project can be considered as a process of transition from the initial state to the final one – the result with the participation of a number of limitations and mechanisms (Walker & Lloyd-Walker, 2015). A project is a task with certain initial data and the required results, determining the way to solve it. This includes the problem, the means of its implementation, and the results obtained during the implementation process.

Procurement

Project procurement management is a methodology for the organization, planning, management, coordination of human and material resources throughout the project life cycle. It is aimed at effectively achieving its goals by applying a system of modern methods and technologies to achieve the results defined in the project on the composition and scope of work, cost, time quality (Araujo et al., 2017). The project procurement management methodology makes it possible to turn the process of creating the final product into a well-organized, well-established, and well-managed process. Studying project procurement management methods allows a manager to approach any of them from a single perspective.

Objectives

It is a comment when organizations, starting a particular project, do not think about why they are doing this, what problem they are trying to solve in this way, what they want to get by completing the project. People believe that they know the purpose of their own business, but in reality, there are rarely leaders who can accurately describe the purpose of their project (Javed & Liu, 2017). Sometimes project managers, answering the question about the project goal, talk about the meaning of the process, for example, to complete the workshop. However, they might identify the real purpose and why they require this workshop. It is also possible that the initiators of the project identified and formulated the goal of the project, but did not explain it to everyone who works on it and performs specific work. Evidently, in the course of the project, the team can quietly deviate from the intended goal and go in another direction.

Budget

Another common mistake is a lack of understanding of the project evaluation and budgeting process. Often confused assessment and budgeting. In contrast to budgeting, the review takes into account many indirect factors affecting the project and primarily subjective. If the organization determines the budget without a preliminary assessment, then it will probably be underestimated, and within its framework, it will be impossible to implement the project. The problem of determining the size of the budget is quite acute, and the inadequacy of the budget will cause other problems. Too small a project budget actually leads to even greater costs than a larger one. This is due to the inevitable pressure on the understated budget. The need for quality tools, equipment, and materials are unlikely to be met (Araujo et al., 2017). The result may be a decrease in the working motivation of the project team members, which will lead to a reduction in work efficiency and a further increase in costs.

Deadlines

One of the main activities in project procurement management is the installation and adherence to a strict schedule. In addition, this can become the source of the most destructive behavior and negative phenomena that arise during the work on the project. At the beginning of work on a project, it may seem that the designer has a lot of time and that some delays are easily made up. However, this often succeeds only at the end of the project, with significantly greater costs (Javed & Liu, 2017). The plan can completely go beyond the established time frame.

Labor and Resources

In the course of resources management, many questions arise, the main of which is why ordinary performers are indifferent to goals, for which the organization and project procurement management is ready to fight, not sparing time, health and resources. Employees are the main resource in the design work because it processes all other types of resources. However, the attitude towards the project participants as a resource encourages managers to act in such a way that employees are always on the first call ready to get down to business with the required qualifications and at the right time. Both the leader and often the performer would like to see only the resource aspect in the performer. Each of them can make their life easier without delving into the problems of the other. In projects in which the human factor is crucial, focusing only on the management of labor resources without taking into account the social culture and individual characteristics of team members often lead to conflicts and difficulties (Pheng, 2018). The latter can be highly detrimental to the process, and it will manifest itself in a failure of the entire project.

Organizational Structure

The project is carried out within the organization, the structure of which significantly affects the success of the project. Currently, enterprises adhere to the classic Taylor function-oriented approach to management, and it is also called the structural approach. The basic principles of such a system were and maintained the separation of functions into separate fragments and the narrow specialization of performers. The main decisions laid by the organizational structure in the organization of project procurement management concerned exclusively the distribution of power (Pheng, 2018). In other words, the organizational structure was solely presented as a system of vertical relations, carrying out administrative-power communications.

However, for the modern world, especially for project procurement management, this interpretation seems too narrow, since the very perception of power, even within the framework of ordinary organizational structures, undergoes serious changes. In addition to direct management teams, the behavior and functioning of structural units are increasingly influenced by horizontal, non-administrative communications. The project as a set of one-time actions is characterized by the presence of clear goals, limited resources, a high degree of uncertainty of many parameters, a high probability of unforeseen situations, the presence of established deadlines for the start and end of the project. Its implementation requires precise coordination in the implementation process.

In addition, it is important to consider the principles of building organizational structures for project procurement management. The factors suggest that a functionally-oriented approach to the construction of organizational structures does not correspond to the specifics of project procurement management (Naoum & Egbu, 2015). This is the conformity of the organizational structure to the system of relationships between project participants, the content of the project, the compliance of the organizational structure, and the requirements of the external environment.

Process-Oriented Approach

Since the project activity of the organization is an integrated, interconnected process, the transition to process management means the change to the management of operations, in contrast to the control of structures characteristic of functional management. At the same time, structures should just serve to manage activities. The functional approach, in this sense, should simply be derived from the process component, where in order to correctly formulate sets of functions for control, one must know the processes. When applying and implementing a process-oriented approach, key changes occur (Nedeliakova & Panak, 2015). The process execution time is reduced while improving the quality of the work performed by eliminating information transfer operations in the management hierarchy. In fact, the activities of managers are aimed at gluing functions into processes, while the transmitted information is distorted, and the quality of the result is deteriorating.

When implementing the approach, it becomes possible to evaluate the effectiveness of operations performed within the process from the point of view of the efficiency of the process as a whole. With a functional approach, the results of the work of employees are evaluated based on the subjective idea of the head of the functional unit about the quality of the result of the operation, and not from the point of view of adding value to the final outcome of the process. In addition, results are consistent across methods. The functional approach is characterized by contradictions in the actions and interests of the functional units of the organization, which ultimately reduces the efficiency of the processes.

With a process-oriented approach, overhead costs, and, as a consequence, the value of the process results are reduced. With a functional approach, costs increase due to the large number of operations arising both from the need for frequent transfer of information and intermediate results between functional units and due to the large number of unnecessary activities generated by the lack of understanding of the performers of their roles in the process. There is an opportunity to build a staff motivation system based on the reward of employees depending on the achievement of the results of the operations in which they are involved (Walker & Lloyd-Walker, 2015). With a functional approach, employee interest in the final result is absent, since the main consumer of the results of their work is functional managers. The process-oriented approach to management allows a person to organize activities in such a way that they are flexible, aimed at constantly improving the quality of the final product, reducing its cost and customer satisfaction.

Analysis

An analysis of the plan is necessary to answer the question of whether the project can satisfy the goals and desires of the participants in this project. All participants involved in the project should evaluate indicators, plans, goals, and planned results. This is the first stage of the project or the planning stage. At this stage, a decision is made to change the project, adjust it, change goals, and results (Khemiri et al., 2017). After the analysis of the plan is completed, all further analysis processes are understood as performance analysis processes.

At the planning stage, estimates and forecasts are developed, and a performance analysis process is necessary to monitor the work to achieve predictions and results. For most projects, an analysis of the criteria for achieving the goal serves as a project procurement management method. Criteria for the success of projects means compliance with the deadlines, quality of work, cost of work for the project (Khemiri et al., 2017). If any of these criteria fails and gives negative results, a decision is made about a small adjustment, a qualitative change, or the complete liquidation of the project. Typical aspects of inefficient project procurement management are the lack of a plan and control system and the launch of many projects without taking into account the availability of resources. This also includes resource conflicts between project managers and department heads, the lack of a complete picture of the status of projects, and a strong dependence on the qualifications of its lead manager.

To complete the project, procurement management requires resources that are divided into labor and material. Thus, resources can be components such as people, equipment, and materials. Assigning resources also help determine how long it takes to complete a task, and if costs are tracked, what costs it will take. A resource can be one person, that is, a universal resource, or a group of people. One can determine the level of employment of labor resources in work for a specific purpose. The destination unit shows how much of the free time of the supply, according to its calendar, is used to work on a specific task. To determine the time that is supposed to be spent on jobs, the values of labor inputs are introduced. Labor costs are the amount of work, the number of people, and the hours needed to complete the task. Duration is the actual time that elapses before the task is completed.

One of the most important planning steps is to create dependencies or relationships between tasks. Dependence occurs when the start or end of one task depends on the beginning or end of another task. Most duties depend on other tasks, and once dependencies are established, one can quickly determine the critical path. By making changes to one task, a manager can immediately see how this will affect the rest of the plan. The task of the compiler is to ensure that all functions are included in the dependency chain. When linking tasks, one can specify the dependencies of various types (Khemiri et al., 2017). Such a relationship means that the predecessor task must end before the successor task can begin. Linking tasks helps save time when managing a project, and by limiting the tasks of the project and evaluating their duration, a manager can start connecting.

Conclusion

In conclusion, project procurement management is a vital part of the project management process, which determines the overall interaction of various elements of a project. These are objectives, budget, deadlines, labor and resources, and organizational structure. Proper project procurement needs to take the given components into consideration in order to ensure the accurate and effective execution of the plan. A process-oriented approach allows a manager to conduct the procurement in the most plausible manner, whereas a functional approach might hinder the general flow.

References

Araujo, M. C., Alencar, L. H., & Mota, C. M. (2017). Project procurement management: A structured literature review. International Journal of Project Management, 35(3), 353-377.

Fleming, Q. (2019). Project procurement management: Contracting, subcontracting, teaming. Fmc Pr.

Javed, S. A., & Liu, S. (2017). Evaluation of project management knowledge areas using grey incidence model and AHP. 2017 International Conference on Grey Systems and Intelligent Services (GSIS), 120-120.

Khemiri, R., Elbedoui-Maktouf, K., Grabot, B., & Zouari, B. (2017). A fuzzy multi-criteria decision-making approach for managing performance and risk in integrated procurement–production planning. International Journal of Production Research, 55(18), 5305-5329.

Naoum, S., & Egbu, C. (2015). Critical review of procurement method research in construction journals. Procedia Economics and Finance, 21, 6-13.

Nedeliakova, E., & Panak, M. (2015). New trends in process-oriented quality management. Procedia Economics and Finance, 34, 172-179.

Pheng, L. S. (2018). Project procurement management. In: Project Management for the Built Environment (pp. 177-193). Springer.

Walker, D., & Lloyd-Walker, B. (2015). Collaborative project procurement arrangements. Project Management Institute.

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