Describe the purpose of a Procurement Management Plan and the key elements that

Question

Describe the purpose of a Procurement Management Plan and the key elements that every project manager should address when creating a Procurement Management Plan.

Describe the purpose of and the key elements of a contract.

Select two types of contracts, describe the pros and cons of each, and explain how risk is assumed in each of these contract strategies.

Describe the purpose of a make/buy analysis. Provide examples/scenarios when you might choose the “make” option as a project manager. Provide examples/scenarios when you might choose to the “buy” option

Explanation / Answer

Procurement refers to a process of obtaining all goods, services, capacities and knowledge from external sources which are necessary for running, maintaining, and managing the firm's primary and support activitites at the most favourable conditions

Procurement Management is a strategic process for the development of a sound purchasing set up and an effective supply base so as to achieve supply chain productivity

Procurement at the operational level deals with day-to-day management of material inflows and information for the smooth and uninterrupted functioning of production system.

The type of activities most frequently carried out for these purposes include:

Important key Elements of Procurement Management

Procurement is a very important component of any supply chain process as it ensures optimum quality and quantity of raw materials / components at lowest possible total cost, low inventories and smooth flow, reliable and competitive supply base, and integration with other functions of supply chain

CONTRACT

A contract ia a an agreement made between two or more parties which the law will enforce. "Every agreement and promise enforceable at law ia a contract"

Key elements of contract

Offer and Acceptance: There must be two parties to an agrrement, ie., one party making the offer and other party accepting it.

Intenetion to create legal relationship: When the two parties enter into an agreement, their intention must be to create legal relationship between them. If there is no such intention on the part of the parties, there is no contract between them.

Lawful Consideration: The agrement is legally enforceable only when both the parties give something and get something in return.Consideration means an advantage or benefit moving from one party to other.

Capacity of parties - competency: The parties to the agreement must be capable of entering into a valid contract. Competent to contract a) age of majority b)sound mind c)not disqualified from contracting by any law which he is subject to

Free and genuine consent - The consent of the parties is said to be free when they are of the same mind on all the materials terms of the contract

Lawful object: The object must not be a)illegal b) immoral c) opposed to public policy

Agreement not declared void - must not have been expressly declared void by law in force in the country

Certainty and possibility of performance - Must be certain and not vague or indefinite

Legal formalities - A contract may be made by word spoken or written. As regards the legal effects, there is no difference between a contract in writing and a contract made by word of mouth. it is however, in the interest of the parties that the contract should be in writing

TYPES OF CONTRACT

1. VALIDITY

2. FORMATION

3.PERFORMANCE

Executed Contract means that which is done. An executed contract is one in which both the parties have performed their respective obligatins

ex; A agrees to paint a picture for B for Rs.100. when A paints the picture and B pays the price.

Advantage: Price for the work is fixed. even if A had spend more than 100 for the picture B is need not to pay the amount which A has Spent. Here,

Disadvantage: Picture is specified in the contract and not its quality, So its validy is neither assurable nor questionable

Voidable Contract   An agreement which is enforceable by law

Ex: A promises to sell his car to B For Rs.20000. his Contract is obtained by use of force. The contract is avoidable at the option of A. He may avoid the contract or elect to be bound by it. In case of wwritten agreement it is benefical to both the parties

Advantage:

If the contract is made by Words, A Can avoid the Contract at any point, where it has no proof of making contract.

disadvantage;

here the amount is high, and in case of contract made by words, B might lose the car as well as the money, where they have no proof of making contract in clear. In some Cases the amount agreed for 20000 may get reduced.

Make-or-buy

Make-or-buy decision determines which products or sctivities will be produced / performed internally and which products or activities will be contracted out. Make-or-buy analysis offers new saving opportunities by eliminating particular production activities and buying the required products from third parties which are cheaper in comparison. Procurement professionals have been giving significant weight to this option in their decisions.

Being a Project manager consider the following to choose the "Make"

Being a Project manager consider the following to choose the "Buy"

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