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Procurement Management Assignment: Case Analysis of Construction Contract Procurement

Question

Task: Scenario:
K Construction Co. Ltd is an established international construction company and is keen to bid for high class residential projects in Malaysia. Assume that you are a newly appointed experienced Construction Manager working for Z Construction Co. Ltd and had been assigned important task of ensuring a smooth implementation of the bidding process for new residential projects in Malaysia by your company’s top management. The client in an international developer company and has obtained the necessary approval from the relevant authorities to put up a high class residential project at sub-urban area.

Mr. Y is your company’s procurement executive who performs the construction project procurement tasks and he reports directly to you. He has attended several meetings with the client’s representatives and briefed you on the client’s brief and specific requirements. He sees your advice on the various contract procurement options that your company can propose to your company’s client. Time, cost and quality are critical considerations and there is strong competition from other international construction companies, hence, various procurement options need to be considered and a strategic bidding decision needs to be made by your company.

Case Study Question:
What are the various procurement options and strategic bidding decisions that you can undertake to address the issues highlighted in the above scenario? For this case study, you may suggest a sample client’s brief, requirement and criteria based on normal bidding scenarios in which an international construction company would normally encounter with an international developer client. You are required to prepare your procurement management assignment with flow charts and illustrations.

Answer

1. Introduction
In Malaysia, K Construction Co. tries toestablish itself as a foothold in terms of an international construction company. As the client is an international developer with necessary approval for the relevant authorities, it will be easier to put up a high-class residential project in the suburban area. To achieve the goal smooth bidding process is required.

2. Problem Statement
2.1. Stating the Problem

Currently, Z construction faces some problems in smoothing the procurement process for the business. An advanced procurement strategy is used in a business to improve accuracy, enhances growth speed in a short period. There is a difference between the ultimate procurement process and the progressed result from it (Tiwari et al., 2018). Non-sustainable workmanship, unsafe structure, cost overruns, these factors are badly hampering the growth of the business. If the workmanship is non-sustainable then it affects the growth of the business.

2.2. Solutions of The Problem
An advanced procurement strategy will get successful when every single step is monitor thoroughly. A sustainable construct manager is important for the successful delivery of the project (Kivilä et al., 2017). To maintain the result the same with the procurement process there should be sustainable workmanship, maintain the cost for process and the structure should be safe.

3. Procurement Problem
3.1. Various Procurement Problem

K construction Co. Ltd is an international construction company and they are keen to bid for the high-class residential projects in Malaysia. They want to implement a bidding process in the project, which will improve the business strategy of the company. But the company is facing various procurement issues while doing business.

Supplier-related issues
One of the biggest challenges that the construction company is facing is the procurement lies in supplier management. Delivering materials on time is one of the issues of the supply chain company (Er Kara & Oktay F?rat, 2018). Manufacturing capability and service management also keep in mind while choosing the supply chain company.

Cost-related issues
The main problem of the construction company deals with cost-related issues. The cost overrun is the main issue of the company (Larsen et al., 2016). It will delay the timeline of the projects and fall impact the time and quality of the company.

Long procurement cycle
Taking too much into a project can decrease the level of construction in the company. The biggest reason for delaying the construction projects are the technical difficulties, preparing the terms of references services, and also not understand the statement of the work properly (Renuka et al., 2017). The time-related problems can overrun the project cost and also effect the man related schedule control-related factors.

Competitive bidding problem
In the construction industry, competitive bidding is nothing but one company is going against another company for a particular project. The K construction Co. Ltd company is facing challenges in the bidding process. The company should hire project owners who will help to do the bidding process smoothly. Problems in the bidding also happen because of a random plan (Ayettey & Danso, 2018). Competitors Company has the right decision-making person, who knows where to put the right bid in the bidding process.

3.2. Strategic Decisions to Address the Issues
Procurement models and theories

Innovative procurement models can help the construction company to implement the high-level supply chain implementation in the company. It will make project delivery faster and lessen the complexity in the designing process (Alleman et al., 2017). The model will specify the specific requirements of the company, helps to make eco-friendly buildings. It will also identify the cost outcomes based on the available data. Procurement theories will help the construction organization to make the right decision about supply chain management (QURESHI, 2020). With the help of theories of cost and supply chain theories the project manager can help to reduce the cost and manages time in the project.

Bidding strategies
Innovative bidding strategies can help the company to make the project more efficient and reliable in the company (Fawale & Dada, 2017). Contract bidding can help the company for the right decision-making process. It will help to determine the right strategy for the bidding. Determining the right bidding can help to manage the project easily.

3.3. Analysis
The analysis will show with the strategic business plan and procurement models the issues can be solved.

Procurement Model and Theories in procurement management assignment

Figure: Procurement Model and Theories (created by the author)
4. Discuss Criteria

Time, cost and quality are three major points taken into consideration for future negotiation. Risk of supply of materials, proper management of the relationship with the client, proper coordination with suppliers, access supply risk and sharing of knowledge will be helpful to perform a job. To make a perfect deal we have to focus on some areas.

  • Proper identification of goods and services is important.
  • We have to consider a list of suppliers and have to check individually their performance and resources. Among them, we have to choose a few potential suppliers.
  • We have to make proper negotiation with suppliers with proper terms and conditions.
  • After the final deal, we have to make a clear Purchase order, after receiving the invoice and finalization of the payment. Modes and duration of payments have to be chosen carefully. All invoices have to keep properly.
  • There should be thorough monitoring of the product delivered, their quality, quantity and thorough audit should be done.

5. Recommendation
5.1. Solution of The Procurement Problem

There will be very strong competition from competitors. A proper procurement plan is very important to achieve the goal. As the client is an international developer with proper authority, product quality should be crucial. The client wants to put a high-class residential project in the sub-urban area. They will want their project to cope up with the international environment standard and maybe go for green procurement.

5.2. Justification of Recommendation
As green procurement provides the alternative environmental strategy which helps to integrate environmental aspects with a result of high-end quality products, the client will surely go for it (Zhang et al., 2017). Checking various environmental factors will be a priority. With this knowledge, we can make a strategy to overcome our difficulties.

5.3. Solution Implementation
The company needs to be result-oriented. Construction of high-class residential projects within a stipulated period and with quality products will generate a positive impact. Good project management with proper technical knowledge is also necessary. Calculation of risk factors is a key to get success. A proper supply chain is also necessary.

5.4. Risk and Contingency Plan
The construction company and suppliers both are co-evolved for successful project completion(Kosmol et al., 2019).There should also be transparency in paperwork. All invoices should be documented properly, can be produced anytime, no secret deal. Payments should be made within the time and there will be a proper audit of budget.

6. Conclusion
K Construction Co. will get success in Malaysia in the upcoming project of putting up the high-class residential project in a suburban area. The client is also an international developer. Proper knowledge sharing and co-operation, proper planning of time, resource and quality management, taking proper environmental care will be effective in complete the task.

7. References
Alleman, D., Antoine, A., Gransberg, D. D., & Molenaar, K. R. (2017). Comparison of qualifications-based selection and best-value procurement for construction manager–general contractor highway construction. Transportation Research Record, 2630(1), 59–67.

Ayettey, D. N. A., & Danso, H. (2018). Contractor selection criteria in Ghanaian construction industry: Benefits and challenges. Journal of Building Construction and Planning Research, 6(4), 278–297.

Er Kara, M., & Oktay F?rat, S. Ü. (2018). Supplier risk assessment based on best-worst method and K-means clustering: a case study. Sustainability, 10(4), 1066.

Fawale, T. S., & Dada, J. O. (2017). Impact of Contractors’ Bidding Strategies on Bid Success in the Nigeria Construction Industry. International Journal of Built Environment and Sustainability, 4(1).

Kivilä, J., Martinsuo, M., & Vuorinen, L. (2017). Sustainable project management through project control in infrastructure projects. International Journal of Project Management, 35(6), 1167–1183.

Kosmol, T., Reimann, F., & Kaufmann, L. (2019). You’ll never walk alone: Why we need a supply chain practice view on digital procurement. Journal of Purchasing and Supply Management, 25(4), 100553.

Larsen, J. K., Shen, G. Q., Lindhard, S. M., & Brunoe, T. D. (2016). Factors affecting schedule delay, cost overrun, and quality level in public construction projects. Journal of Management in Engineering, 32(1), 04015032.

QURESHI, T. (2020). ROLE OF PROJECT MANAGER IN COST AND TIME CONTROLOF CONSTRUCTION PROJECT, 240-345.

Renuka, S. M., Kamal, S., & Umarani, C. (2017). A model to estimate the time overrun risk in construction projects. Theoretical and Empirical Researches in Urban Management, 12(2), 64–76.

Tiwari, S. T. S., Chan, S. W., & Mubarak, M. F. (2018). Critical analysis of procurement techniques in construction management sectors. IOP Conference Series: Materials Science and Engineering, 342(1), 12100.

Zhang, Z., Hu, J., & Shen, L. (2017). Green procurement management in building industry: An alternative environmental strategy. Proceedings of the 20th International Symposium on Advancement of Construction Management and Real Estate, 1217–1228.

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