1 THE OPEN UNIVERSITY OF TANZANIA FACULTY OF BUSINESS MANAGEMENT DEPARTMENT OF MARKETING AND ENTREPRENEURSHIP: MPM PROGRAMME OME 624: PROJECT PROCUREMENT AND CONTRACTING COURSE OUTLINE INTRODUCTION This course introduces you to the complex world of procurement by providing an overview of how the project procurement and contracting function is carried out and used by project managers in managerial decision-making. MODULE AIM The module aims to provide project managers with sufficient skills to make complex decisions on project procurement and contracting on both national and the international procurement arena. This will be achieved by introducing students to the most important elements of procurement function and the modern knowledge in national dimensions of project procurement and contracting as well as to expand student s knowledge to other international variables which affect project decision making systems. Thus, the fundamental element of procurement and contracting gained in this module, will prepares graduates to be capable of addressing both the global and national requirements in the function by incorporating global best practices and demonstrated models of excellence. MODULE OBJECTIVES The course objectives have been objectively outlined in each topic to enable the student to evaluate himself at the end of each topic on the general understanding of the subject matter. References have been provided at the end of each topic but students are advised to obtain more reading material from the books on Procurement and supplies management which contain the like topic coverage MODULE CONTENT Lecture 1: Introduction to procurement management 1.1 Introduction The lecture introduces you to modern knowledge in procurement. It then analyses procurement cycle to enable you to acquire knowledge and skills and apply the same in problem solving and decision making. 1.2 Objectives
2 Identify procurement functions Describe procurement objectives Analyse procurement cycle and risks Prepare appropriate specification 1.3 Contents Introduction to procurement function Procurement objectives and procurement cycle Procurement organizations Specification and quality management Different approaches to arrive at the right quantity Timing of procurement 1.4 Recommended Readings Arnold Tony JR et al (2008), Introduction to Materials Management, 6 th Edition, Prentice Hall UK; Leenders, Michael R and Fearon, Harold E, (1993), Purchasing and Materials Management, 10 th Edition, Irwin - USA; Peter Baily et al (2005), Purchasing Principles and Management, 9 th Edition, Prentice Hall - UK; Public Procurement Act No. 21, 2004, and its Regulations, 2005 Lecture 2: Warehouse management 2.1 Introduction The lecture aims at imparting you with knowledge on cost and services characteristics involved in warehousing process and procedures. Furthermore, it will examine in depth principles, techniques and methods involved in efficient storage, movement and layout of stores 2.2 Objectives Describe philosophy of stock yard and warehouse management Explain various layout of storehouse administration Apply different methods of material handling 2.3 Contents Basic philosophy of good warehouse management o Role and responsibilities of warehouse manager o Warehouse function and its role in an organization o Centralization and decentralization of warehouse function o Performance evaluation of warehouse operations Warehouses and stock yards Storehouse administration Nature of materials and their storage
3 Storage equipment and methods 2.4 Recommended Readings Jessop, D and Morrison, A (2005), Storage and Supply of Materials, 6 th Edition, Pearson Prentice Hall - UK; Jenkins, C. H (1990), Modern Warehouse Management, The Chartered Institute of Purchasing and Supply, UK Lecture 3: Inventory Management 3.1 Introduction This lecture will enable you to develop and understanding and competence in relation to the management of physical stocks and related inventory in supply management. It will then examine in depth the economies of good flow systems and sound accountability of inventories thus avoiding stock outs and overstocking. 3.2 Objectives Describe inventory control functions Explain inventory planning process Identify factors that affect stock holding policy Analyse inventory management techniques Apply operation research models in controlling inventory 3.3 Contents Inventory control function Inventory planning Determination of stock holding policy Inventory ordering system and economic order quantity Measuring inventory management system Operation research models 3.4 Recommended Readings Dobler, Donald W (1995) Purchasing and Materials Management, McGraw Hill Co Ltd, India; Lysons, K & Farrington, B (2006), Purchasing and Supply Chain Management, 7 th Edition, FT Prentice Hall; Stevenson, William J (2005), Operations Management, 8 th Edition, McGraw Hill USA; Walter, D (2003), Inventory Control and Management, John Wiley & Sons UK. Lecture 4: Project Procurement Management 4.1 Introduction This lecture introduces you to processes and activities needed to purchase and acquire goods and services from outside the project that needed by the project for executing
4 the actions necessary to complete the deliverables required. Important areas to be covered including planning and processes for purchases and acquisition, the contents of a procurement management plan and contract statement of work including the creation of various procurement documents and evaluation criteria for sellers, and calculations involved in a make-or-buy analysis 4.2 Objectives Explain the importance of project procurement management Describe the work involved in planning purchases and acquisitions for projects Discuss what is involved in planning contracting Illustrate the project procurement process Discuss the importance of good contract administration Describe the contract closure process 4.3 Contents Procurement Planning Solicitation Planning Solicitation Source Selection Contract Administration Contract Closeout 4.4 Recommended Readings Saunders, M (1997), Strategic Purchasing and Supply Chain Management, 2 nd Edition, Prentice Hall UK; Cousins, P et al (2008), Strategic Supply Management Principles, Theories and Practice, Prentice Hall UK Van Weele, A. J (2010), Purchasing and Supply Chain Management, 5 th Edition, Seng Lee Press, Singapore Lecture 5: Introduction to Contract Management 5.1 Introduction This lecture aims to develop you on knowledge of principles, practises and techniques for the contract management with particular emphasis on elements and various types of contract and their legal consideration. Contract management cycle will also be discussed. 5.2 Objectives Explain the elements of contracts Identify various types of contracts and their legal consideration Discuss the importance of contracts
5 Analyse contract management cycle 5.3 Contents Definition and elements of Contracts Types of Contacts and their legal consideration Importance of managing contracts Contract Management cycle 5.4 Recommended Readings Dobler, Donald W (1995), Purchasing and Materials Management, McGraw Hill Co Ltd, India; Lysons, K and Farrington, B (2006), Purchasing and Supply Chain Management Margaret, G and Ivory, G (2002), Law of Purchasing and Supply, 3 rd Edition, Prentice Hall UK Public Procurement Act No. 21, 2004, and its Regulations, 2005, Government Press Tz Public Finance Act No. 6, 2001, and its Regulations, Reversed Edition, 2004, Government Press Tz Lecture 6: Contract formation and strategies 6.1 Introduction This lecture introduces you on how to prepare a procurement contract taking into account factors influencing project contract, salient features and negotiation process. The lecture will also describe necessary steps in developing contract proposal. 6.2 Objectives Identify factors affecting preparation of project contract Elucidate significant features of good contract Describe contract negotiation processes Develop contract proposal 6.3 Contents Factors to consider in preparation of project contract Salient features of good contract Contract negotiation processes Proposal Development o Specification o Terms of Reference o Bill of quantities o Bill of materials/requirements o Terms and conditions of contracts
6 6.4 Recommended Readings Van Weele, A. J (2010), Purchasing and Supply Chain Management, 5 th Edition, Seng Lee Press, Singapore Lysons, K and Farrington, B (2006), Purchasing and Supply Chain Management Margaret, G and Ivory, G (2002), Law of Purchasing and Supply, 3 rd Edition, Prentice Hall UK Public Procurement Act No. 21, 2004, and its Regulations, 2005, Government Press Tz Public Finance Act No. 6, 2001, and its Regulations, Reversed Edition, 2004, Government Press Tz Lecture 7: Contract Management and Control 7.1 Introduction This lecture will provide you with the basic knowledge of operational techniques, necessary for managing and controlling of project contracts. The lecture will also provide you with other control tools such as time control, cost and volume control, and quality control to ascertain value for money. Contract closure and liability for defects will also be discussed. 7.2 Objectives Apply techniques of network analysis and measuring and reporting progress to control contracts Discuss management and negotiation of variations and claims Apply various contract control tools to manage project contract Describe the contract closure in relation to liability for defect 7.3 Contents Network analysis techniques Measuring and reporting progress Management and negotiation of variations and payment Time control [PERT, Gant] Cost and volume control Quality control and value for money Contract closure and liability for defect 7.4 Recommended Readings Davis, M. M and Heineke, J (2005), Operations Management, 5 th Edition, McGraw Hill, Irwin Heizer, J and Render, B (2008), Production and Operations Management, 9 th Edition, Pearson Prentice Hall.
7 Public Procurement Act No. 21, 2004, and its Regulations, 2005, Government Press Tz Dobler, Donald W (1995) Purchasing and Materials Management, McGraw Hill Co Ltd, India; Lysons, K & Farrington, B (2006), Purchasing and Supply Chain Management, 7 th Edition, FT Prentice Hall; Lecture 8: Project Financing and payments 8.1 Introduction This lecture will provide you with the basic knowledge of project financing and payments. Being introduced to the sources and conditions of funding payment and approving authorities, the lecture will take you through payment milestone price adjustment, modification and variation. The lecture will conclude by discussing Procedure for payments in managing exchange risks; and thus, prepare graduates to be capable of managing challenges in project financing and payments at both national and international level. 8.2 Objectives Describe source and conditions of funding payment and approving authorities Discuss various payments/price adjustment, modification and variations Apply procedures for payments in managing exchange risks 8.3 Contents Contract Funding, source and conditions of funding payment methods and approving authorities Payment milestone price adjustments o Fixed-price (FP), o Cost -plus-fixed-fee (CPFF), o Cost-plus-percentage-fee (CPPF), o Guaranteed Max-Shard Savings (GMSS), o Fixed-price Incentive- Fee (FPIF), o Cost-Plus-Incentive-Fee (CPIF) modification and variations Procedure for payments in managing exchange risks 8.4 Recommended Readings Dobler, Donald W (1995) Purchasing and Materials Management, McGraw Hill Co Ltd, India; Lysons, K & Farrington, B (2006), Purchasing and Supply Chain Management, 7 th Edition, FT Prentice Hall; Shapiro, A. C. (2010). Multinational financial management. 9 th Edition. John wiley & Sons.
8 Mishkin, F. S and Eakins, S. G (2009), Financial Markets and Institutions, Pearson Prentice Hall, USA; Van Weele, A. J (2010), Purchasing and Supply Chain Management, 5 th Edition, Seng Lee Press, Singapore Lecture 9: International Procurement and Documentation 9.1 Introduction This lecture introduces you to motives of international procurement and the related challenges of the processes. The lecture will then discuss factors affecting international procurement, application of International Commercial Terms (INCOTERMS) and documentation required for international procurement. 9.2 Objectives Examine the characteristics of international procurement Discuss factors influencing international procurement process Apply INCOTERMS and identify their limitation Describe various payment documentation 9.3 Contents Factors affecting international procurement Specification and standards Difficulties when buying overseas Payment terms, insurance and transportation Payment documentation 9.4 Recommended Readings Lysons, K & Farrington, B (2006), Purchasing and Supply Chain Management, 7 th Edition, FT Prentice Hall; Shapiro, A. C. (2010). Multinational financial management. 9 th Edition. John wiley & Sons. Mishkin, F. S and Eakins, S. G. (2009). Financial Markets and Institutions. Pearson Prentice Hall, USA; Don, B and Wendel, M.C. (1999). International business the challenge of global competitive. 7 th Edition. McGraw Hill. Irwin USA.
9 Lecture 10: Risk management in international procurement 10.1 Introduction This lecture introduces you to the management of risks involved in international procurement. The lecture will starts with an assessment of economic opportunity against political odds (political risks) and the importance of evaluating both economic and political indicators. The lecture will then examine the management of regulatory risks. The lecture will end up with discussion and application of various techniques necessary to manage financial risks 10.2 Objectives Describe various techniques necessary to manage political risk Identify regulatory risks and illustrate how to manage them Apply necessary techniques in project procurement to hedge and protect payments denominated in foreign currency 10.3 Contents Political risks management Regulatory risks management Financial Risks management Forward contract hedge Money market hedge Option contract hedge Futures contract hedge 10.4 Recommended Readings Shapiro, A. C. (2010). Multinational financial management. 9 th Edition. John Wiley & Sons. Mishkin, F. S and Eakins, S. G (2009), Financial Markets and Institutions, Pearson Prentice Hall, USA; Don, B and Wendel, M.C. (1999). International business the challenge of global competitive. 7 th Edition. McGraw Hill. Irwin USA.