Critically evaluate the use of complex models of Project Risk and Procurement Management; systematically and creatively making sound judgements based on the systematic analysis and creative synthesis...

PROJECT RISK AND PROCURMENT MANAGEMENT:
The procurement and contract administration process are prone to risks. There are risks in
determining need and planning procurements, developing specifications, selecting the appropriate
procurement methods, preparing solicitation documents and calling for offers, evaluation and selection
of firms and individuals, negotiating the contract, and contract administration.
Procurement management is about solving problems and managing risks. Customers need
supplies and services to solve immediate and future needs. They usually have little understanding of
procurement and unrealistic expectations about the procurement process. Procurement planning and
strategy development are important to reduce risk in the procurement process. A comprehensive
understanding of the procurement process, principles and guidelines is also important to finding
appropriate solutions and minimizing risks.
RISKS INVOLVED:
1. Identifying the need and planning the purchase
2. Developing the specification
3. Selecting the purchasing method
4. Purchasing documentation
5. Inviting, clarifying and closing offers
6. Evaluating offers
7. Selecting the successful tenderer
8. Negotiations
9. Contract management
10. Evaluating the procurement process
11. Disposals

1. Identifying the need and planning the purchase
Risk Likely consequences Action
Understatement of the
need
Purchase of unsuitable
product or service
Money wasted
Need not satisfied
Analyse need accurately
Overstatement of the need Greater expense
Poor competition
Analyse need accurately
Use functional and
performance requirements
Misinterpretation of user Totally unacceptable Improve consultation with
Risk Likely consequences Action
needs purchase or not most
suitable product or service
Time lost
Increased costs
Possible downtime
users
Obtain clear statement of
work and definition of
need
Insufficient funding Delay in making the
purchase
Additional costs for re-
tender
Obtain appropriate
approvals before
undertaking process
Improve planning
Impractical timeframe Inadequate responses
from tenderers
Reduced competition
Delivery schedule not met
Improve forecasting,
planning and consultation
with users
Improve communication
with potential tenderers
Probity issues
Increased procurement
costs
Misuse of resources
Most suitable product not
obtained
Unethical conduct
Implement best practice
policies, guidelines and
practices
Maintain ethical
environment
Improve training of
personnel
Put suitable controls and
reviews in place
Consider using a probity
adviser
Improve communication
with potential tenderers
2. Developing the specification
Risk Likely consequences Action
Narrow definition or
commercial specification
(eg. use of brand name)
Fewer alternatives
Most suitable product or
service may not be
obtained
Increased costs
Define the specification in
terms of required outputs
Use functional and
performance specifications
Definition of inappropriate
product or service
Need not satisfied
Time lost
Increased costs
Possible downtime
Ensure specification is
consistent with needs
analysis
Improve market
knowledge
Use functional and
performance specifications
Biased specification Inadequate responses
from tenderers
Claims of unfair dealings
Use functional and
performance specifications
Implement a control
mechanism to review
specification before
release
Inadequate statement of
requirements
Variety of offers
Insufficient responses
Products offered not
meeting needs
Difficult to evaluate
Be familiar with
requirements
Use functional and
performance specifications
Use an Expression of
Interest or Request for
Information to clarify
requirements (be careful
not to infringe intellectual
property rights or
copyright)
3. Selecting the purchasing method
Risk Likely consequences Action
Risk Likely consequences Action
Failure to identify potential
sources
Lack of offers from suitable
tenderers
Improve procurement
planning processes
Improve market
knowledge
Seek industry participation
Selecting inappropriate
method
Need to seek offers again
Possible cost variations
Failure to obtain value for
money
Improve implementation
of procurement policies,
guidelines and practices
Improve tender
documentation and clearly
identify the evaluation
criteria in Request for
Tenders
Provide staff with
appropriate training and
experience
4. Purchasing documentation
Risk Likely consequences Action
Terms and conditions
unacceptable to tenderers
Loading of costs in offers
Having to modify tender
terms and conditions
Disruption
Low response
Use standard
documentation prepared
by Crown Law
Select appropriate
documentation for
purchase type (ie. goods,
services, goods and
services, or information
technology related)
Improve tender planning
Assess and allocate risks
appropriately
Consult with Crown...