Unique Aspects of International Procurement Relation to Project Management

Introduction

Project procurement management is defined as the outsourcing, contracting, and finalization of business projects. It is essential in international projects; it ensures goods and services are timely received and in good condition. On the other hand, international procurement is where companies and firms purchase services or goods overseas on c. It is a designed approach to reducing production costs to neutralize overseas competition. This article discusses the relationship between the unique aspect of international procurement and the procurement aspect of project management.

The Aspects of International Procurement

Legal structures and cultural practices are some aspects of managing international procurement. Legal structures are the regulation that governs firm operation in a given country (Jo et al., 2018). They include tax obligations, data protection, contracts and employment laws. Additionally, beliefs of the country of supply are aspects considered in international sourcing. The cultures of the seller and that of the buyer should align for the successful shipment of goods (Buzzetto et al., 2020). In cases where beliefs differ project management team permanently terminates the contract and looks for new suppliers of the same culture.

Project Management in International Procurement

The international procurement project manager designs a plan to manage the procurement process overseas. Some of the information included in the plan design is; the types of international contracts used and metrics used in contract performance measurement, dates of delivery of goods or services, the standard documents of the company, number of vendors and their management, assumptions, and limitation of the project and the lead time coordination with the development of the international project (FM‘t Hoen et al., 2018). The management planning of the international procurement is the subsidiary of the project plan.

The project management team uses different techniques and tools to execute the process during international procurement. The techniques and tools include definitions of the type of contract and make or buy Analysis. Make or Buy Analysis determines whether the international procurement process should be contracted or done by the company itself. Consider significant factors when deciding on a make or buy Analysis. Some of the significant factors considered before making a project decision are; project cost, schedule and scope effect, and time availability. In international procurement, different types of contracts can be available. According to Ershadi et al. (2020), The project manager chooses a workable and fair contract with the firm. Project management has several contracts involved; for instance, A fixed price is a contract with an authorized agreement of the project firm and an international entry for goods and services provided at the agreed price. The details in the fixed price contract are; services and goods quality, the time required for project support, and the delivery prices of commodities.

A predictable cost is offered on a fixed contract that the services and goods’ work scope is unlikely to change. The international project team tracks the schedule and quality to ensure the contractors meet the projected desire. International contractors provide a change of order to the project manager if the planned project changes (Thakkar, 2022). The contract requires more than one internationally qualified supplier. The client’s cost is constant for a fixed contract regardless of the applied effort.

Table showing contracts of cost reimbursable

Another type of contract involved in international procurement is the cost reimbursable international contract—an agreement by the firm to pay the international contractor for the goods and services. The contract commonly uses an unknown work scope. The global contractors are paid allowable expenses by the project manager using the cost-plus contract. Without incentives, contractors lack the motivation to reduce projects cost (Buzzetto & Carvalho, 2020). Additionally, another type of contract is called a time and material contract. The contractors charge high rates per hour for unknown activities. The international contractor does not assume the risk. Also, time and material contracts provide a total cost less than the project cost. The contractor also includes price contingency for high-risk cover and an amount to minimize the project risk. Moreover, the project’s final cost is unknown until enough information about the contract is available.

Payment program of the Contracts in International Procurement

International suppliers and vendors require payment during the contract’s lifetime. Thus, contractors will incur high costs on projects that last for months. The payment schedule is developed as part of the contract until the project’s completion is reached. The progress payments are before the project closure based on how the project progress (Jovanovic & Beric, 2018). During international procurement project management, the work, the time frame for completion, and the standard of quality of work must be checked before payments are made. International vendors and suppliers have a work scope defining the production and supply process of the services or goods. The work scope determines the amount to be paid in the contract.

The process of International Procurement

The process starts when a decision to purchase services and goods is made and ends when the bill is paid; the procurement management team develops a plan to secure the services and goods (Alsamarraie & Ghazali,2022). The plan may include appropriate relationship and contract selection, evaluation of international partnerships, contract change management, and contract closure. The plan development process takes a different period depending on the project complexity level. According to Jovanovic and Beric (2018), the project schedule contains the contract’s materials, equipment delivery time, and completion work dates. A special attention plan is required for the project’s delay. Also, the project management team develops a work description used for the contract approach selection. The answers in the report will be used to obtain the goods and services.

International bidders are requested to provide the price and supportive information of project details through solicitation. Similarly, management’s establishment and persuasion of partnership are based on a case by case. According to Gavurova et al. (2019), potential international bidders are bidders capable of providing goods and services overseas. Hence the eligible dealers are placed on the list of bidders. The management team investigates the potential international bidders’ qualities before placing them on the list. The performance ability and financial muscle determine suppliers’ eligibility (Ahsan & Kumar,2018). Furthermore, after the bidder with the required quality wins the bidding, they are contracted for the projected.

Proposal request is accountable for prices but focuses on schedule requirement meeting. The proposal development process by international procurement is always costly. Bid evaluation is done in response to a proposal request for services or goods (Jo et al., 2018). Services and goods’ costs, the cost of shipping, warranty values, and other service costs that add value to the project are included in the final price list of the procurement. After all, requirements are validated by the project manager; and the contract is awarded. Moreover, the project manager tracks the contractor’s performance after awarding the contract. Goods and services are then shipped to the buyer (Flynn et al., 2020). Thus, the project team manages the logistics and the expediting to ensure the safer arrival of the goods.

Figure showing process flow in the international procurements

Conclusion

Conclusively, the aspects of international procurement are related to the aspects of project management. The process flows from where business projects are outsourced and contracted to the shipment. Since global procurement is between states overseas, legal and cultural practices differ. Thus, the project management team should be familiar with contracted bidders’ legal structures and cultural beliefs for a successful procurement process. Similarly, a distinct process flow is followed during the global international procurement process. It commences with contract approach selection, bid solicitation, bidder qualification, quotation request, proposal request, evaluation of bids, contract awards, and contract management up to expediting and logistics at the final stage. The project manager successfully executes the international procurement process with another project team member’s help.

References

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