Administer procurements II

April 29, 2010


Administering procurement is about managing the buyer seller relationship, measuring the contract performance periodically and making the changes that are required due to on-going changes happening in the process. The tools and techniques that one uses to ensure this threefold aim are achieved are contract change controls system, procurement performance reviews, inspection and audits, performance reporting. Payment systems, claims administration and an efficient record management system.

Of these, the contract change control system, procurement performance reviews, inspection and audits have been discussed in the part 1 of this two part article. This part will discuss the issues related to the performance reporting, payment system, claims administration and the records management system.

Tools and Techniques for the administer procurement system

How the three goals are helped along by the contract change control system, procurement performance reviews and inspection and audits have been discussed already in the first part. We look at the tools & techniques of performance reporting, payment systems, claims administration and the records management system here. While performance reporting helps with the on-going measurements of the contracts performance; the payment system and the claims administration facilitate relationship maintenance. The record management is a tool that facilitates all aspects of administering for the administer procurements process.

Performance reporting is about providing information to management about how the procurement action is progressing. This is essentially based on the assessment of how well the seller is progressing with the goal of producing the deliverable as specified in the contract. These performance measurements should not only asses possibility of delivering the outcome but also the quality, cost and the schedule performance associated with that outcome. The measurements are periodic in nature driven by the procurement plan. Quite often it is based on the results found in the inspections and audits carried out by the buyer at the sellers premises.

An efficient payment system is an essential requirement of an efficient procurement administration. Nothing is more sensitive that delayed payments. So for the sake of maintaining a good relationship it is essential that payments are processed very quickly and without any undue delay. The usual process with payments is through the accounts payable system of the buyer. The payment claim in the form of an invoice will need to be authorized by someone authorized to do that in the project management team. The payments made need to be documented. Remember that these are contractual obligations on the part of the buyer to meet the payment demands when due. The recording format will have been specified in the contract. When the seller can raise an invoice and what payment delays can be there will normally be specified in the contract. Quite often seller imposes conditions that say the due amount will be added with a certain amount of interest when delayed beyond the period agreed to. When there are periodic payments involved the seller may impose a further condition that the next lot of work, outcome or result may be withheld unless the payment on the earlier invoice is not received.

An efficient claims administration is essential not only for the sake of maintaining a relationship but also for avoiding litigation with any outstanding claims. Legal action, as we all understand is an expensive option. Besides it is undesirable on several counts. Contested changes and potential constructive changes can happen in the lifetime of procurement action. Contested changes are those that those that one party is not ready to accept without a change in the compensation. Constructive changes are those changes that are accepted by either party as a constructive, necessary change but are not able to agree on the extent of compensation that would be fair. These contested changes are variously termed as claims, disputes or appeals.

These claims need to be documented, processed, monitored and managed well through the existence of the procurement action. Most contract formats would cater for such claims or disputes. It is common to specify the mechanism of redressal of such disputes. Usually an alternate dispute resolution or an ADR mechanism is written in into the contract. This usually takes two forms. Some authority is called in to mediate in the dispute or both parties agree to an arbitration procedure. The constitution of the arbitration panel and the processes to be followed by the also are put in into the contract. Obviously, both buyer and seller have to agree on the mediation authority and the arbitration panels and its processes.

A record management system that is a part of the project information system needs to be used to help collecting, managing and finding the right documents quickly and easily. This would manage the procurement documents and records. A specific set of processes, control processes that mange these and an information tool together constitute such a system. The system must essentially have a vault that archives all the procurement documents and correspondence. An easy retrieval based on sophisticated search criteria is an essential feature required of such systems.

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