Project Risk And Procurement Management Construction Essay

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The following project plan is provide a brief idea about the project risk and procurement. In this project the first thing is identifying the project environment and what are the risks involved and why it is risky, why the risk planning processes are important and how to identify the risks associated with the project. The risk analysis processes is carried out, and continue evaluation process of the project. Why the risk treatment plan is necessary and how to conduct monitoring and review of the project.

The next is procurement of the project this will include project planning, how to conduct procurement strategies associate with the project. Why procurement solicitation and source selection important for project. Why procurement monitoring and controlling is necessary and what are the reasons.

Project review and completion stage gives, how effectively the project was closed and what are the tasks that are carrying out in project closing stage. Why periodic review is necessary in closing stage of the project and how the stakeholder valued the post completion review of the project.

1-Introduction

This assessment is to analysis the risks that are going to be effect and how to manage the procurement management system of the "Mandhoo" resort project. This is a project that includes many different types of risk and various difficulties of managing the procurement system which are required for this project.

This project stakeholder has higher level of concern to secure their investment by mitigating the risks and providing an effective ways of procurement system with minimal cost.

The project take place in the place where consist of a delicate and difficult series of ecosystem. The Island is standing alone surrounded by the sea and land area is also very small.

The most common risks are included in this environment are threats that occurring on sea level rising, strong waves and strong winds blow to the Island. To securing all the buildings and provide safe jetty for vessels which are used in this resort hotel.

Procurement management is very important day today works of this project and identifying what are the risk of transportation of good and materials, how to store, secure, and providing the goods and materials to the work sites on time.

2- Risk Planning and Identification

2.1- What is Risk?

The Association for Project Management (APM, 2000) describes procurement as ''the process of acquiring new services or products. It covers the financial appraisal of the options available, development of the procurement or acquisition of suppliers, pricing, purchasing, and administration of contracts. It may also extend to storage, logistics, inspection, expediting, transportation, and handling of materials and supplies.

2.2- Risks of the Project Environment How "Risky" it is?

There several types of risks associated with this project, the main thing is the place where the project undertakes. Maldives is a one of the most vulnerable country that having a different environmental issues,

Large numbers of islands are spread over the country and these islands are small and very low lying according to sea level, approximately three feet when sea rose. The major risk related to climate change such as accelerated seashore and reducing the availability of pure water in the land and changing to salt water and beach erosion.

The seasonal storms lead to occurring of huge waves and damage the reefs that safe guard the Island, and remove the sand and the coconut palms from the beach side of the Island. These negative impact leads to flooding the island.

According to above mentioned reasons protecting and safe guard the investment and also safe guard the people around the environment is very important.

2.3- Risk Planning associated with the Project

Risk planning of the project is very important, according to plan can pay more attention on overall project and another most important factor is organizing project works and maintain particular standard adopted for the project.

The project risk planning is necessary for every project and planning stage is within the evaluation stage of the project. This will helps to identify and take the suitable action to mitigate the risks when the beginning to end of the project. Planning steps of this project are divided in two steps those are preliminary and final planning.

Preliminary planning provides project strategy to the project team to how to handle and managing the risk. This will include estimations of works, within the given budget and time period and the final planning implement required work schedule for the project team.

Risks planning of the project are combination of Input, Tools and Techniques, and Output. Input of this project considers Project Charter, Risk Management Polices, Roles and Responsibilities, Stakeholders Risk Tolerance and Risk Management Plan Template.

Tools and Techniques consider Planning Meetings and Analysis which required for the project.

Output will provide Risk Plan will depict how to identify risk, analysis and response planning and monitoring. The following steps are considered in planning stage of this project.

Budgeting: To managed and complete the project works within the given budget.

Timing: To managed within the given time period.

Thresholds: Benchmarking maximum or minimum costs.

Reporting and tracking: Controlling the project works.

Below Figure-1 has shown how the risk planning of the project work.

Evaluation

Resolution

Verification

Closed

Starting point of Risk Planning

No

Yes

Figure-1: Risk Planning Flow Chart

According to the risk planning adopt for this project, the evaluation stages will identify and open when the risk is reached, after identification risk will move to the resolution stage and do the necessary things to resolve, when the risk reached to verification stage and it will verified, then the process will closed.

If the risk is not resolve then the verification stage will reopen again and risk will send again to resolution stage and next evaluation stage. Likewise the process will repeat until identification of risk.

2.4- Risk Identification associated with the Project

Project risk Identification is also work within the evaluation stage of the project. After risk planning the next thing is risk identification.

In the risk identification of this project, all identified risks will be stored in a risk register and this list will be determine which risk is most danger to the project and will give more priority to attend the high risks first likewise resolving one after another.

In risk identification of the project considered Input, Tools and Techniques and Output. Input includes Risk Management Plan, Project Planning Output, Risk Planning Categories and Historical Information.

Tools and Techniques consider Documentation Reviews, Information Gathering Techniques, Checklist, Assumption Analysis and Diagramming Techniques.

Diagramming Techniques includes following techniques

Cause and effect, and fishbone Ishikawa diagrams

Process flow charts

Influence diagram

Output will provide Risk, Triggers and Inputs to other process and Risk Register will provide:

List of recognized risks

List of possible responses

Causes of risk

Updated risk categories

The above Figure-2: shows the how the risk identification process works.

Risk Register

Risk Evaluation

Identify Categories

Plan for possible response

Closed

Entry point of Risk

Yes

No

Figure-2: Risk Identification Flow Chart

According to the Risk Identification Flow Chart, after entering the risk into risk register all the risks are evaluated and identified the risks categories and plan for response. If the response are matched then the process will closed else the process will moved to evaluation stage.

3 - Risk analysis, evaluation and treatment

3.1- Risk analysis associated with the project

Risk analysis of the project identifies the process of reviewing the impact and likelihood of the risks. According to risk analysis of this project Qualitative Risk Analysis is major role it will measure the risk as well as assets value and then ranking the risks into descriptive categories such as high (very important), medium (important) and low (not important) and also it will scale from 1 to 05 etc.

In this project risk analysis method is prioritizing the risks in order for further action like Quantitative Risk Analysis, with the help of Quantitative Risk Analysis the project team can effectively improve the project performance. It includes data of the past projects and lesson learned from these projects.

The next important step of quantitative risk is always focusing on high risks first and identifies the risks using likelihood of occurring; consequently identify the objectives if the risks occur,

Qualitative Risk analysis is used in most of the project this includes Inputs, Tools and techniques and Output. Input includes the available database of the organizational to get the past projects information, Project Scope, Risk Management Plan and Risk Register.

Tools and Techniques includes Probability of risk and impact assessment, Probability and impact matrix, Risk data quality assessment, Risk categorization and Risk urgency assessment.

Output includes Updated Risk Register by ranking the risks on the priority order, categorizing the risks, ready for risk response, gather the additional information to risk response, observe the low priority risks and learning from qualitative risk analysis.

3.2- Risk evaluation associated with the project

Project risk evaluation process is manage within the project team, as soon as identified the risk that will be registered in the risk register in order by high to low and send risks list to project team discussion, each member should provide own opinion about the each risk separately after that choose major threats which are related to particular risk.

The next step is all those risks are discussed in special risk analysis team of the project and finalizing the actions that are going to take, regarding the particular risk. The prior attention goes to the risk which causes more damage and higher expenses. The main importance of evaluating the risks is to identify the categories of risks such as: Operational Risk, Schedule Risk, Budget Risk, Business Risk, Technical Environment Risk, Information Security Risk and Programmatic Risks. Identification of all these risks is highly important for every project.

Below Figure-3 has shown how the Risk Evaluation of the project works.

Risk Register

Risk Categorizing

Entry Point

Attending High Risk First

Closed

Risk Evaluation

Yes

No

Mitigating Risk

Figure-3: Risk Evaluation Flow Chart

According to this risk Evaluation flow chart, when a risk is entering to risk register the identification process will be started. In this process all the risks are categorized in different levels to attend high risk first then others. If the risk is mitigating properly the process will be closed else risk mitigating process will move risk evaluation stage until it makes rectification.

3.3- Risk treatment associated with the project

Risk treatment plan is a part of risk and also it is a part of risk management plan. This plan will show how the risk will be managed either that is high, medium or low. According to this project the first create risk management plan that will guide the team members and stakeholders, how they react on the risk.

The next thing provide in risk treatment plan, it is always repeatedly suggested to risk assessment plans that identify how to avoid, mitigate, transfer and accept the risk, all these actions that will help to deal with the risks. The four methods that are going to use in risk treatment are:

Avoiding Risk: to avoid the risk the first thing is identifying the past project experiences and project documentation to analyze what risks may occur in the project initiation.

Mitigating Risk: to allow the risk before it starts or managing the risk in an acceptable level. First identifies the potential threats to take appropriate action to mitigate the risk and other thing setting a contingency plan that deals with risk when occurrence.

Transferring Risk: identified the risk that can be transferred to third party, it does not mean risk goes away. These types of risks are handled by an expertise team from organization or outside source.

Accepting Risk: according to risk response planning, if the risk considered low or small or the risks are recognized that can be adjustable within the project to identify the cost or schedule may not missed.

Tools and artefact which are going to use in risk treatment are:

Inputs:

Register of Risks

Profile of Risks

Matrix for Cause Control

Outputs:

Risk Statements and Treatment Plan

Updated Register of Risks

Updated Profile of Risks

3.4- Risk monitoring and review associated with the project

Risk monitoring of the project is keep track of how the risk is entering and what are the responses that can perform against the risk, and keeping contingency plan how the new risks can be managed. Risks can have positive as well as negative impact. Positive risks have potential benefits that are more important than traditional approach and negative risks that are negatively influence to cost and schedule of the project. According to this project the main goals of monitoring are:

Verifying risk responses are implemented according to planned

Checking whether risk response are effective or required new response

Checking the validity of the project statements

Checking past experienced risk has changed or required new trends for the project progression

Verifying the procedures and policies adopt for the project worked as planned

Monitoring the project for new risks

Monitoring the risks triggers

Risk triggers are the event that causes the threat of the risks to become reality for example, if the project using one generator for all electrical works required for the project and in middle of the work if any things happen to any part of the generator, the whole work will be blocked, if the problem cannot be solved immediately, then the risk will become reality.

According to this project each identified risk there will be a response plan. This will help to stop the risk before it becomes reality. These are the Input and output processes that are going to used monitoring the risks.

Input

Risk management plan

Risk Register

Risk response plan

Communications of the project

Identification of new risks

Changes of project scopes

Outputs

Approximate work plans

Corrective and Preventive actions

Change needs

Updates of risk response plan

Risk database

Updates checklist

4 - Procurement planning and strategies

4.1- What are procurements?

The term "Risk" define An endeavour in which human, material and financial resources are organized in a novel way, to undertake a unique scope of work of given specification, within constrain of cost and time, so as to achieve unitary, beneficial change, through the delivery of quantified and qualitative objectives. Turner (1992)

4.2-Procument planning associated with the project

Procurement planning is the one of the most important role of any project. In this process will provide the product and resources which are required for the project and delivered the products on time. Implementation of procurement planning helps the management to ensure that they can buy appropriate products in right prize from right suppliers.

In this project procurement handling is extremely difficult, the project is going to conduct in an inhabited and individual standing Island, all the things required for the project can supply by sea transportation.

According to that the company is going to face many difficulties, because of that they decided to get external supplier to provide all major products which are required for the project. For example heavy machineries like Crane and Highmark, Construction materials, Toilet fittings imported from foreign suppliers. Custom clearance is going to handle company employees and for goods and material loading and unloading company is going to select capable local companies. Below given are the benefits of procurement planning.

Always materials are available for production

Giving more attention to material and resources prices

Minimize the procurement time and cost

Decreasing the level of risk

Equally perform the production plan

An effective understanding between business partners and suppliers

Procurement planning is divided into two categories those are high value or strategic procurement planning and annual procurement planning. For this project the company decided to adopt annual procurement planning. This planning encourages the company management to handle the available resources as well as deliveries according plans and strategies and also minimize the cost and increase the production. The most important factor is providing order of purchasing and from which suppliers. Company management consider following stages of annual procurement planning.

Supporting service of delivering the products

Assessing company expenses on goods and services

Improving the project procurement process

Improving the project performance of goals and events

Identify the Required Goods and Materials

Gather the Supplier Information

Select the Most Appropriate Suppliers

Divided the Categories of Goods and Materials

Provide the Proposal to Suppliers

Inform the suppliers who are selected and not

Identified the Best Proposals

Signed the Agreement

Start Point

The below Figure-4: shows how the planning systems work.

Figure-4: Procurement Planning Flow chart

According to this procurement planning priority goes preparation to arranging warehouses facilities to store goods materials which required for the project. According to the planning company is going to build temporary warehouses that can store materials and goods for first three month periods.

The most important thing is internal audit, according to the audit management system project procurement plan for required good and materials are ordering according to project phases.

The next stage of the strategic plan is considered, when 50% of the goods and materials get used. According to project plan company will reorder for goods and materials by checking the stock balance records and damaged item records.

4.3- Procurement strategies associated with the project

What is Contract?

A contract is an agreement between two or more persons it include individuals, organizations and government agencies. The main purpose of contract is assigning responsibilities of particular works and exchange for value and it is generally form of written, either formal or informal terms, and sometimes entirely verbal. The terms of the contract includes who, what, where, when, and how in the agreement with their promises.

Procurement strategies are one of the important part of a project, it helps operating the project requirements successfully internally as well as externally. This refers a planned approach of cost effectiveness of purchasing company required. These includes time period for procurement, required funding or budget, project risk and opportunities.

Procurement strategies of this project, the project team members sit together for clarify all the works within the project. This includes project objectives, what are the available and existing resources and supplies, budget and time scheduling of the project works and evaluate what are the various ways to drive down costs, based on these factors prepare what are the requirement that company accepted in "Quotation Request for Qualification (RFQ) and Proposal Request for Proposal (RFP)" from the bidders.

Main objectives of procurement strategy are:

The major rules included in the procurement strategy are availability of goods and materials from the beginning to end of project and maintain the quality of the goods and materials supplying for the project.

Educate and train to encourage internal purchasers to review their consumption of goods and services, reduce the usage and adopt environmentally friendly alternative products

Communicate and maintain procurement policy to all staff, suppliers and stakeholders

Promote best practice for maintain procurement

4.4- Legal issues and Strategies associated with the project

A "Legal issues and Strategy" is a major concern on every project and it is a most important part of the project. There are some reasons to consider, the first thing is there are number of peoples are involving in the project. This includes Companies, Associations, Groups and Individuals all these people plays very important role to complete the project.

Mostly legal issues are arising in somewhere middle of the project, to avoid these problems the project begins with many different agreements and understanding. There are set of government rules and regulations, which are applied on company strategies and it does consist of many legal issues. According to this project, below these are the Government Ministries involved in this project.

The project begins with legal agreements between the Company and related Ministries, those are Ministry of Environment and Planning to protect the environmental related issues, same way Ministry of Construction for maintain the construction standard, Ministry of Human Resource and Labor, protecting employer as well as employees, Ministry of Economics for applying the trade policies.

These agreements are very important to project Employees, Suppliers and Contractors. This will helps to both the parties to respect each other. Based on those agreements company will made the contract with all those people who are involving in the project.

The most common Legal issues associates with "Strategies" are the time, when considering to time, if the suppliers cannot supply the goods and materials on time, contractors cannot complete the works on time, with the acceptable standard. Next thing is health and safety of the workers.

On the other hand legal issues arise if the company cannot pay the payments on time to suppliers, contractors and employees. These are the major legal issues concern in this project to success.

5- Procurement solicitation and source selection

5.1- Solicitation and source selection associated with the project

"Solicitation" is the process of obtaining information (bids and proposals) from the prospective sellers on how project needs can be met (Garrett & Rendon, 2005). According to this project the contracting solicitation phase process includes:

Conduct pre- bid or proposal meeting.

Advertising the procurement opportunity or Sending the notice to interested suppliers.

Giving special attention to qualified bidder's list.

"Source Selection" is the process of receiving bids or proposals and applying the proposal evaluation criteria to select a supplier (Garrett & Rendon, 2005). This process includes the contract negotiations between the both parties to go for an agreement on all aspects of the contract. This will include cost, scheduling, performance, terms and conditions etc. the following activities are included in source selection process of the project.

Identify the Evaluation criteria to managing, cost, and technical proposals.

Negotiating process with suppliers.

Implement the contract award strategy.

Source selection phase include using a formal source selection with trained and experienced cross functional proposal evaluation teams of the company and also using a disciplined approach to evaluation criteria stated in the solicitation phase.

In additional best practices is also include to obtaining independent cost estimates ways to assist in evaluation of supplier proposals, and conducting a price differentiation analysis on each supplier proposal.

6- Procurement monitoring and control

6.1- Procurement monitoring and control associated with the project

Procurement monitoring and controlling is a process of evaluating, tracking, goods and materials. It helps to monitor and controlling the audit of the company.

The most important factor of procurement monitoring and controlling and maintain the stock records updated. This will provide what are the necessary goods and materials required for the project, after knowing these things it is easy to monitor and control the procurement.

According to this project procurement monitoring system will monitor:

Goods and materials ordered from suppliers.

Goods and materials received from suppliers.

Goods and materials used in project phases.

Goods and materials damaged.

The main reasons of procurement monitoring are easy payments to supplier and continue the project phases firmly without any obstacles.

7 - Project review and completion

7.1 - How effectively project was closed

The last phase of a project's is the close-out.  Closing the project should be a fairly routine process. At the end of the project the company will check the entire unpaid project works and make sure final invoices are received and paid to the suppliers, contractors and all employees. The main reason is adjusting all outstanding are make the project successful.

Effective projects are always prepared financial report on each stage and these reports are going too used in planning of the next phase and the company will checked following stages.

All the payments have been made

Available budget can manage the payments

Check payments made are correct

Check there are any unfinished responsibilities that can be cancelled.

Another reason of prepare the final financial reports is some information may be needed by the company finance department and also joint-venture partners. According to steps followed in implementation stage, effectively the project was closed.  

These are the key elements to project closing:

 

Accept the project's by owners

Complete the Post Completion Evaluation Report

Conduct a session of lessons

Complete the project records

Identify outstanding and achievement

Celebrate the project completion

 

These key elements activities are highly important on large projects with records and resources. The first step of the close-out process is the owner's acceptance of the project works.  This is a critical and important step, as the owners decides when the project is completed. 

 

7.2 - Periodic review associated with the project

Periodic review is easy way of balance versus number of correct action. The main reason is check all the previous works are performed according to the project plan. The periodic reviews of this project conduct in every six months.

The main objective of periodic review is to assure the management and the project owner under remains validated and under control during the operational life and another important thing is previous reviews also be assessed to see if they have been implemented are effective.

The review should be planned and dates are agreed in advance with all involved with the process. The planned will outline the scope of the audit and the area to be reviewed. A periodic review follows the following outline time table.

Opening meeting, all personnel involved with the audit and discuss the timetable.

Overview of the project to explain the review team with the project.

Review of the project according to the plan

Review's the closed meeting to discuss the audit and plan for close meeting.

Closing meeting where brief are discusses with the project owner and their representatives.

These are the reporting review follow- up at the end of review:

The report should be record what was reviewed in depth, what are the briefly review areas and where the work not done.

The result should be classify in order, a typical grading scheme may be:

Critical: Works that required rapid solution.

Major: A serious concern on correct it.

Minor: Issue to correct it.

7.3 - How the stakeholders valued post completion review of the project

What is a post completion review?

A Post Completion Review, is performed after a project is completion. The main purpose of this review is to find out whether the project was completed successfully and identify the lessons learned and also looks the project works was successfully performed particular timeframe. The overall outputs are documented in the post completion review report.

The best time of conducting this review is six months after completion of project. A post completion review is a most critical part in the project life cycle. During the review the success of the project will be is measured. This will includes all of the content perform in a post completion review. The post completion review of the project is the last task in the project life cycle, it will allows an independent teams to validate the success of the project and give assurance to the stakeholders that it has met the objectives.

By performing a post project review helps to identify successes of the project, deliverables of the project, achievements of the project and lessons learned from project. The below template helps to perform a post completion review:

To measure the benefits and objectives

To decide the project was within scope

To assess the final deliverables produced

To review the project against schedule

To compare the expenditure against budget

Start the final outcome of the project

The post completion review of the project also helps:

To identify the key achievements and milestones of project

Document all the lessons learned for future projects

Communicate with stakeholders to get success

8- Conclusion

Considering to this project report, that will identified the importance of risk and procurement management are how important for a project, especially before investing the tourism industry of Maldives.

This project report highlighted the importance of risk planning and what are the different stages of risk planning and how these stages help in a project, those stages are risk analyzing , risk evaluating, risk treating and risk monitoring, through the reviews and what are the tools that can be used in all these stages and how effectively handle the project.

The report discussed importance of procurement planning, procurement strategy and procurement legal issues and strategy associated with the project and also solicitation and source selection associate with the project and how solicitation and source selection works in a project.

The next thing discussed in this report is procurement monitoring and controlling and finally how effectively the project can close with using periodic review and post completion review.

9- Recommendations

According to conclusion of this project report, there are many recommendations on the overall project. This part of the project concern on project risk and procurement system associated with the project. This is a difficult part of any project. The first thing that recommended in the project is strong relationship between project manager and stakeholders, project manager and co-workers and co- worker and stakeholders.

To avoid the project risk a friendly environment is very important, project teams are always work as a team, this is an effective way of identifying the risk in the initial stage, if the risk is identified in the beginning that will be easy to take appropriate action and chances spreading will be low.

To manage the effective procurement system project manager should have strong relationship between suppliers contractors and all who involving in highly important, this will help to control the project budget and project standard.

If the project manager concern on above issues and take corrective action the project will be a successful project.

References

http://www.mv.undp.org/v2/?lid=72

Heldman, Kim,(2006)," Project Manager's Spotlight on Risk Management", What is Risk Management", Page 1-28

Hellman, Kim,(2006)," Project Manager's Spotlight on Risk Management",Identifying and Documenting Risk, Page 29-59

Nickson, David, (2006),"Project Management Disasters", Page 75-91

National Academies Press,(2005)," The Owner's Role in Project Risk Management", Properties of Project Risk, Page 17-21

National Academies Press,(2005)," The Owner's Role in Project Risk Management", Identification and Analysis, Page 22-40

National Academies Press,(2005)," The Owner's Role in Project Risk Management", Risk Mitigation, Page 41-51

Hillson , David, (2009)," Managing Risk in Projects", Risk and Project, Page 11-21

Hillson , David, (2009)," Managing Risk in Projects", Managing Risk Practice, Page 23-52

Kendrick, Tom, ( 2009),"Identifying and Managing Project Risk"(2nd Edition),Page.20

Peter W. G. Morris and Jeffrey K. Pinto,( 2007 ), "The Wiley Guide to Project Technology, Supply Chain & Procurement Management"

http://library.books24x7.com.ezproxy.usq.edu.au/book/id_23407/viewer.asp?bookid=23407HYPERLINK "http://library.books24x7.com.ezproxy.usq.edu.au/book/id_23407/viewer.asp?bookid=23407&chunkid=0152846403"&HYPERLINK "http://library.books24x7.com.ezproxy.usq.edu.au/book/id_23407/viewer.asp?bookid=23407&chunkid=0152846403"chunkid=0152846403

Rendon R. G. & Garrett, G. A.,(2005) "Managing Contracts in Turbulent Times", Contract Management, Page 48-57.

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