Running head: PROCUREMENT ANALYSIS
7-1 Final Project Submission: Procurement Analysis
Beatrice Koech
SNHU
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PROCUREMENT ANALYSIS
Table of Contents
1.0 7-1 Final Project Submission: Procurement Analysis .............................................................. 3
1.2 Types of Contracts .................................................................................................................. 4
1.2.1 A Fixed-Price contract ....................................................................................................... 4
1.2.2 Cost Reimbursement contract......................................................................................... 4
1.2.3 Cost plus Fixed Fee Contract ............................................................................................. 4
1.2.4 Cost plus Incentive Fee Contract ....................................................................................... 4
1.2.5 Cost plus Award Fee .......................................................................................................... 5
1.2.6 Cost plus Percentage of Cost .............................................................................................. 5
1.2.7 Indefinite Delivery/Indefinite Quantity (IDIQ).................................................................. 5
1.2.8 Incentive Contract .............................................................................................................. 5
1.3 Procurement Regulations and Source Selection ....................................................................... 6
1.3.1 Procurement Regulations: United States and Abroad ........................................................ 6
1.4 Summary of Procurement Principles ........................................................................................ 9
References ..................................................................................................................................... 13
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1.0 7-1 Final Project Submission: Procurement Analysis
A procurement management plan is a link between existing suppliers to acquire or buy goods
and services for projects. Such partnerships are often formed on the basis of a contract, in order
to receive the required goods or services on time and to meet the standards demanded by the
buying agency. It is distinct from the declaration of work (SOW) which also defines the technical
requirements of the contractors, known as the Terms of reference (TOR). Actually, it discusses
the overall strategy and vendor management. The roles and responsibilities, scheduling, vendor
monitoring, forecasting, risk management, authority, compensation, and constraints and
assumptions are some of the key components of the procurement management plan. This paper
will focus on the Harley Davidson Motor Company's project management strategy and the option
of a software company.
The project management plan needs the method to be identified, decisions reported and
contractors listed. The explanation for that is to see whether external support is necessary to
support the project, and if outside aid is given to the person it is, how much it cost and when it is
required. The job breakdown framework is some of the reports that will need to be done in detail.
It includes task list, schedule, plan and correspondence. The remaining text is a statement of
work containing the definition of purpose, context statement, outcomes, goals and estimates of
costs and schedules. Harley Davidson's case study deploys a technique for supply management.
Stakeholders and priorities need to be established so that the procurement process is transparent
and defined. The WBS is built into the task list to ensure the project is effective when the
schedule is clearly defined. The schedule focuses on what must be completed within a given
period of time, and this case study not only uses the dates as a guideline but also provides the
benchmarks to monitor progress.
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1.2 Types of Contracts
1.2.1 A Fixed-Price contract
When no confusion occurs in the work area, it is used. The seller is contractually bound
to perform the assignment within the agreed amount of money and time once the contract has
been signed. Due to the nature of the contract, the seller takes responsibility for the bulk of the
risk and is responsible for the work as provided for in the contract. Fixed-Price contact can be
classified into three categories. Firm Fixed Price (FFP), Fixed Price Incentive Fee (FPIF), and
Fixed Pricing Enhanced Economic Prices (FP-EPA).
1.2.2 Cost Reimbursement contract
It is a kind of contract that reimburses the seller for finished work plus a fee for its benefit. This
fee is payable in most situations if the seller meets the specified project targets or exceeds them.
If there is a vulnerability in this area, or the risk is greater with good costs if there is no welldefined range, a refundable cost contract will be used. As the buyer pays all expenses, he faces
the threat in this deal. The seller will always try to raise the price, as they are bound by a charge
or refund. There are three types of cost reimbursement contract these are;
1.2.3 Cost plus Fixed Fee Contract
If the project is seen as high risk and fears that the procurement agency cannot attract the bidders
and contract of this type is ideal. It protects the seller against risks because they are all carried by
the procuring company. The contract should include a clause to pay the seller for costs incurred
plus an exempt fee.
1.2.4 Cost plus Incentive Fee Contract
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The procurement agency will also assume the risk in this type of contract, but that risk will be smaller
because there is an additional incentive for the contractor. The contractor is reimbursed for its costs plus a
performance-based reward fee. The incentive fee is typically a pre-determined percentage of the savings
resulting from the seller's performance.
1.2.5 Cost plus Award Fee
Although the Incentive Fee is based on a fixed savings rate, an award can be subjective and
based on the quality the buyer thinks of the seller. The award is subjective and therefore cannot
be appealed. Utilize the terminology that means that the seller can be compensated up to a dollar
if they meet or surpass the contractual requirements.
1.2.6 Cost plus Percentage of Cost
The seller is paid all costs by a CPPC agreement plus an additional gain of a percentage of those
expenses. Be cautious with this type of contract, since some sellers will receive a higher profit incentive
to inflate their costs.
1.2.7 Indefinite Delivery/Indefinite Quantity (IDIQ)
It is commonly used for replacements or modifications to fixed-price contracts or cost-refund contracts to
make the government's particular products, equipment or parts of a project flexible. IDIQs enable several
companies working under the main contract to be chosen by the government contracting company for
potential break-out contracts. It offers the maximum value, versatility and product possible. The main
contract usually lasts for five to 10 years and each work order is declared as required during this period.
1.2.8 Incentive Contract
This is a form of contract which is the holder for the supplementary payment of a contractor on
the basis of cost, schedule, performance and security execution by the contractor in compliance
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with the contractual terms and conditions. There are two possible incentive agreements, fixed
incentive contracts and incentive contracts for cost reimbursement. Fixed rate contracts are
favored when contract costs and conditions for quality are fairly certain.
The SOW, which will include a fixed price and time and materials contract will be the
applicable contract form for the Harley-Davidson Motor Enterprise Software Selection
Procurement Program. A certain set of deliverables for a certain price will be available with a
fixed bid. This cost has been set and without a change of order does not fluctuate with the
venture. A software development company finds it very hard to devise a set proposal for any
project over a certain amount or period of time. If a Fixed Bid strategy is used for a bigger
project, smaller and specified changes in the course of a project may be required.
1.3 Procurement Regulations and Source Selection
1.3.1 Procurement Regulations: United States and Abroad
The federal, state and local government administrative acquisition of goods, products and
materials from service providers and suppliers is subject to additional rules and regulations in the
United States. Federal procurement documents detailing information on their relevant contracts
are needed for agencies within the state. The Federal Acquisition Regulation is a statute created
to deal with the rules and regulations on public procurement, acquisition preparation and contract
details and administration of goods and services. In the bidding process at all levels of
government, including federal, state, local, regional and special districts, most agencies can
accept bids from any eligible firm, regardless of whether they are headquartered in the USA or
abroad. Foreign firms must however first obtain certain requirements and approvals, for
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example, the NATO Commercial and Government Entity (NCAGE) Code, Award Management
System (SAM) before starting the bid process.
Home Domestic and international procurement can be a little more different because
international procurement has many laws to follow that may have consequences for international
business transactions of a purchaser. Among these are the Foreign Corrupt Practices Act, the
Anti-Boycott Law and the Export Administration Code. In the Harley Davidson case study,
when a software company is selected local regulations must be considered since the final three
vendors are operating for-house under local government regulations.
Source selection criteria are a collection of characteristics that the buyer wants to satisfy
or surpass a seller that is chosen for a contract. The requirements for the choice of sources are
often included in procurement reports under project management. Selection criteria for more
complex products, services or outcomes may be defined and reported. Source selection criteria
may include; Understanding the need where the proposal is assessed to determine how well it
addresses the procurement SOW, Life-cycle cost which is used to determine if the chosen seller
will provide the minimum sum of ownership, Risk to determine how much of it is embedded in
SOW, Management Approach as well as Technical Approach.
The sixteen qualitative parameters on which the providers are measured are shown in
Exhibit10 from the Harley Davidson case study. Once we add low-, medium-or high numbers to
your ratings, we will see which supplier is better in keeping with Harley Davidson's price, with
low-= 1, medium /Low = 1.5, medium= 2, medium / high= 2.5 and high= 3.
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Provider 1
Provider 2
Provider 3
Rating
Rating
Rating
3
3
2.5
2.5
3
2.5
3. Training Approach
3
2.5
1.5
4. Implementation/Education/Change
Management Methodology
3
2.5
2
5. Understanding Harley’s
Requirements
3
2.5
2
6. Enabling the SMS
2.5
3
2.5
7. Out of the box Fit
2.5
3
2.5
8. Financial Viability
2.5
3
2.5
9. Cost
3
1
2
10. Technical Support Offerings
3
3
2
11. Overall Functionality
3
3
2.5
2.5
3
2.5
13. Architecture Compatibility
3
2.5
3
14. Platform Portability
3
2
3
Qualitative Criteria
1. Long Term Relationship Potential
2. Research & Development
12. Number of Partner Providers
included in Solution Proposal
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15. Web Functionality “to go”
2
3
1.5
16. Manufacturing Experience
3
2.5
2
44.5
42.5
36.5
Overall Score
1.4 Summary of Procurement Principles
Acquisition management can be considered to accept services and goods from an external
agency or corporation. This is a popular way of running a business and it almost guarantees that
it is used at least once in a company's life. The owners of a company must know the basic
principles that go hand in hand, to use this form of management successfully. It covers money
value, morality, openness, accountability and competitiveness. These principles and the impact
on Enterprise Software Selection processes are described in greater detail in this paper.
As mentioned before, money quality and good guidance would enable business owners to
build a comprehensive plan which is a key to their success and can easily be enforced. The
procurement needs to continue to develop because of its management of a large amount of
money within the company / company. The ability to improve this system allows the business to
effectively increase the value of the money. "It means that areas which can be maximized can be
identified in order for the company to be reinforced and made more procurement efficient It is
possible to measure value by analyzing a lifetime asset, which includes start-up costs, asset
maintenance, warranties and guarantees, services support, obsolescence, and the timing of the
asset disposal (Kuira, 2014). A good example is Harley Davidson's technology selection (ESS).
In particular it provides a good example of the value-for-money of new software implemented
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throughout the entire company. The reason is, Harley Davidson needs similar technology in the
entire enterprise, so the value of the money will increase if a lot of software is used. Another
example of how Harley can increase sales is to sell software for its old used bikes for scrap
metal. The partnership should therefore not spend as much on its pockets and thus maximize its
revenue. Ultimately, products that maximize the value of cash should include a company or
organization.
Second, transparency can be described as "the access to information that is timely and
easily understood. Transparency contributes to the early identification of any deviations from fair
and equal treatment and makes such deviations less likely. This preserves the dignity of the
system and the stakeholder and the population's interests. Transparency is essential in sending
contracts to potential buyers, where trust is created with different external suppliers. In addition,
contracts can also be simplified, leading to information that is easily accessible and attractive to
suppliers, as well as strengthening the confidence built between them. In so doing, Harley
Davidson will be able to choose the right vendor for her venture and create a competitive
atmosphere that will reduce the actual project costs.
Harley Davidson must submit RFQs to prospective vendors in order to focus on the ESS,
which will contribute to competition. Harley Davidson invited all vendors to attend a conference
when this mission was completed. The overall objective was to allow businesses to ask questions
based on contracts, priorities, expectations, etc. Ultimately, the meeting / session is vital for the
progress of the face of openness, because it helped Harley to clearly identify everything on the
table to ensure that all questions and concerns were addressed.
Thirdly, the transparent procurement process in which competitive contractors, suppliers or
vendors permit offers to be made free of charge on the scope, requirements, terms and conditions
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and on the parameters by which bids are evaluated. The goal of competitive tenders is that by
increasing demand and avoiding favoritism, products and services are delivered at the lowest
prices. By (1) open competitive bid sealed bids shall be opened to all who may wish to see the bid
open; (2) closed competitive bid sealed bids shall not be opened unless a licensed staff is
present. Through use of this team, companies like Harley Davidson ensure that they get the best
product or service at the best cost. As shown in the description, there are different types of bids.
All these factors are closely connected to the highly competitive environment process,
which offers companies many opportunities. Studies indicate that the ESS is one of the most
important components in its strategic aspects in the field of procurement. Competition is the
biggest driving force of all when all the variables as described are taken into account. If this part
of the process fail, the company will eventually have a significant problem getting a seller from
the given budget.
In order to change technology and consumer behavior, ethics are of great importance in
procurement. Ethical means of complying with rules or standards of right behavior or practice,
particularly those of a profession (Wins 2018): "A disaster was the original presentation, some of
whom considered the relation they had previously had with Provider3 unethical. The
manufacturer's representatives were late; they had never met the members of the organization.
But Provider3's self-assessment checklist rating was strong (96.8 percent) and the group claimed
it could not be dismissed. After much debate, the committee agreed to give Provisioner3 another
two hours to discuss this issue "(Austin, R. Sole, D. Cotteleer, M, 2003), but it was because
Harley Davidson did not present the other businesses with the same question, that the subject
gained so many attention. It actually fits well if you look at what is called an ethical decision. A
section says that all are treated equally and impartially and will receive the same treatment.
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Therefore Harley should have finally given everyone a shot, because it only hurts the business
when people look at such things.
Responsibility depends on your job and the extent of the consequences when something happens
in many ways. But, with a view to the acquisition aspect, accountability can be described as'
anyone who takes part in the acquisition process must report on the consequences of your action
and decision to the designated supervisory authority and the public' (Lynch n.d).
Like a large company such as Harley Davidson, they are not only accountable but also
hold the public at large when a person makes something that reflects on the company. This might
encourage others to step up and take responsibility for other individuals if they adversely affect
the business. For example Jeff Bezos had been divorced and, as the Amazon founder, not only
the perpetrator, but the business had been publicly affected. Harley Davidson made sure, on the
basis of its capacity to meet default requirements, that all prospective vendors complete a preevaluation process. Upon conclusion, each vendor's presentation would be pre-assessed by the
evaluation group. They not only held sellers responsible for their actions, but also for their
confidentiality. In the final analysis, the two forms show the result. I find that trusting the seller
is one of the bigger weights after the contract is signed and a project is irresponsible. Ultimately,
as mentioned above, one has to be able to understand and to succeed with the managers involved
in the procurement process and management parts. The purpose of this paper was to analyze
each detail so that each theory would better understand what is expected. Value for money,
openness, efficiency, ethics and responsibility were the following concepts discussed.
Ultimately, if a business / organization does this, it paves the way to success, as Harley Davidson
did.
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References
Lindstrom, D. Procurement Project Management Success. [MBS Direct]. Retrieved from
https://mbsdirect.vitalsource.com/#/books/9781604277470/
Procurement Management 101: Three Types of Contract. (n.d.). Retrieved from
https://www.projectmanagement.com/blog-post/7660/Procurement-Management-101--Three-Types-ofContract
Austin, R. D., Sole, D., & Cotteleer, M. J. (2003). Harley-Davidson Motor Co.: Enterprise
Software Selection. Retrieved from https://hbr.org/product/harley-davidson-motor-coenterprise-software-selection
Lynch, Jorge. (2019). Public Procurement Principles, Categories and Methods. [Volume2].
Kuira, B. (June 23, 2014). Value for Money in Procurement. Retrieved, June 5, 2019, from,
https://www.linkedin.com/pulse/20140623065259-126552187-value-for-moneyin-
procurement
Wins, Marc. (January 5, 2018). Ethics in Procurement: What are you doing to keep procurement
ethical?
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