Contract Management – Godinterest

Over the past decade business procurement has experienced rapid technological upheaval that, in the main, has made life easier for everyone involved.

The first ever Global Procurement Technology Summit was held in March 2016. It shows the emphasis procurement is now putting on understanding and utilising new technologies, and that it’s clearly a huge talking point for professionals across the world.

Looking in greater detail: which technology has been responsible and what has the effect been on procurement and buying professionals?

1. More informed decisions are being made

The digitalisation of procurement processes and integration of data-sharing across buyer behaviour, ratings and history of purchases over extended periods of time, has made for smarter and more informed decisions.

Despite the greater insight into decision-making, a study of US procurement professionals still revealed accurate forecasting to be the biggest challenge, something that’s possibly down to the rise in budget responsibilities over the last ten years.

The Coupa ‘Top 5: Constants and Change in Cloud Procurement’ report revealed that in 2003, budgets were reported as an average of $31m, compared to $100m in 2013.

2. Response times have drastically reduced

Procurement solutions are now quicker and easier than ever thanks to new marketplace technologies.

Buyers can take advantage of online purchasing possibilities, using websites like Amazon to source, purchase and arrange delivery of items.

The speed of procurement reflects the new speed in which consumerism moves ’’ the integration of digital mediums with online shopping has made the process of deliberation through to transaction much easier, a trend which has been reflected in the world of procurement.

3. Integration has brought its own problems

Technological integration has created many positives for procurement, but it’s also created challenges.

Millennials will make up 40% of the workforce by 2020, which is great for improving current procurement solutions as younger generations have higher expectations for technology and are early adapters.

However, the average age of procurement professionals in the UK is currently 44 – much older than the next generation of workers, who fully understand the capabilities of technology, and who will be easier to train and able to work with increased speed and accuracy.

The gap will close in the coming years, but procurement faces a struggle as older workers need to ensure their skills are relevant to the changing world around them.

Additionally, Hays’ ‘Procurement Salary Guide’ revealed that demand for procurement professionals has increased at all levels within the public sector, pushing salaries up. This demand is the result of a squeeze on public finances and attempts to cut costs following the slowdown in the economy.

4, Technology and the future of procurement

To conclude, technology is clearly a powerful enabler that’s here to stay. Plenty of companies are now seeing the importance of procurement technology as a means to improve their bottom lines, which was reflected in the inaugural Global Procurement Technology Summit earlier this year.

Integration of contract management, risk management and supplier lifecycle systems through investment in improved systems with added capabilities, has ensured more accurate sourcing is possible and due to the skills involved in running these systems, has driven salaries up.

Sophia Chapman is a guest contributor from Portfolio Procurement, expert recruiters in the compensation, benefit and reward sector.

Due to the large scale and outlook attached to them, mega-projects have a large opportunity for failure. Typically, the failure begins at the outset of the project, whether that be due to poor justification for the project, misalignment among stakeholders, insufficient planning, or inability to find and use appropriate capabilities.

Underestimated costs and overestimated benefits often offset the baseline for assessing overall project performance. This is why it is important for organizations to first establish social and economic priorities before even considering what projects will answer their needs. Once social and economic priorities are established, only then can a project be considered. Selecting projects must be fact-based and transparent in order to ensure accountability with stakeholders and the public.

Successful Megaprojects Must Have Robust Risk-analysis or Risk-management Protocols

It’s also important to maintain adequate controls. Successful megaprojects must have robust risk-analysis or risk-management protocols and provide timely reports on progress relative to budgets and deadlines. Typically, progress is measured on the basis of cash flow, which is less than ideal as data could be out of date and payments to contractors do not correlate construction progress. Instead, project managers should deliver real-time data to measure activity in the field. For example, cubic meters of concrete poured relative to work plans and budgets.

Overall, improving project performance requires better planning and preparation in three areas: doing engineering and risk analysis before construction, streamlining permitting and land acquisition, and building a project team with the appropriate mix of abilities.

Project developers and sponsors should put more focus into pre-planning such as engineering and risk analysis before the construction phase. Unfortunately, most organizations and sponsors are reluctant to spend a significant amount of money on early-stage planning because they often lack the necessary funds, they are eager to break ground and they worry the design will be modified after construction is underway, making up-front designs pointless.

However, it’s proven that if developers spend three to five percent of capital cost on early-stage engineering and design, results are far better in terms of delivering the project on-time and on-budget. This is because through the design process, challenges will be addressed and resolved before they occur during the construction phase, saving both time and money.

It’s not unusual for permits and approvals to take longer than the building of a megaproject. However, if developers look to streamline permitting and land acquisition, that would significantly improve project performance. Best practices in issuing permits involve prioritizing projects, defining clear roles and responsibilities and establishing deadlines.

In England and Wales, developers applied these approaches to cut the time needed to approve power-industry infrastructure from 12 months to only nine months. On average, timelines for approval spanned four years throughout the rest of Europe. Likewise, the state of Virginia’s plan to widen Interstate 495 in 2012 was able to cut costs and save hundreds of homes thanks to land acquisition planning by a private design company.

Investors and Owners Must Take an Active Role in Creating the Project Team

When it’s all said and done, projects cannot deliver the best possible return on investment without a well-resourced and qualified network of project managers, advisers and controllers. Investors and owners must take an active role in creating the project team.

It’s not enough to have a vague overview of what the project might look like in the end. Instead, it’s necessary to review risks and costs and draft a detailed, practical approach to tackle various issues. An experienced project manager cannot do it all alone. The project team must include individuals with the appropriate skills, such as legal and technical expertise, contract management, project reporting, stakeholder management, and government and community relations among others.

Failure to Properly Plan for These Projects Could Have a Negative Impact on Society

While mega-projects are important in filling economic and social needs, failure to properly plan for these projects could have a negative impact on society. Take Centro Financiero Confinanzas (Venezuela), the eighth tallest building in Latin America at 45 stories, located in the financial district of Venezuela’s capital, Caracas for example.

To those unaware of its history, the Centro Financiero Confinanzas is actually home to over 700 families, a “vertical slum” that is a truly fascinating example of reappropriation of space in an urban environment. An ironic symbol of financial failure that was intended to represent the unstoppable march of Venezuela’s booming economy.

It’s much more than an unbuilt building, bridge or tunnel, failed mega-projects are a blow to the economic growth and social improvements of communities around the world.

Tag: Contract Management

How Technology Has Changed Procurement in the Last 10 Years