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Procurement Systems
Introduction
The report focuses on the analysis of the procurement approach of a project in detail and suggests an alternative procurement approach that could help the company make the procurement efficient. The project selected for this case is the power project initiated by Horizon Nuclear Power Company; the project selected for the case analysis is a long-term project and is expected to last until the year 2024 at least.
Procurement Systems There are power projects initiated all over the UK by different energy and power companies considering the fact that the power production based on existing plants is expected to decline significantly by the year 2025. At the same time, the demand for energy specifically electricity is expected to go up during the same period due to constantly changing trends and move towards online activities (Twidell, and Weir, 2015).
Procurement Systems The total value of projects initiated in the UK is worth £10 billion as per the expected cost. The project is purely based on technical grounds from both production and delivery point of view; the company aims to add 7.8 Gega Watt to the production of electricity by the end of the project initiated.
The Horizon Nuclear Power Company is committed to different parties on the basis of different types of procurement contracts used in project management. In the view of Borg (2015), there are three broad categories of the procurement contracts used in the project management those include the fixed fee contract, cost reimbursable contract and a third one is based on time (duration) of project and cost of materials used.
In the power sector, the projects are based on the third alternative; the project cost increases if more time is incurred and cost of materials increases. Similarly, in the case of the project selected for this case, the contracts comprise the time and material type contract. The list of related parties to the project are shown in the table below:
| Horizon Nuclear Power Company (Project Initiator |
| NDA (Owns Site) |
| PBO (Provides Management Expertise) |
| The contract will be Awarded for procurement activities after detailed analysis (discussed in the body of the report) |
Table 1 – Parties Related to the Project
There are different procurement approaches/methods used by different managers in different industries based on the conditions as well. There are six common types of procurement approaches commonly used which determine how the contractor will be selected for a particular project. The request for quotations approach was used for this project as the contractor is selected on the basis of best quotation offered to the company (Walker and Rowlinson, 2007).
Case Analysis
As the case study focuses on the analysis of procurement methods employed by the Horizon Nuclear Power Company; therefore, it is important to discuss what comes under the head of procurement and how it is generally done. According to Walker and Rowlinson(2007), there is a misconception that procurement relates to the buying physical goods and their contracts only but it must be noted that procurement can be used to employ all resources for a project regardless of the nature of operations of the industry.
When it comes to procuring different goods or availing different services, there are always three options available to the companies which include sole source, single source and oligopoly. When there is only one supplier available in the market, it is known as the sole source. When the company is in love with one particular supplier it is known as the single source and when there are few suppliers of similar capability, it is known as the oligopoly (Walker, Bourne and Rowlinson, 2008). In the case of the project initiated by Horizon Nuclear Power Company, there is an oligopoly as there are few suppliers who provide different goods to set up a power plant including the machinery which needs to set up.
Procurement Systems
How was the Project Identified and Brought into the Organization?
The Horizon Nuclear Power Company is a subsidiary of a famous UK company named Hitachi Ltd. The main reason behind initiating this power project was due to the need arising in the market and production rate falling. The project was identified on the basis of analysis of the production and demand trends in the power sector. It has been…
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