Benefits and Drawbacks of Direct Procurement

This assignment discusses the advantages and disadvantages of direct procurement as a method for obtaining project requirements in construction projects. Direct procurement refers to the process where a client selects a single supplier to provide all the necessary resources without going through an open tendering process. The advantages of this method include reduced time spent on advertising and selecting suppliers, allowing the project to continue in case of emergencies, and saving resources that would be wasted through other methods like open tendering. However, the disadvantages include high costs due to lack of competition, potential poor quality of products, and risk of the sole supplier running out of stock or becoming bankrupt. The assignment concludes by recommending direct procurement for urgent projects or where there is only one suitable supplier, but suggests considering alternative methods like open tendering for non-urgent projects.

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Procurement.
By
[Student’s name]
Course
Institution
Date

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Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................3
Open tendering method....................................................................................................................3
Restricted tendering method............................................................................................................5
Single-source procurement..............................................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

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Executive summary
Procurement is the process of acquiring goods and services needed by an organization so that it
can operate efficiently. There are various methods of procuring the needed goods and services.
The methods include direct tendering process, restricted tendering process, request for proposal,
request for quotation and open tendering method but this report has highlighted the main ones
which are open tendering, restricted tendering and direct procurement. The client should select
the method that is most effective to suit his requirements.
This report seeks to highlight the factors that should be considered before choosing a certain
procurement method. The elements are not limited to cost of the method, time to be consumed,
the complexity of the project at hand and even the financial stability of the suppliers. For urgent
projects, this report recommends that direct procurement should be preferred but with
considerations of the factor that the supplier can run out of stock or even become bankrupt.
Where the deadline is long, this report recommends that open tendering or restricted tendering
method can be employed.

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Introduction.
For every business to grow effectively, it needs to have projects which will help in the
production of quality goods and services that satisfy customers. The project to be constructed
require different materials and even labor which most of the times the business is not able to
provide. To make the project successful the business will have to procure the material and the
other requirements which it is not able to provide from other businesses through a process called
procurement (Georghiou,et al.2014, p.10). There different methods of procuring the
requirements. This report is written to highlight some benefits and problems of using various
procurement methods and recommendations for best procurement methods for different
construction projects.
Open tendering method.
This is a method which allows competitive bidding as all the companies capable of providing the
required material can bid without any restrictions (Guccio, et al.2014, p.50). This method focuses
on the value for money and seeks to give the tender to the product provider who will provide
quality products and services at the lowest cost.
Characteristics
The procuring company is required to adhere to the following requirements and characteristics of
open tendering procurement; advertise locally and even internationally when required
(Georghiou,et al.2014, p.10). Make the process open to all qualified bidders, the tender given to
the least cost provider who meets the minimum requirements for the products needed, have clear
and neutral product specifications and also adhere to the objective evaluation measures set by the
procurement regulations act in the country.
Benefits of open tendering to project developers

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This type of tendering methods has some benefits which include; all the qualified bidders bid and
this gives the developer to choose the best material provider who is cost effective, and this
provides value for the client's money (Curto, et al.2014, p.185). The client can get the most
quality products as there is no favoritism, hence making the project to be of high quality.
Disadvantages of open tendering to project developers.
The developers face a lot of challenges when they employ this kind of procurement method. This
because the process leads to a lot of time wastage before the required materials are procured.
This may affect the project completion time. The time is wasted through strict adherence to
guidelines and procedures. The method recommends the least cost material provider to be
selected. This may lead to selecting unsuitable supplier who may not be able to provide the
required services and products, and this will affect the effectiveness of the construction project.
Excessive formalization of the process limits the supplier's or bidder's participation in the process
(Barasa, 2014, p.55). The bidder is not given a chance to demonstrate the technical specifications
of his/her products, and this leads to selecting the wrong supplier who does not possess the
required expertise in that certain area. This will affect the efficiency of the project due to use of
undesired materials.
Recommendations.
This type of procurement method is suitable for construction projects which are not urgent. Ths
is because the process of selecting the supplier is long. This procurement method is also very
formalized and adhering to all the formalizations may affect the completion date of the project.
This method is also suitable for construction projects which are not technical such as the
construction of glass skyscrapers and developments of computers. This is because this process

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does not provide the supplier an opportunity to demonstrate the technical competence of his
products and this may lead to the selection of the unsuitable bidder. This method is suitable for
projects with very long deadlines, projects which are after quantity output and not quality output.
It is also suitable for construction projects which are not complex because complex projects
should be handled by a process which is not much formalized.
Restricted tendering method.
This is a procurement method which limits the bidders as the procuring company only invites
selected bidders or suppliers. Although selected suppliers who qualify are invited to bid, the
process is still competitive.
Characteristics
The main characteristic of this procuring method is that competition is confined to few suppliers
or bidders because of various reasons such a few firms are qualified or there a set conditions
which warrant the use of selective tendering (Lesniak and Zima, 2013, p.315). The process even
though restricts the process to few firms should adhere to the public procurement legal acts and
procedures and policies that govern the procurement systems in the organization.
Benefits of the restricted tendering method to clients.
This method has various benefits which include the developer can select the suppliers or bidders
who have the necessary experience to carry out the project effectively (Glock and Broens, 2013,
p.1). This will help the company from selecting suppliers who may not deliver the expected
project. Due to the experience the, the developer will be able to avoid a lot of risks such as
failure to meet deadlines and will save time and resources (Schöttle and Gehbauer, 2013, p.230).
Another benefit is that the client can select the suppliers who are financially stable and have the

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needed resources to execute the requirements of the project. This will help the client avoid
situations where the selected supplier becomes bankrupt, and this adversely affects the project.
The developer also selects the suppliers with the needed skills to execute the project. So whoever
will be selected will be capable of handling the project requirements well.
Disadvantages of restricted tendering to developers
Just like the open tendering method, the restricted tendering method also causes developers to
wait for a longer time before a contract can be awarded. This is because the process of selecting
the suppliers or bidders who should bid takes a lot of time in scrutinizing the supplier’s resources
and capabilities and this can affect construction project’s completion dates (Leśniak, 2015,
p.255). If the project is urgent, this kind of procurement cannot be used as it is long and some
formalities have to be followed to the latter before the tender is awarded. This leads to wastage
of time and resources.
Recommendations.
This type of procurement should be used if the requirements of the project are complex and
employing other methods of procurement can affect the construction project efficiency. The
developer needs to select the companies capable of handling the project at hand. The method can
also be used if the anticipated number of suppliers or bidders who will respond to the advert will
be very large. This will save the client a lot of time which could have been spent sorting much
application for the tender. This procurement method can also be used in projects which do not
have long deadlines, but they are not urgent as it has some aspects of time-saving and also time
wasting. This method can also be employed where the project to be constructed is very complex,
and other methods are not suitable.

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Single-source procurement.
This is a non-competitive method of procuring goods and services as one supplier is selected to
supply the needed project requirements (Large, et al.2013, p.130). This method undergoes strict
approvals from the relevant authorities before it can be used. The approvals help to prevent the
client from breaking procurement laws and regulations that are stipulated by procurement legal
frameworks and procurement procedures and policies set by the procurement system in the
organization.
Characteristics
The characteristics of this type of procurement include it can be employed in cases of
emergencies. It can be used when there is only one supplier who is qualified to provide the
needed services and requirements of the project (Kumru, and Kumru, 2013, p.730). If the
developer needs a certain project requirement that can only be provided by one supplier, the
benefits of using the selected provider are clear, and it can also be used in the situation of
continuation of work where other suppliers cannot provide the needed requirements.
Benefits of direct procurement.
The benefits to the client include, in case of emergencies the project can continue and this will
help to meet the project deadlines, this method saves the developer a lot of time that could have
been spend advertising and selecting the supplier, and this will ensure projects are completed in
time (Loader, 2013, p.40). The method will also help in saving resources that are wasted when
selecting suppliers when other methods such as open tendering are used.
Disadvantages of direct procurement

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The disadvantages of this kind of method are that the cost of project requirements is very high
due to the power of monotony where one supplier is capable of offering the required product.
Another problem is that the quality of products may be poor due to lack of competition,
especially where there is only one supplier (Tai, 2013, p.200). The other problem is that in case
the sole supplier runs of out stock or even bankrupt, the project construction will be halted.
Recommendations.
This type of procurement should be used where the project is very urgent, and there is no time to
procure resources through other methods which can delay the project completion deadline. It can
also be used where there is only one supplier who can provide the project’s requirements. It can
also be used where the benefit of using the selected sole provider are many, clear and they cannot
be disputed.
Conclusion.
Before selecting the procurement method, the client should analyze all the methods of
procurement and settle for the one that suits his/her needs adequately. Factors such as duration
and resources required to make a certain procurement method should be considered. In urgent
projects, direct procurement should be preferred. In cases where the projects have long deadlines,
the open tendering method can be used. Where possible the developer should even opt for
services of procurement agencies that will in procuring the needed project requirements as they
have needed experience and expertise.
References

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Barasa, H.W., 2014. Procurement practices affecting effective public projects implementation in
Kenya: a case study of Kenya Civil Aviation Authority. European Journal of Business
Management, 6(6), pp.49-67.
Curto, S., Ghislandi, S., van de Vooren, K., Duranti, S. and Garattini, L., 2014. Regional tenders
on biosimilars in Italy: an empirical analysis of awarded prices. Health Policy, 116(2), pp.182-
187.
Georghiou, L., Edler, J., Uyarra, E. and Yeow, J., 2014. Policy instruments for public
procurement of innovation: Choice, design and assessment. Technological Forecasting and
Social Change, 86, pp.1-12.

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Glock, C.H. and Broens, M.G., 2013. Size and structure in the purchasing function: evidence
from german municipalities. Journal of Public Procurement, 13(1), p.1.
Guccio, C., Pignataro, G. and Rizzo, I., 2014. Evaluating the efficiency of public procurement
contracts for cultural heritage conservation works in Italy. Journal of Cultural Economics, 38(1),
pp.43-70.
Kumru, M. and Kumru, P.Y., 2013. Fuzzy FMEA application to improve purchasing process in a
public hospital. Applied Soft Computing, 13(1), pp.721-733.
Large, R.O., Kramer, N. and Hartmann, R.K., 2013. Procurement of logistics services and
sustainable development in Europe: Fields of activity and empirical results. Journal of
Purchasing and Supply Management, 19(3), pp.122-133.
Lesniak, A. and Zima, K., 2013. Design and build procurements in the polish public sector.
Journal of Public Procurement, 13(3), p.315.
Leśniak, A., 2015. Reliability assessment of research into contractors’ bidding decisions.
Procedia Engineering, 122, pp.251-257.
Loader, K., 2013. Is public procurement a successful small business support policy? A review of
the evidence. Environment and Planning C: Government and Policy, 31(1), pp.39-55.
Schöttle, A. and Gehbauer, F., 2013. Incentive structure in public design-bid-build tendering and
its effects on projects. In Proc., 21th Annual Conf. of the Int. Group for Lean Construction, CT
Formoso and P. Tzortzopoulos, eds., Fortaleza, Brazil (pp. 227-236).
Tai, Y.M., 2013. Competitive advantage impacts of direct procurement management capabilities
and Web-based direct procurement system. International Journal of Logistics Research and
Applications, 16(3), pp.193-208.