Procurement Process Analysis: Decentralized Contracting Risks Report

This report delves into the procurement process, emphasizing the distinction between centralized and decentralized contracting methods. It provides a detailed examination of decentralized contracting, exploring its advantages and disadvantages. The report identifies and analyzes specific risks inherent in decentralized contracting, including duplication of efforts, potential loss of control over project activities, and concerns regarding the privacy of contracts. It further discusses the implications of these risks on project management and offers insights into mitigating strategies. The analysis covers the importance of effective contract management and the need for standardized procedures to minimize uncertainty and ensure the successful completion of projects. The report concludes with a summary of findings, highlighting the significance of understanding and managing risks associated with decentralized contracting in achieving project objectives.

Running Head: PROCUREMENT PROCESS
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Table of Contents
Introduction......................................................................................................................................2
Decentralized contracting................................................................................................................2
Associated risks...............................................................................................................................4
Duplication...................................................................................................................................4
Loss of control.............................................................................................................................4
Privacy of project.........................................................................................................................5
Conclusion.......................................................................................................................................5
Bibliography....................................................................................................................................6

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Introduction
Procurement process includes the basic skills and knowledge of project management that
help to manage contracts. This process includes working relationship with departments. This is a
formal process for obtain services and good that is known as procurement. Documents, change
requests, further procurement documentation are known as the output of procurement process.
There are only few skills necessary for managing procurement that includes negotiation, legal
knowledge, etc. Contract is known as the mutually agreed agreement at level that mandates seller
to deliver goods and services to purchaser regarding pre-agreed compensation. There are many
contract evaluated and identified that associated with the particular risk. There are two types of
main contracting. These are centralized and decentralized contracting. If all contracts of business
are managed through purchasing department than known as centralized contracting.
Decentralized contracting is known as the contract in which separate contract mangers are
appointed to complete every projects (Norta, 2015). Following discussion will cover the
decentralized contracting and risks associated with it.
Decentralized contracting
Traditional business structure was centralized as authorities of the businesses
remain within the hand of upper level management and executives. In this kind of business
power is concentrated with the management and lower level management has little authorities to
handle work on day to day basis. In today’s time competition has grown at broader level that
pushes businesses to move forward with decentralized contracting approach. In this kind of
contracting middle and lower level management have gain more authorities to make the
decisions and employees feel more empower as their ideas are factored within the daily
operations of projects. This has also become important for the businesses to understand the
associated risks (Reichmann, & Rohlfing-Bastian, 2014).
Decentralized contracting is work for the businesses to control the process of contracting
for every project. Employee from central procurement office assigned to work with the contract
manager. Management of project maintains the control of contracts award. Efforts of contracting
tailored to singular project. Contracting efforts are tailored to particular projects. Contracting

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person also have the other responsibilities and remain within the direct control of project
management. Contract employees are located nearby to eliminate the issues of communication.
(Jing, & Chen, 2012)
This has enabled the middle and lower level management to make the decision which
affects efficiency, productivity and standards of performance. This become more effective to
implement decisions of business management in an appropriate way as support to communicate
visions, expectations and trust to figure out the most appropriate methods to achieve the desire
objectives. This also provides the authorities to deal regarding purchase and sales of products
and services without approval. In particular instances power or authority is limited to specific
situations or criteria of dealing.
Decentralized contracting is effective to implement quick decisions that save organization
money. It empowers the management to work as per trust, abilities, and instincts as understand
the day to day process of business effectively compare to others. Decentralized contracting
enables to lighten workload and free up to establish the strategic plans for good future of project.
This enables the project management to deal the project issues and conflicts within the particular
time as motivate the employees to prove and improve the trust. Improved motivation also leads

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to effective communication within the management and employees with higher level morale
within the project (Wang, Zhao, & He, 2016).
Decentralized contracting in project management help to respond very fast to changing
requirements of customers and meet the demand of many different products for particular
markets. This provides many facilities which cover bigger areas and allow to reaching more
customers through effective manufacturing and distribution very fast. The process of approval
and decisions become more effective and middle and lower level management within the product
have authority to implement effective procedures. It also works to collect the more updated and
relevant details. Decentralized contracting in project management establishes the culture to
remain in touch with requirements, customers, and processes.
Associated risks
There are many advantages of decentralized contracting within the management of
project. There are also many risks are associated within the project management which are as
follow.
Duplication
The risk associated within the project management is duplication. Duplication of efforts
can lead within the contracting, receiving inspection, and higher the total costs of accounts
payable. Duplication within the decentralized contracting increases the administrative costs for
buyers and contractors within the procurement process of project. Contractors are compelled to
finish the project due to the fear of being locked out of marketplace. Duplication contract within
the procurement process of project negatively influences the contractors and also generate the
many issues due to limited resources to complete the project. This also led to lack of
standardized procedures that increase the uncertainty and criticality within the project
management (Xu, & Wang, 2017).
Loss of control
The main issues remain within the decentralized contracting of project is loss of control
within the daily activities of project management. This lead to divide the power and ceding
authority to management that present the more trust on their skills, instincts, and talents. This

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kind of power transfer lead to the conflicts and backfire. If middle and lower level management
not work and achieve the desire objectives within the project management than it generate the
issues between management and employees. Sometimes these works with the different agendas
that also makes schism within the objectives which management likes in advance. For example,
middle level management can remain more interested to grow the particular department within
the project to meet the performance standards. This lead to lose the project objectives as only
particular department grows while other not grows and led to failure of project (Han, 2014).
Privacy of project
Privacy of contract within the business and project is known as the contractual
relationship within the buyer and main contractor. There is no contract exists within the
subcontractors and buyer. This sometime leads to legally improper to deal with the subcontractor
directly. There are also many other issues remain for buyers and remain cautious to deal with
subcontractor. Buyer can inadvertently relieve main contractor regarding particular liabilities.
For example, is buyer inform the subcontractor which thing can work better and force to work
according to the instructions within the project management that trouble the middle level
management and sub-contractors. The main contractor and upper level management can
effectively claim that interferences of buyers lead to the main issues (Mureithi, et al., 2018).
Conclusion
In the limelight of the discussion it can be concluded that contracting is important for the
business to achieve success. This presents that organization in today’s time focusing more on the
decentralized contracting to complete their project and maintain the good atmosphere to produce
better services within the procurement of project management. There are many disadvantages
created by the many decentralized contracting. These are risk regarding the collusive cartels,
demand implementation regarding central procurement system, increase the costs that associated
with the process of coordination, create barriers regarding purchase of standardized
commodities, and high investment and transaction costs. This discussion covers the associate
issues within the decentralized contracting are duplication, loss of control, and privacy of project
that mismanage the project within the procurement process.

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Bibliography
Han, S. (2014). Implicit collusion in non-exclusive contracting under adverse selection. Journal
of Economic Behavior & Organization, 99, 85-95.
Jing, Y., & Chen, B. (2012). Is competitive contracting really competitive? Exploring
government–nonprofit collaboration in China. International public management
journal, 15(4), 405-428.
Mureithi, L., Burnett, J. M., Bertscher, A., & English, R. (2018). Emergence of three general
practitioner contracting-in models in South Africa: a qualitative multi-case
study. International journal for equity in health, 17(1), 107.
Norta, A. (2015). Creation of smart-contracting collaborations for decentralized autonomous
organizations. In International Conference on Business Informatics Research (pp. 3-17).
Springer, Cham.
Reichmann, S., & Rohlfing-Bastian, A. (2014). Decentralized task assignment and centralized
contracting: On the optimal allocation of authority. Journal of Management Accounting
Research, 26(1), 33-55.
Wang, Q., Zhao, D., & He, L. (2016). Contracting emission reduction for supply chains
considering market low-carbon preference. Journal of Cleaner Production, 120, 72-84.
Xu, L., & Wang, C. (2017). Contracting pricing and emission reduction for supply chain
considering vertical technological spillovers. The International Journal of Advanced
Manufacturing Technology, 93(1-4), 481-492.