| The risk management of a project at the
top level is complex enough, but
when the infeed from outside companies
has to be considered as well,
it becomes even more so. Starting
with the receipt of an invitation
to tender from a potential customer,
the steps to be taken to manage
the risk associated with selecting
suppliers are as follows. The
project technical lead must review
all the technical documentation
received from the customer. Following
the project team's decision that
certain items need to be sub-contracted,
the technical lead will write,
or have a representative write,
a technical requirements specification
for each item to be sub-contracted,
which will form part of the sub-contractor
invitation to tender. In addition,
all other members of the project
team will review the areas of
their own particular discipline
(quality assurance, configuration
management, etc.) and write their
own specifications for flowing
down to the sub-contractor invitation
to tender. For each item to be
sub-contracted, a procurement
package will be compiled. This
will contain whatever documents
are deemed necessary depending
on the complexity of the item
in question, but as a minimum
the aforementioned technical specification.
To start the risk management process,
all documents to be included in
the procurement package will be
peer reviewed. This involves at
least one person of the same discipline
comparing the customer requirements
with those included in the sub-contractor
specification to ensure that nothing
has been omitted. A list of potential
suppliers for each item of supply
is then drawn up. Ideally, in
terms of risk mitigation, there
will be a minimum of three companies
thought to be capable of fulfilling
the technical requirement for
each item, preferably more in
the first instance. This list
is then reduced to a manageable
number (the ideal three) by reviewing
the possible sub-contractors in
terms of the following. Companies
who have supplied goods in the
past: - Quality and reliability
of items supplied - Timeliness
of delivery - Adequacy of documentation
- Attitude, flexibility and co-operation
of personnel - Ease of contract
negotiation - Pricing policy -
After sales service, including
warranty Companies who have not
supplied goods in the past - Reputation
in the market place - Quality
assurance certification - Financial
stability This list is not exhaustive
but contains the most important
areas to be considered. The most
objective way of reviewing the
above, is to weight each one in
order of importance, devise a
scoring mechanism, create a grid
to be completed by each member
of the review team and calculate
the numbers. This method isn't
foolproof but is as close as it
possibly can be. At this stage,
the project risk has already been
reduced because the best few of
the potential sub-contractors
have been chosen to compete for
the sub-contract. Alternatively,
the selection process has shown
that there is only one supplier
capable of fulfilling the requirements.
This requires quite different
handling and will be the subject
of a future article. -------------------------------------------------------
Michael Russell Your Independent
guide to Risk Management ------------------------------------------------------- |
