Assessing Procurement Risks

This paper will focus on the concepts of assessing procurement risk and the impacts it has on the overall success of a project. In addition, the paper contains topics, which focus on risk and issues that individually or jointly negatively influences the success of procurement. The key topics discussed in the paper are procurement risk types, which examine some common risk that are observed with procurements and on projects. Lastly, the paper examines how risk management is defined, how to identify risk, and how to determine a plan for closing risk.

Fleming (2003) says that project risk can be divided into three categories known as a triple constraint. The three categories that make up the triple constraint are risk related to the technical, quality, or performance attributes of a deliverable; risk associated with schedule; and risk associated with cost (Fleming, 2003). The triple constraint has a hierarchy of risk that ranks risk from highest down to the lowest. Technical risks are the highest-ranking risk on a project followed by schedule, at second, and cost, at third. However, it is important to understand that all three categories are related in unique ways that cannot easily be observed (Fleming, 2003). Technical risk often stem from a lack of funding to procure highly reliable material. Unreliable material can cause technical problems within projects. Piecemeal funding can be another way risk is introduced into the project schedule.

Project procurement risks are a subset of the project’s overall risk and they should cover internal and external procurements. Some common risk observed during procurements are, confidential data being released, which limits negotiating power; lack of early procurement engagement ...

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...isk, it requires additional testing, proofing, employing experienced professionals, and could involve the procurement of insurances such as fire to protect the company if a risk event occurred (Fleming, 2003). Finally, acceptance of risk is only tolerated once none of the aforementioned strategies works. Sometimes acceptance is the only option for a company and they have to develop contingency risk plans where the risks are frequently examined for occurrence (Fleming, 2003).

References

Fleming, Q. W. (2003). Project procurement management: Contracting, subcontracting, teaming. Tustin, CA: FMC Press.

Guide (2009). A guide to the project management body of knowledge. Newtown Square, Pennsylvania: PMI, Inc.

Russill, R. (2010). A short guide to procurement risk. Burlington, VT: Gower Publishing Company.