Running head:  ADVANCED PROJECT PROCUREMENT

Advanced Project Procurement

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Abstract

Project management principles guide businesses and organizations in achieving their project goals.  Organizations have different frameworks in place in order to facilitate their companies goals and objectives.  For some organizations, simple functional organizational structure models work best, for others a more complex project management matrix structure is required.  The model of the organizational structure depends on the nature of the desired outcome, whether it is a product or service, or something else entirely.  For complex high-input needs, a company will adopt a project management structure, such as Emaar has done with its property management building model.  Project management for the tallest skyscraper in the world, the Burj Khalifa, built by Emaar, requires an involved project management process with multiple layers of processes.  This report examines the Burj Kalifa project and associated project management principles involved in this project.

Advanced Project Procurement

Introduction

            Organizations that have complex business goals embrace an organizational model the project organization.  For large-scale, multi-phase projects, a heavy-weighted model of a project organization is utilized.  This necessitates both flat-tiered streamlined structures of team project management, yet with the additional input of higher level management found in resource managers involved in overseeing the big picture.  The structure of the following essay is divided into two main parts:  part one is on the issue of project management, and part two is the case study example of the Burj Khalifa project.  An outline of the history of project management is offered, followed by a breakdown of the general principles of the concept.  The success and failure of projects is related to project management.  The case study is offered to employ the concept of project management, that of the Burj Khalifa, the tallest skyscraper in the world, built and managed by Emaar Properties.  A look at the Emaar organization is offered, followed by a discussion on the Burj Khalifa project.  Principles of project management are related to the Burj Khalifa project to illustrate the application of the concepts of project management.  Additionally, the issue of risk as related to the Burj Khalifa project is conceptualized.  A conclusion is offered to highlight the main points of this report and synthesize the topics.

1. PROJECT MANAGEMENT

What is Project Management

            Undertakings of all sizes require a plan.  For the organization involved in a profit-driven enterprise that engages in large scale operations of staggering complexity, the rubric of project management is necessarily utilized.  Project management is the framework within which the processes of planning, organizing and managing resources occurs for the ultimate goal of a timely completion of a task (Nokes, 2007).  Projects are size, time, and financially delimited issues; project management utilizes methods to facilitate these the processes bound within these delimitations for a successful outcome.  Examples of project management include budgeting, setting deadlines, allocating resources, assessing progress, and tracking expenditures (Webb, 2003).

History of Project Management

            Modern project management is credited to begin in the era of the 1950’s.  However, that is not to discount the enormous efforts of managing large scale projects of ancient times, such as massive building projects including the Zuggerats, the Egyptian Pyramids, the Great Wall of China, the hugely complex Byzantine Cathedral projects, and more.  Each era dealt with their limitations on time, money, and resources to make the project happen (Project Management Source, 2005).

Modern project management dates to having roots in the 1950’s with the implementation of various project management models including the Critical Path Method, the Program Evaluation and Review method.  Moreover, the U.S. Department of Defense employed techniques of project management in their defense projects, and the American Association of Cost Engineers formed as well (Carayannis, Kwak, & Anbari, 2005).  The International Project Management Association formed in 1965, and the Project Management Institute formed in 1969.  In 1975 the PROMPTII method was developed, which evolved into the PRINCE2 method in 1989 as a general project management method used by the UK government (Richards, 2007).  Software and engineering technological developments drove the evolution of project management methods in the 1980’s, 1990’s, and into the 21^st century.  The need for more complex models to reflect and manage complex multi-phase projects involving scores of various inputs were and are the impetus for the evolving nature of project management (Evaristo & van Fenema, 1999).

General Principles of Project Management

Project management typically utilizes a five-stage approach in addition to a closing process.  The following diagram represent those stages:

(Building Design Construction, 2010)

The roles of the stakeholders, the time involved, the scope, and the financials all need to be taken into careful consideration in the project management process.  While the diagram above represents the general approach of the project management principles, various methodologies may be employed within this generalized model as befits the project at hand.  A project can also be terminated at any stage, before it ever reaches a completion time.  As such, in the design process of the project development, various analyses will be performed to assess inputs, risks, and favorability of success (Carayannis, Kwak, & Anbari, 2005) .  The success of failure of any given project can happen at any stage from development to closing.  Success is favored if the proper organizational structure is utilized to begin with, followed by a detailed project analysis consisting of financial assessments, risk analyses, stakeholder analyses, and other factors depending upon the project scope and nature.  Failure can happen if mismanagement occurs, whether it be from an improper assessment of risk, mismanagement of resources, lack of knowledge of various sectors involved, or even lack of human capital to get the job done (Laufer, 2009).  Large projects such as the Burj Khalifa represent a significant investment in sound project management decision making within a complex heavy-weighted matrix project organizational structure utilizing both flat and hierarchical models of project management.

Procurement, Vendors, Contracts

Procurement is essentially the process of securing goods and services external to the organization is order to facilitate the project.  This includes a process that takes into account the accounting principles that maximize the return on investment, as well as issues related to minimizing risk and exposure to potential fraud (Benton, 2010).  The procurement process can be illustrated in the following general diagram:

PROCUREMENT PROCESS

Source: Original author-derived diagram

Explanation of Procurement Process:

1. Information Gathering:  involves the search for suppliers in regard to purchasing needs.
2. Supplier Contract: involves identifying potential suppliers and putting out Requests for Proposals to get a pool of bids for the posted supplies/services.
3. Background Review: involves researching the quality and warranties for goods and services; assesses reliability of products and services.
4. Negotiation: involves agreeing on price, availability, and deadlines with potential supplier.  Contract is written and agreed upon.
5. Fulfillment: products and services are delivered, installed, and/or installed.  Payment is delivered per contract agreement.
6. Consumption, Maintenance, and Disposal: products and/or services are assessed as they are consumed; may involve ongoing support per contract.
7. Renewal: involves reassessing the potential future needs to continue with an extended or new contract once the old contract requirements are met and completed.

(Indirect Purchasing Ltd., 2010)

Contract Management

Within project management and the procurement phase, the contract management portion involves determining needs, such as should something be made or purchased, determining correct costs, deciding on what type of cost contract will be used (fixed price, cost-plus contract, cost plus fee contract, etc), deadlines, and how the job will be determined to be ‘complete’; that is, in the final stages of the contract, a method needs to be managed to close out the contract (Houman, 2002).

2. CASE STUDY

The Burj Khalifa and Emaar Properties

            About Emaar

Emaar Properties formed in 1997, and is a Dubai-based property construction and management property specializing in large-scale, high end communities and buildings.  It is a publicly owned joint stock company, and is listed on the Dow Jones Arabian Titans Index (Emaar Properties, 2010).  The company has holdings in the Middle East, Pan Asia, Europe, North America, and North Africa, with over 60 different business segments (Emaar Properties, 2010).

Emaar’s vision is to offer premier global lifestyle solutions, incorporating not just real estate but also shopping, entertainment, health, education, and finance.  They propose to accomplish their mission through establishment of business segments that act as different growth engines (Emaar Properties, 2010).

Emaar has a hierarchical management structure with the Chairman at the top, followed by the Board of Directors.  The next level is the Corporate Office management, followed by the levels of the business segments management.  Each level is flat unto itself, yet has a higher chain of command up to the Chairman (Emaar Properties, 2010).

The Burj Khalifa

The Burj Khalifa (formerly the Burj Dubai) is a skyscraper located in Dubai that was built by Emaar Properties.  Construction began in 2004 and completed in 2009.  The Burj Khalifa is the tallest skyscraper in the world (Bianchi & Critchlow, 2010).  The building is a mixed-used building, offering residential, business, and entertainment facilities.  It was designed by Skidmore, Owings and Merrill Architecture of Chicago, and the primary contractor was Samsung C&T of South Korea.  Turner Construction Company, one of the largest construction companies in the United States and a subsidiary of a German company, was hired as the major project manager of the venture (Turner Construction Company, 2010).  The total cost for the building was $1.5 bill.............