The Role Of Purchasing In Contract Management And Administration (A Case Study Of Bekado Construction And Engineering Company Ltd, Ikot Ekpene Akwa-Ibom Sate)

Project and Seminar Material for Purchasing and Supply (PS)

The Role Of Purchasing In Contract Management And Administration (A Case Study Of Bekado Construction And Engineering Company Ltd, Ikot Ekpene Akwa-Ibom Sate)


Abstract


The growth of a nation is usually predicted upon the successful execution of its developmental contracts. Having realized the importance of these contracts to the economy, this research was designed to evaluate the contributions of purchasing in contract management and administration.

The research covers some areas to be considered in procurement of capital equipment such as quality, time and price. Bekado construction and engineering company Ikot Ekpene, Akwa Ibom state was sued as a case study.

The study coves up to five chapters. Chapter one deals with the background of the study, chapter two deals with literature review, chapter three talks about the researcher methodology and chapter four is on the discussion of major findings while chapter five is the summary, recommendations ands conclusion of the study.

The study recommends that purchasing role should not be overlooked in the management and administration of contract.


Table Of Contents


Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgment
  • Abstract
  • Table of contents

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of problem
  • 1.3 Purpose of the problem
  • 1.4 Research question
  • 1.5 Hypothesis
  • 1.6 Significance of the study
  • 1.7 Scope of the study
  • 1.8 Limitations of the study
  • 1.9 Definitions of terms

Chapter Two

2.0 Literature Review

  • 2.1 Introduction
  • 2.2 The role of purchasing in contract management and administration
  • 2.3 Determination of quality
  • 2.4 Position of purchasing in organization
  • 2.5 The role of purchasing department
  • 2.6 Contribution of purchasing management functions to contract management
  • 2.7 Purchasing relationship with other departments in contract management

Chapter Three

3.0 Research Design and Methodology

  • 3.1 Introduction
  • 3.2 Research design
  • 3.3 Questionnaire design
  • 3.4 Population and sample size
  • 3.5 Sample technique
  • 3.6 Sources of data collection
  • 3.7 Survey method
  • 3.8 Observation method
  • 3.9 Method of data analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Introduction
  • 4.2 Findings and analysis of data
  • 4.3 Discussion of findings
  • 4.4 Summary of findings
  • 4.5 Test of hypothesis

Chapter Five

5.0 Summary, Conclusion and Recommendations

  • 5.1 Introduction
  • 5.2 Summary
  • 5.3 Recommendations
  • 5.4 Conclusion
  • Bibliography
  • Appendix i
  • Appendix ii-

Chapter One


1.0 Introduction

Purchasing has long been considered as one of the basic functions common to all organizations. Its function is to see that materials and services are provided at the lowest cost which is compatible with suitable quantity and safety. Efficient purchasing is therefore achieved when the buyer purchases the required quantity and quality of raw materials, parts, tools and equipment of the right time and at the lowest possible price. It must be born in mind that buying at the lowest price may become uneconomical if the required quantity of material is not delivered and received when needed.

Purchasing can therefore be defined as the management function which is responsible for obtaining by purchase, lease or other legal means, equipments, materials and services required by an under-taking for use in production at the right quality and price. It is the process that involves an understanding of the nature of the forces of demand and supply that forces of demand and supply that influence the availibility of materials.

Contract on the other hand can be defined according to Oyeoku (2010) as an agreement between two or more persons or company which is intended by them to have legal consequences. It is a business contract which implies the entry into an unambiguous legal agreement with a company, another party or person to do something example construct a building as in the case of BEKADO construction and engineering company Akwa Ibom state.

Contractors in the construction industry working to civil engineering or building contracts build factories, hospitals, supermarkets, bridges, tunnels and motorways. The contracts range from enormous works such as the channel tunnel casting thousands or millions of naira to minor works such as an ordinary house or garage. In the excution of contract, there is need for adequate management to be able to achieve the required result at the end. Management can then be defined as the process of combining and utilizing organizational resources to achieve stated goals. Contract management concerns itself with the management of enterprises with a specific set of objective constrained by time, cost and quality performance.

The word contractor itself indicates that the contract and its clauses are more important in construction industries and requires appropriate management. Standard form contracts are normally used in the construction industries except for small jobs.

The recognition of the role of purchasing in contract management and administration in industrial and technological development of Nigeria has principally accounted for significant economic development in Nigeria.


1.1 Background Of The Study

BEKADO construction and Engineering company LTD is a leading indigenous road building and Construction Company founded and incorporated in 1968.

This company has maintained a steady growth having a strong economic base and has satisfactorily completed quite a number of federal, state and local government projects. It has over three hundred (300) heavy serviceable and unserviceable equipments used for executing its contract. These equipments includes among others bulldozers, scrappers, motor graders, pay loaders, pluviometers, caterpillar, lift lurked and bucket loaders. It also has a computerized laboratory for all types of soil, cement asphalt test with full compliment of hand surveying instruments.

The company has also satisfactorily constructed medical centers, schools, churches, mosques, etc. it has its own road access built bridges, culvert drain, electricity and water to rural communities. Furthermore, the company has management team with board of directors as executive. Directors, coordinators, finance, technical administration and audit management team as executive directors, engineering manager, construction manager, assistance general manager, secretarial operations, logistic staff and over three thousand hire and permanent staff.


1.2 Statement Of The Problem

The business of contracting has been spotted in Nigeria society today as very vital and viable venture, hence people are now found in the business. Unfortunately, the game has not been properly practiced to achieve the full result. Some of the problems confronting the venture today in this part of Nigeria include the increasing negligence by contract parties on the need for consulting experts for advice before contracts are made.

The consequences resulting from breaches, abandonment of contract, under or over estimation of contract jobs before contract are awarded. Because of poor liquidity ratio, bad management in some cases has forced some organization to serve some contract which gets frustrated on the way. It inspired the researcher into conducting the extent the state of contract will improve and develop and the necessary role of purchasing in contract management and administration.

To further examine how purchasing management can offer greater scope for cost effectiveness, the reseacher deem it necessary to conduct an investigation on the following:

  1. Unqualified purchasing manager to head the purchasing management department.
  2. Deviation from the contract terms and condition.
  3. Late delivery or operation schedule.
  4. Wrong materials purchase.
  5. Wrong invoicing procedures and documentation.
  6. Possible conflicts with other department.

1.3 Purpose Of The Study

The main objective of every business concern is survival and growth, while the traditional objective or goal is to develop and produce long lasting project contract which will stand the test of time at a profit. The purpose of this study is to find out why there are still instances of litigation arising from breaches, in spite of all precautions companies and individuals take to ensure a hitch-free contract business. Does it means that the parties to contracts do not know the implications of words used in the contract or that the problem lies in the execution?

Another purpose of this research is to determine the role purchasing play in carrying out a smooth-running contract. It will also be necessary to find out other problems which are likely to affect the parties to a contract. It is also important to know the possible results of late delivery of contracts. And to evaluate, monitors and control contract progress. In addition, evaluation of the performances of some organization in the past will be made and finally useful recommendation on possible ways of improving the contract efficiency will be given.


1.4 Research Questions

The researcher in carrying out this research work was able to formulate the following research question.

  1. How do you evaluate, monitor and control contract progress?
  2. What are the effects of late delivery of contract?
  3. In what ways do you improve contract efficiency?
  4. How do you determine the role purchasing play in carrying out smooth running contracts?
  5. In what ways will breach of contracts be prevented?

1.5 Hypothesis

The researcher in the course of appraisal of the contract and the role of purchasing in contract management and administration formulated the following hypothesis.

  1. (H1): that the organization has purchasing department.
    (H0) that the organization does not have purchasing department.
  2. (H1) that the organization complete work on time.
    (Ho) that the organization do not complete work on time.
  3. (Hi) that poor management can frustrate contract on the way.
    (Ho) that poor management can not frustrate contract on the way.

1.6 Significance Of The Study

It is imperative that the important and validity of this research project be succinctly stated. The important of this research study is to provide a comprehensive and in-depth study of the role of purchasing in contract management and administration exploring vast possibility through cost reduction and increase in material productivity.

The study is essential particularly for the principle application and techniques that have been outlined and also for students of purchasing and supply management who may wish to research more on contract management.

This study is equally pertinent because of the importance attached to purchasing in any organization. The significance also includes the award of contract in Construction Company; the price system used in Construction Company; monitoring and controlling contract, monitoring and total supplier performance and successful contract administration. It is also to highlight the implication of neglecting other functional units that are related to purchasing.


1.7 Scope Of The Study

Beside the role of purchasing in other construction companies, the researcher decided to restrict the study within the boundary of Bekado construction and engineering company Ltd, Ikot Ekpene in Akwa-Ibom state.

The study embraces all the activities that are involved in the role of purchasing in contract management and administration like material form, stock control, design engineering, transport and other related activities which are involved in purchasing.

More so, the research also carried out an in-dept investigation on the reason why the concept is not being adopted to the fullness despite the tremendous benefits derived from purchasing management.


1.8 Limitations Of The Study

An investigation of this kind is faced with several limitations. The researcher is on the role of purchasing in contract management and administration, A case study of Bekado construction and engineering company Ltd, Ikot Ekpene, Akwa Ibom state.

As a matter of fact, it was not possible to meet all the officers concerned and some of those approached with relevant questions complained of lack of time as they would not like to waste the employee’s time outside what constituted their daily work schedule.

This kind of anti-research altitude which is common with Nigerians is due to some ambiguous administration policies and ignorance of the benefit of such an academic researcher to an organization. Some staff indicated interest to help but could not because of one reason or the other factors that prevented the researcher for conducting more detailed observation on this research was forced to abandon lectures for many time for the purpose of this study.

Again, lack of financial aid coupled with the present state of the economy has militated to a large extent the profit work because a lot of money is involved. There was also lack of adequate textbooks in our school. The researcher has to travel to other higher institutions where this course is being studied also together data, which would be necessary for this research study.


1.9 Definitions Of Terms

The following terms are used:

Purchasing:

Purchasing is a sequential chain of events leading to the acquisition of materials/supplies or services (Uzor, 2009).

Contract:

This is an agreement between two or more persons which is intended by them to have legal consequences (Onyeoku, 2006).

Administration:

This is the management of public or business affaires.

Client:

This s the owner of the contract.

Contractor:

This is the supplier of the contract.

Quotation:

This is a document, which is issued, offering goods or services for a given consideration.

Negotiation:

This is a conference between one party or person and another party or person with a view of arriving at a consensus.

Tender:

This is an offer for the supply of goods and services and usually made in response to a request for tenders.

Sourcing:

This process and procedures used by buyers or purchasers to seek, source, evaluate and determine which supplier can best meet the requirement of their organization.

Crashing:

This is a system of involving additional resources to achieve project completion at a shorter duration time than the normal time allowed.

Sub-contract:

This is where the main contractor sub-let part of the contract to another contractor.

Letter of acceptance:

This is the formal acceptance by the employer of tender.

Bill of quantity:

This is the priced and completed bill of quantities forming part of the tender.

Contract price:

This means sum stated in letter of acceptance as payable to the contractor for the execution and completion of the work.

Specification:

This is a functional document that describes in detail the characteristics of a product with regard to its intended capacities.

Execution:

This is the action of performing a duty or putting a plan or a design into effect. Example performing a contract work.

Project:

Thus us a scientifically evolved work plan devised to achieve a specific objective within a specific period of time.

Due process:

The mechanism for ensuring strict compliance with the openness, competition and cost accuracy rules and procedures that should guide contract award.

Management:

This is the process of planning, organizing, coordinating, directing and controlling decisions in an organization.

Agreement:

This is an arrangement, a promise or a contract between two parties.

Liquidity:

The state of owning things of value that an easily be charged into cash.

Bulldozer:

A powerful motor vehicle with a broad steel blade in front used for moving material or clearing ground.

Tunnel:

This is an underground passage. Example for a road or railway through a hill or under a river.

Act of God:

Any event in nature which could not have been prevented and is beyond the control of human.

letter of acceptance:

This is the formal acceptance by the employer of tender.


Chapter Five


5.0 Summary, Conclusion And Recommendations

5.1 Introductions

This chapter is a very important part in the research work because form this chapter any interested researcher or industry concerned will quickly glance through without many difficulties as this would act as a guide in the role of purchasing in contract management and administration. This is why the researcher has carried out proper evaluative reference to the problem statement, its solution and objective, in line with the above established fact. The researcher has view it necessary to reasonably draw conclusion, summary and make some meaningful and suggestive recommendations in this chapter.


5.2 Summary

The introductory aspect of this work as evidenced in chapter one where the researcher critically asked some research questions, examined the scope, purpose and importance of the study in the role of purchasing in contract management and administration. To this end, the researcher equally started by highlighting the problems involved in the role of purchasing in contract management in the BEKADO construction and engineering company Ltd in the area under investigation.

Chapter two of the work is the review of related literature. It is obvious that a research ahs previously been carried out in this area under study, so the researcher in her work cited number of scholars, whose work were reviewed and acknowledge accordingly. However, efforts has been made to the opinion of authors who had written on this subject matter. On the other hand, investigation into this work was conducted by the use of questionnaire, personal interviews, and observation and to some extent desk research.

The chapter three is all about research methodology, which include; the research design, the questionnaire design, the method used, sampling and selecting procedure of respondents, the data sources and data analysis method.
In chapter four of this work, the data collected were presented and analyzed. This was done according to the answers given in the questionnaires distributed to a selected sample population, the aim behind this is to test the validity of the data collected.

From the above, the researcher in chapter five having gone through his findings and statement of [purposed has deemed it necessary to make useful recommendation and finally draw up conclusion which helps for further research work.


5.3 Recommendations

Having carried out a thorough investigation on the purchasing role in contract management and engineering company in Bekado construction and engineering company Ltd Ikot Ekpene Akwa-Ibom state especially the area relating to material acquisition and management, and having analyzed the findings, the researcher this put forward the following recommendations:

  1. The organizational structure of Bekado construction and engineering company Ltd should be redesigned to allow for a perfect materials management and purchasing type of the organization. It is true that they have purchasing management department but it is not well structured. With the new structure, purchasing, inventory control, stores and traffic which are all material oriented activities will be brought together under one manager. This is necessary in view of the inherent responsibility of:
    1. Determining manufacturing requirement
    2. Scheduling storing and dispatching materials on time.
  2. The organization should employ professionally qualified personnel to occupy the various material and purchasing oriented activities in purchasing management department i.e. purchasing, store, inspection, warehouse, production and quality control for efficiency and increased profit. The personnel should possess either of the following professional qualifications:
    • Membership of the chartered Institute of Purchasing and supply London or Nigeria
    • HND in purchasing and supply
    • OND in purchasing and supply obtained from any accredited institution. In addition, they should possess some years of experience in a related job.
  3. The equipment and machine in the organization should be controlled by the store department since stock represent money, it therefore means that any misappropriation will bring loss to the organization. Store department should handle material’s with reasonable care.
  4. The organization should be able to make available sufficient number of computers and related electronic data processing equipments with installation and financing.

5.4 Conclusion

In conclusion, it should be realized that the prime objective of organization is to make profit with a drastic cost reduction. From the investigation carried out in Bekado construction and engineering company Ltd, problem centered on improving the coordination and control of the various activities that contributed to the role of purchasing in contract managements and administration. In view of this, effort was made during the guiding to look into the problem of determining the raw materials needed for an organization, the problem of cost reduction by engaging in efficient purchasing procedures, the problem of determining manufacturing requirement and scheduling order, housing parts of materials either as bought out or in various stages of manufacturing and the problem of procuring, storing and dispatching of material on time within allowable cost.

When the findings were analysed, it was found out that the organization could have attain a higher portion in the labour mount if effective control of its operating unit is handle by a purchasing manager. It was found out that with purchasing and production control, substantial benefits also occurred when inventory management, value analysis, receiving, store and surplus and salvage were placed with a materials management department. Again, the operating effectiveness of each materials and purchasing activities should be viewed as dependent upon the policies and performance of any organization.


The Role Of Purchasing In Contract Management And Administration (A Case Study Of Bekado Construction And Engineering Company Ltd, Ikot Ekpene Akwa-Ibom Sate)


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