Addressing Uncertainties through Procurement
THIS CHAPTER IS DEVOTED to an overview of the applications of risk management in procurement. In some situations, a project or contract looks so attractive that a company jumps on it without diligent consideration. Then, its execution opens up a can of worms leading to huge impacts on the company’s objectives.
For the most part, no one is interested in a contract that looks terribly risky. However, a company might be able to identify the key contract uncertainties and come up with smart and effective means of addressing them and this project or contract could become the most profitable one the company ever had.
Major steps of the procurement process are described in this chapter as related to risk management. There is a similarity in the risk methods used for selection of engineering design options1 and selection of bidders. Their applications to procurement ...