Applying AI in Project Procurement
From the AI IQ Blog
by Paul Boudreau
Project procurement management is critical to the success of many projects. There are three important areas where artificial intelligence (AI) technology will change current practices: the contract statement of work, vendor selection, and tracking procurement progress.
The contract statement of work (SOW) takes on additional significance when outsourcing work to a vendor. The SOW is the basis for requesting bids, evaluating potential vendors, and finalizing a contractual agreement to deliver the SOW contents. Therefore, the SOW needs to be accurate and comprehensive. Natural language processing (NLP) is an essential tool to provide this requirement. NLP uses documents from similar projects and the wording in the SOW to find errors or omissions. NLP performs entity recognition to extract objectives, deliverables, and stakeholders. Sentiment analysis is performed to analyze the tone or content of communication and ensure no issues or conflicts. NLP identifies and extracts keywords critical to project success, then compares that data to find omissions.
The vendor selection process is one of the most challenging areas to maintain ethical behavior. NLP software can remove human bias, similar to current software that scans a candidate’s resume to determine how well they meet job requirements. In addition, seller bid submissions will be automatically checked and ranked based on the selection criteria.
To track vendor progress, the performing organization needs to observe vendor behavior and, if possible, access vendor project data. Robotic process automation (RPA) software creates reports and determines the most critical metrics. A machine learning algorithm detects anomalies and predicts future performance. Unsupervised learning performs clustering of data, compares trends in performance, and highlights variances that may result in unacceptable deviations. This allows both the vendor and project manager to be proactive to avoid any deterioration in the probability of project success.
The future of project procurement will be based on applying AI technology.
Posted on: August 14, 2023 02:49 PM |
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Comments (4)
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Luis Branco
CEO| Business Insight, Consultores de Gestão, Ldª
Carcavelos, Lisboa, Portugal
Dear Paul
Very interesting the theme that brought to our reflection and for debate
Thank you for sharing and for your opinions.
Thank you very much for the interesting article. I have some doubts regarding vendor selection: I believe the AI will be a significant tool to increase the efficiency of procurement (as well as other processes), but due to the high risk of legal actions against each other partners of contract as well as some regulatory issues (like anti-monopoly regulations etc), a majority of final decisions will be taken by humans - at least we need to have someone to accuse for unethical behaviour.
Secondly - AI may be biased as well, similarly as it was biased in infamous experiments of face recognition. AI may be biased against some vendors while discriminating against others.
In addition, we may have the answer, but with only very blurry knowledge about the reasons.
The third reason is that it looks to me like a huge area for manipulation to choose some specific vendor - and behind such choices, we may have huge money for the preferable vendor. Eventually, if we combine it with the buried knowledge about reasons why AI chose the vendor, it looks like a great area for some unethical manipulations - much bigger than today, because we can always say "computer said NO".
Peter Rapin
Subject Matter Expect; Project Delivery| Independent Consultant
Ontario, Canada
Your article looks at the issue from the Owner's perspective but the proponents' (vendors') perspective must be considered as well. The proponents will apply AI to respond to an invitation and will tailor the response recognizing the Owner's AI involvement. Thus you will have an AI response proposal to an AI invitation for proposals. With refinement the responses may be identical.
The future seems to be - "Have your AI communicate with my AI". Am I the only one that sees this as a potential problem?
Nice points of discussion. Let's see how AI and RPA can evolve to enhance the automation of tasks and similar
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