What is Project Procurement Management?
Procurement refers to the act of purchasing goods, supplies, or services. Project procurement refers to obtaining all materials and services necessary for the project. The process of project procurement management is the one that ensures successful procurement.
Those are the three main project procurement management processes.
- Plan procurements
- Manage (or control) procurements
The Project Management Book of Knowledge (PMBOK), had a fourth process called close procurements in its previous editions. However, it was dropped from the sixth edition.
The first step is a successful project procurement management plan. This includes planning for:
- What materials and services will you need for your project? This covers all details of the materials and services required, including minimum quality requirements. You don’t need just steel beams, but Lloyd’s approved Grade B steel beams.
- What services can your company provide and what should you buy elsewhere? This is known as the “make vs. purchase decision.” Outsourcing can be beneficial for your company, even if you are able to do it in-house.
- What are your requirements for purchasing outside of the contract?
- Are you able to deliver the items on time?
- Are you looking for a fixed price or cost-reimbursable contract?
- Do you think there are any key milestones that should be included?
- What about the legal conditions and terms that must be observed?
- How do you find suppliers for the services or materials you require?
- Do you intend to issue a Request for Proposal (RFP).
- Are you a local supplier?
- What criteria are used to determine who wins the job?
- If all contract requirements have been met, will it be based only on price?
- Is there a better way to assess bidders? Is it possible to take into consideration their Better Business Bureau ranking?
It’s important to plan how changes will be handled after a contract has been awarded. What happens if a supplier says they cannot deliver on time? Or when you find out that you need 200 feet of cable rather than 150?
This process produces a primary output, a written project procurement plan. It is a subsidiary to your project management program.
Some other outputs include:
- Formularies for Request for Proposals
- Vendor selection criteria
- Statements of Work
- Documented buy-or-not decisions
- Request for changes or documentation processing
- All risks noted to the risk registry and risk management plan
Conduct procurements Process
This is the execution stage of project procurement management. This is when RFPs are published, bids are collected, and selections are made. During this phase, vendor negotiations are conducted and the contracts signed. Procurement also involves the actual receipt and payment of goods and services.
Control or administering procurements is about monitoring and controlling project procurements in order to meet all requirements. These are the two key steps.
- Vendor status or progress updates
- Delivery of services or products is subject to quality control
This process also includes cost monitoring and schedule monitoring for procurements. Here, you can monitor any changes and their effect on the overall budget and project schedule. It is important to remember that if a piece of material arrives two weeks late, how will this affect the rest of your project schedule?
What is the Project manager’s role?
Unless your organization is small, there will likely be a procurement project management department within your company. It’s normal to want to find out what are the procurement team’s roles and responsibilities are in project management and the responsibility of the project manager. Details will vary depending on the organization and the roles involved in procurement.
Many companies have procurement managers that work with the project manager to manage the majority of these tasks. Other times, the procurement team might only be responsible to perform transactional tasks. These are the main responsibilities of a project manager regardless of how your procurement department looks.
Planning: You will not be the only one creating the plan. The plan will be developed with input from the entire project team, including your procurement team, legal team (if one exists), and other subject matter experts in the company. These may include finance, design, engineering, operations, and estimators.
Controlling procurements The procurement manager is not usually responsible for the procurements. You are responsible for ensuring that they are done correctly. You must be aware of the status and timelines of procurements. You need to be aware of the impact on your project schedule if something is delayed and take appropriate action.