What Is Project Procurement Management?
Procurement is the act of obtaining goods, supplies, and/or services. Therefore, project procurement is obtaining all of the materials and services that are required for the project. Project procurement management encompasses the processes used for making sure project procurement is successful. Project procurement management processes
Project procurement management includes three primary processes. These are:
- Plan procurements
- Conduct procurements
- Administer (or control) procurements
Prior editions of the Project Management Book of Knowledge (PMBOK) included a fourth process, called Close Procurements, but it was removed from the sixth edition.
The first step in successful project procurement management is making a plan. This includes planning for the following:
- What are all the materials and services you will require for the project? This includes all specifications of the materials and services, such as minimum quality requirements. For example, you don’t just need steel beams; you need Lloyd’s-approved Grade B steel beams.
- What can be provided by your company, and what should you purchase elsewhere? This is called the make vs. buy decision. Even when your company can do something in-house, there may be a benefit of choosing to outsource such as cost savings, faster delivery, etc.
- What are your contract requirements for outside purchases?
- Do you have required delivery dates?
- Do you want a fixed price contract or cost-reimbursable?
- Are there key milestones to be included?
- What about legal terms and conditions that must be met?
- How will you search for suppliers of the materials or services you need?
- Will you release a request for proposal (RFP)?
- Do you have a preferred supplier?
- What are the criteria for who will win the work?
- Will it be based on price if all contract requirements are met?
- Is there another way to evaluate bidders? For example, will their Better Business Bureau ranking be taken into account?
During the planning stage, it’s also important to determine how changes will be handled once a contract is awarded. What happens when a supplier tells you they can no longer deliver on time? Or when you discover you actually need 200 ft. of cable instead of only 150 ft.?
The primary output of this process is a written procurement management plan, which is a subsidiary of your project management plan.
Other outputs may include:
- RFP forms
- Vendor selection criteria
- Statements of work
- Documented make-or-buy decisions
- Change request forms or process documentation
- Any noted risks added to the risk register and risk management plan
This is the execution phase of project procurement management. It’s when the RFPs are released, bids are gathers, and selections are made. Any vendor negotiations will occur during this phase, and then the agreed-upon contracts are signed. Conducting procurements also includes the actual receipt of and payment for goods and services. Administer procurements
- The control or administer procurements process is focused on monitoring and controlling project procurements to ensure all requirements are met. Two key steps included in this process are:Status or progress updates from vendors
- Quality checks of products or services delivered
Schedule and cost monitoring for procurements are also part of this process. Any changes and their impact on the overall project schedule and budget are monitored here. It’s important to consider that if a piece of material is going to be two weeks late, how it will impact the rest of the project schedule?
The Project Manager’s Role
Unless you’re working in a small organization, you likely have a procurement team within your company. Therefore, it’s natural to ask what their typical role is with project procurement management, and what’s the responsibility of the project manager. The details will depend on your organization and the procurement roles present. Some companies have procurement managers who work alongside the project manager and take care of the majority of these processes. In other cases, the procurement team may only be responsible for the transactional tasks. Here are some general guidelines of what you will be responsible for as a project manager, regardless of what the procurement management department in your company looks like:
- The planning process
- As the project manager, you will not create the plan in isolation. It will likely be undertaken with the input of your entire project team, including the procurement team, the legal team (if you have one), and any other relevant subject matter experts within the company. This may include estimators, finance, scheduling, design or engineering, operations, etc.
- Controlling procurements
- The project manager does not generally conduct the procurements. However, you are still responsible for ensuring they are conducted appropriately. This means you need to be aware of the status of procurements. If something is late, you need to know how it impacts the rest of your project schedule and mitigate it appropriately.
If there is a conflict between department requirements, it will be up to you to resolve. For example, imagine that you are told a key material has a 10-week lead time. Unfortunately, your schedule shows you need it in 8 weeks.
You’re told they can get it in 8 weeks if you pay an extra 15% for air transport. Do you allow the 2-week delay, or do you accept the cost overrun? Is there a third option, such as finding a different supplier? As the project manager, the decision will be your responsibility.