No organization can deliver a project in a silo, they would need to buy a product, services or a combination of both from outside to deliver the project objectives. Project Procurement Management refers to the goods and services required
to complete the project. These can be procured from other parts of the organization involved in performing the project through resource management. It refers to the formal processes that many organizations follow to acquire goods and services.
Procurement Management is the procedure of choosing, monitoring, and closing vendor contracts. Managing project procurements require the project manager to effectively cooperate with the buying department on the procedure of scheduling and managing procurements. Procurement on the project will be heavily impacted how the performing organization deals with the procurement in general. What kind of policies and procedures are in place and who enjoys what approval rights. The procurement process may be impacted by the decision to stay centralized or do a de-centralization
Project Procurement Management is the subdivision of the application plan to figure out how the well-organized products needed for producing deliverables can be provided on time and within the given budget. One thing to notify that the plan will be important only for projects that deal with a substantial buy-in of expertise or investment items.
Note: The exam questions are based on USA law of Contracting.
Plan Procurement Management (Planning)
Plan Procurement Management is the process of formulating procurement procedures to follow. The process standardizes the way the project team chooses vendors and administers contracts. The process documents project buying decisions, postulating the tactic, and determining potential sellers. The plan includes the key objectives of the project, task description, summary milestones and the pre-approved monitory resources of the project. The plan helps in explaining the project to the potential sellers while the summary milestones and pre-approved financial resources determine when to acquire the required goods and services.
- Create templates for procurement statement
- Choose a contract type for every procurement
- Formulate the procurement documents
- Determine the source selection criteria
- Identify risks and create appropriate risk response plans for risk mitigation
In simple words, it is to identify what external resources that are needed on the project to send out RFQ/RFI including SOW or TOR. Project Manager is involved with the procurement, but he is not supposed to deliver the full activity so he is not the buyer in most of the cases and the process is being handled by the dedicated department. For legal purposes also he is not the one who could administer the project but he is responsible for SOW and the deliverables acceptance. A project manager should be able to read and understand the contracts.
Conduct Procurement (Execution)
Conduct Procurement is the procedure of acquiring seller responses, analyzing their bids, choosing a seller, and awarding a contract. The process involves choosing experts with specialized knowledge in proposal evaluation, industry regulatory environment, government laws and regulations, technical matters and negotiations. Many organizations unify their procurement system to handle the details of the project procurement. Moreover, the process involves communicating with potential users with soliciting interest in bidding on a contract for procurement. The conferences make sure that every prospective bidder comes with clear information and understanding of the procurement. Lastly, the procedure includes proposal evaluation which uses the source selection criteria on which the bidder proposals are analyzed to make sure they are complete so there is no delay in the bidder conferences.
Control Procurement (Monitoring and Controlling)
Control Procurement is the procedure of managing procurement relations, monitoring agreement performance, and make changes when required. This is the execution phase of the procurement where you periodically monitor the progress after signing of the contract. The procurements are completed in this phase and a final inspection is done. Once it is approved, the procurement is considered close. The major benefit of the process is that it makes sure that both sellers and buyers operate according to the terms and conditions outlined in the procurement contract. The failure of the supplier/buyer or contractor could have a negative impact on budgets, cost and quality. In the worst case scenario, they can even fail to deliver the objective which in turn could cost the main contractor
Control Procurements is the process of managing procurement relationships; monitoring contract performance,
and making changes and corrections as appropriate; and closing out contracts. PMBOK 6
The knowledge area helps you establishing and maintaining good working relationships with vendors/ subcontractors/ contractors of goods and services during the project life cycle while buying the requirements on most reasonable prices.
Agreements can be amended at any time prior to contract closure by mutual consent, in accordance with the change control terms of the agreement. Such amendments are typically captured in writing. PMBOK 6
Key Deliverables for Project Procurement Management
It refers to the annual document which describes the products and services that a public body will acquire from external suppliers. An effective procurement plan helps in procuring entity to explain their procurement requirements and choose when and where to procure.
Source Selection Criteria
It defines properties that are critical for a purchaser when deciding on a supplier. Individual judgement may be biased and therefore it requires balance with objective measures. The criteria are based on multiple factors like the project’s scope, schedule, requirements, payment terms and quality certifications. Risk factors and budgetary constraints are also considered while drawing out the source selection matrix
It obligates the project manager and the contractor to provide the specified deliverables. Also, it obliges the project owner to pay for the rendered facilities. An agreement can never be legal without a contract.