Project Procurement Management: Definition and Processes
Projects in a variety of industries require external materials and resources to successfully achieve their objectives. Project procurement management is the selection, coordination and maintenance of these goods and services and is an important part of successful project completion. Understanding the processes, benefits and uses of project procurement management can help you more effectively achieve your project goals. In this article, we define project procurement management, discuss who uses it, its benefits and processes and describe the responsibilities of project procurement managers.
What is project procurement management?
Project procurement management is the creation and maintenance of relationships with external resources needed to complete a project. A project procurement manager communicates with vendors to buy, rent or contract products and services needed to achieve project objectives. Most often, the selection of vendors occurs after they have placed bids to partner with businesses seeking their products or services. A project procurement manager then determines which bid and partnerships are most beneficial to their objectives. Further negotiation may take place to ensure fair representation of both party's interests.
Who uses project procurement management?
Project procurement management may be necessary for a variety of industries where projects requiring outsourced materials or services occur. The following industries commonly use project procurement management to meet their project objectives:
Benefits of project procurement management
There are several benefits of adding procurement management to projects of varying size and complexity, including:
Project procurement management allows organizations to negotiate detailed service contracts to best suit their needs and could increase the certainty of high-quality goods and services. An increase in certainty of quality could help stakeholders feel more confident in a project's success and may result in future investments and funding.
The process of drafting and negotiating service contracts can help organizations more clearly understand their vendor options by outlining costs, processes and service quality. This can help to decrease the risk of violation of contract terms which could delay or negatively impact a project's success.
Carefully negotiated procurement terms are a great way to reduce costs and control spending. Procurement management may help organizations better understand the costs necessary to complete a project and may help them select products and services from vendors that best fit their needs without exceeding their budget.
Related: FAQ: Project Management Basics
Processes in project procurement management
There are four key processes involved in product procurement management:
1. Planning procurement
Planning procurement involves a series of steps that help determine which resources an organization needs for project completion and the extent of its budget. Project procurement managers often consider the following aspects when planning for procurement:
The materials and resources required to complete the project
The materials and resources they already have and which need to be outsourced
Contract requirements for outside purchases
Delivery date requirements
Key project milestones and their deadlines
Legal terms and conditions
Industry safety standards of materials and resources
Researching providers and vendors
Criteria for partnerships
Most often, managers use a written document as a project procurement plan that addresses the above considerations and details any other important information, such as how to handle changes in delivery dates or contract terms.
2. Conducting procurement
After planning for procurement, project procurement managers assess bids from vendors and select partnerships based on their project needs. Any vendor negotiations often take place during this phase of procurement and all involved parties sign the agreed-upon contracts. Project procurement managers may also make payments for products and services at this time.
3. Controlling procurement
Once contracts become active, procurement control and management are important parts of maintaining partnerships with vendors and ensuring the services and products function as they're intended throughout the course of the project. Controlling procurement often includes:
Evaluating regular internal status updates
Reviewing contractor agreements
Reviewing progress and performance updates from vendors
Conducting inspections and audits
Assessing work orders
Issuing additional payment as necessary
4. Closing procurement
Closing procurement involves all necessary steps in ending a partnership or contract. This often involves a review of the work or services completed, renegotiation of any changes to original contract terms and confirmation of payments issued and received. Organizations may also file a formal release of liability upon procurement closing. This contract confirms that the vendor has fulfilled the terms of the original contract and is no longer responsible for any additional involvement in the project.
Project manager responsibilities during procurement
Throughout project procurement, there are several responsibilities of project managers. These may vary depending on the project and its objectives, but there are five common duties of project procurement managers:
1. Project initiation
A project procurement manager may begin the procurement process during project initiation. They often communicate with management, executives and members of the team assigned to the project to discuss objectives and timelines. This may also include discussing the budget, internal capabilities and high-level expectations.
2. Procurement planning
A procurement plan is an important part of aligning expectations and organizing processes. During procurement planning, project managers often create lists and documents that outline necessary resources and materials, timelines and milestones and potential means of contacting vendors. They may also advertise their need for contractors through classified ads, online networking sites and through their professional networks.
Project procurement managers may also work with management and executives to discuss vendor requirements and post-procurement activities.
3. Stakeholder coordination
Projects often involve several stakeholders, including business owners, management, executives, project teams, liability professionals and consultants. The project procurement manager is responsible for coordinating these teams and individuals to ensure mutual understanding of project goals and objectives. To do this, may they identify all important stakeholders and engage them at appropriate times throughout the project.
4. Vendor coordination
Often, multiple vendors may engage in a single project. It's important that project procurement managers effectively coordinate the efforts of multiple contractors. During this process, a project manager may create vendor schedules of collective meetings or demonstrations and facilitate communication between contractors when necessary.
5. Communication of progress
As a project evolves and progresses, a project procurement manager communicates these changes and advancements to all stakeholders involved. This can help to ensure that all teams and individuals working on the project remain informed on deadlines and schedule changes. Project procurement managers often determine which information is necessary to communicate, collect that information from stakeholders and vendors and circulate it to the appropriate parties. They may also send weekly email updates to inform all team members of current project statuses.
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