Procurement management is a term that is often used and is well-known. This isn’t easy for everyone. Many industries don’t have procurement exposure because they have a separate legal department.
Let’s start by explaining what procurement is.
Procurement is the management of projects that involve the acquisition of goods and services from other companies. It does not include other departments within your company.
Your experience as a buyer or seller within your organization will help you understand this area of management. You must think like a PM of buyer organization to obtain PMP(r).
The Project Management Body of Knowledge (PMBOK (r)) of the Project Management Institute (PMI), describes four processes that are part of the Project Procurement Management knowledge area.
Plan Procurement Management
Conduct Procurements
Control Procurements
Close Procurements
Plan Procurement Management
Documenting and specifying the approach to project procurement. This is how you identify potential sellers. This process determines whether or not to acquire outside support. If so, it also specifies how and when to acquire it.
Plan Procurement Management helps to identify project needs that are best met or should be fulfilled by acquiring products or services outside the project organization. This is in contrast to those needs that can be met by the project team. For each item that is acquired, the process from Plan Procurement Management through close Procurements is followed.
Plan Procurement Management also includes the evaluation of potential sellers, especially if the buyer wants to have some control or influence over acquisition decisions.
Conduct Procurements
Conduct procurement is the process of getting responses from sellers, selecting a seller and awarding a contract. This process has the key benefit of aligning internal and external stakeholder expectations via established agreements. The Conduct Procurements team will receive proposals or bids and will use previously established selection criteria to select one seller who is qualified to do the work and acceptable to be sold.
For major procurement items, the process of asking sellers for their responses and evaluating them can be repeated. Based on a preliminary proposal, a short list of qualified sellers may be established. The seller on the shortlist can then be asked to provide a detailed requirements document. This will allow for a more thorough evaluation.
Control Procurements
Control Procurements refers to the management of procurement relationships, monitoring contract performance, making corrections and changes to contracts, as well as managing procurement relationships. This process has the key benefit that it ensures both the buyer and seller meet the procurement requirements as set forth in the legal agreement. The procurement contract will be administered by both the seller and buyer for similar purposes. Each party must ensure that the other parties fulfill their contractual obligations and that they respect their legal rights.
When you have multiple providers involved in larger projects, managing interfaces between them is a crucial aspect of contract administration
Many organizations view contract administration as an administrative function that is separate from the project organization due to their different organizational structures. Although a procurement administrator may be part of the project team, they typically report to a supervisor from another department. This is often true if the performing organisation is also the seller of a project to an outside customer.
Close Procurements
Close Procurements are the process of completing each procurement. This process has the key benefit of documenting agreements and supporting documentation for future reference.
Close Procurements also includes administrative activities like finalizing open claims, updating records with final results, and archiving such data for future reference. Close Procurements covers each contract that is applicable to a project or phase.
An early termination of a contract is a special type of procurement closure. It can be a mutual agreement between the parties, from the default by one party, or for convenience for the buyer, if the contract provides for it. The terminations clause of a contract outlines the rights and responsibilities for the parties in the case of an early termination.