Project procurement management describes the processes required to procure product or services for a project from outside the project. Procure means no more than obtain, just to be clear on terminology. Procurement can entail either entering into a formal contract, such as for purchasing (buying), leasing or hiring, or entering into a non-contractual arrangement, such as an internal requisition or indent procedure, or some other means by which organizations allocate resources internally. Although procuring from outside the organization will normally entail a formal contract, note that procuring from within the same organization as the project may also, at least nominally, involve a formal contract, and, less frequently, procuring externally may be on a non-contractual basis.
A key output from the procurement process is often a legally binding contract. Except for the simplest ones, contracts need to be managed and controlled, and often need change control. Examples of common activities performed as part of contract management are passing information to the supplier (for example, to let them know that the project is ready to receive a supply) and checking that payment should be made and initiating payment. The most important control activity is usually to ensure that payment is not made until the project is satisfied that the relevant part of the contract has been met.
Where there is a legal contract, the project needs to operate according to the terms and conditions thereby imposed, or, if these are unacceptable, the project needs to change them. Changing a contract can be difficult and expensive, and may be impossible, so close attention to detail must be applied during the planning and drafting of the contract; once the contract is in place, the focus of the project's effort switches to controlling, managing and administering the procurement processes. We can see from this that there is a natural lifecycle to project procurement management.
In a large or complex project several contracts or other procurement agreements may be running at the same time, and there may be interplays between them. Managing procurement for a large or complex project can thus be a major task in terms of effort, cost and risk.
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