Steps in project procurement management

Figure 12.1 shows the full sequence of processes and activities in project procurement management.

Figure 12.1. Project procurement management sequence of processes and activities

First steps: planning

The very first step, before even starting the process of purchasing a product or service, is to ensure that as project manager you know the organization's procurement and approval process. If you don't know these, then at best you will duplicate work unnecessarily, you will most probably do a worse job of procurement than the established organization would, and at worst you may create legal liability and risk for you personally. If time permits you should ensure that you have a rough understanding of the terms and conditions included in your organization's standard procurement contract. If you don't already know these things, then finding them out is also a way to start developing a working relationship with key people in your organization's procurement department. If you know these things but don't have those relationships, asking again is one way to start to develop them.

The first two steps in project procurement management (after ensuring that you know your own procurement organization) are:

  1. Plan purchases and acquisitions

  2. Plan for contracting.

PMI says

Plan purchases and acquisitions

'Plan Purchases and Acquisitions is the process of determining what to purchase or acquire, and determining when and how to do so.' PMBOK Guide (p.366)

The objective of procurement management is to procure a product or service necessary to the project. This begins with the first of the six procurement management processes, 'plan purchases and acquisitions'. In this process you decide what goods or services to procure for the project, and how to procure them. It will help to understand why each good or service needs to be procured, that is, how each relates to the final deliverable and business purpose of the project. You should already understand this as project manager, but if you delegate the procurement process, which you might on a large or complex project, you should ensure that the person or team to whom you delegate also has the appropriate understanding. Planning may need to include generating options for procurement and selecting between them, and identifying potential suppliers.

Another decision which may need to be answered in the procurement planning process is the make-or-buy decision. This is a classic general management decision, and it arises in project management too. Table 12.2 gives an example of the make-or-buy decision, highlighting the very common and potentially career-fatal risks in it for project managers, and showing how to manage them down to safe levels.

Table 12.2. The make-or-buy decision on procuring a database: an example of how to protect yourself as project manager in make-or-buy decisions
An example of a make-or-buy decision, and the personal risks you may face as a project manager involved in it, is when a project needs a database, and the project can:

  • EITHER buy an off-the-shelf database that meets the requirements almost but not completely,

  • OR can hire a team of computer database programmers to create exactly what the project wants.

Cost is one factor in such decisions, but risk is more usually a bigger factor. In the database example, the risk in buying something commercially available is that although we think it is a close enough but not exact match for what the project needs, it may turn out to have critical limitations, and on the other hand, the risk in hiring a team of programmers is that they do not deliver what is needed, or deliver late or over budget. As a project manager you are likely to find that you come under pressure to go with the least cost option, and then are personally blamed when the risks associated with that option crystallize. People who were quite happy to back the low cost decision, and even insisted on it, suddenly start to say that all along they knew it was the wrong thing to do, and blame you for not listening. What can you do? The solution to this very common problem is actually quite simple. First, be clear in your own mind that in project management generally, not just project procurement management, your job is not to make such decisions but rather, secondly, to present such decisions to the right people, the right stakeholders, and to provide them with the relevant available information and factors so that they can make a decision. In the case of decisions that no one wants to make, it is your job, working with the sponsor, to ensure that either such decisions are made, or, if they are critical to the project, to consider halting the project until they do, although that is in extremis. Thirdly and this is your personal insurance policy and the bullet proof jacket for your bonus it is your job to document how such decisions were reached, mainly so that if someone involved in the decision is possibly likely to blame you if things go wrong, you have the documentation to show that you did not take the decision, they did. Ninety nine times out of a hundred, if you run this process and document it, no one will try to blame you anyway.

Planning needs information as an input. Key documents for use as input into the project procurement management processes are:

  • Project scope statement.

  • Risk register.

  • Schedule.

  • Costs.

  • WBS.

  • WBS dictionary.

Once the plan purchases and acquisitions process is completed, or underway, the next process in project procurement management is 'plan for contracting'. The purpose of this process is to produce:

  • Procurement documents (for prospective suppliers).

  • Evaluation criteria by which suppliers will be selected.

  • Updated statements of work.

Prospective suppliers, whether sole suppliers or in a competitive bid, need information about the project's requirements of them, and eventually will need a statement of work and terms and conditions. This information is contained in the procurement documents, which terms may include, for example, requests for information (RFIs), requests for quotations (RFQs), and invitations to tender (ITTs). The details of how to attract and evaluate bidders are the heart of the procurement or purchasing management profession, and fall outside the scope of this book. The various ways to identify potential suppliers include advertising, bidders' conferences, and qualified seller or preferred suppliers lists. That kind of detail should be left to your organization's contracts or procurement department. What you need to ensure from a project management point of view in the plan for contracting step is that you (or the project) have identified and then communicated clearly what needs to be procured, in sufficient detail such that the people doing procurement for you understand it and can use their professional judgement well. Ideally the project will have professional procurement support for the process to plan purchases and acquisitions, who will handle the detail, but the project must be engaged in the process.

Next steps: executing

The next two steps in project procurement management are:


Request seller responses.


Select sellers.

The project, through the procurement staff where they exist, requests potential suppliers to respond to invitations to tenders or other procurement documentation. Once the deadline for responses arrives (or if no deadline, once enough responses have been received), the process is to assess the proposal for supplying the project and select one or more suppliers. Negotiations may follow, to resolve ambiguities or agree changes to the terms and conditions. When both parties approve the contract, representatives of the project's and the supplier's organizations sign the contract or other supply document.

It is worth knowing that in most advanced economies, including the UK and USA, irrespective of what in-house lawyers and procurement professionals may say, it is now the case that for most kinds of procurement transaction electronic signatures are at least as good and reliable as ink-on-paper signatures (real-estate transactions are the main exception). How prudent or useful it is to argue this point in your project is something you must judge for yourself, but using electronic signatures can save weeks or months on procurement it is the magnitude of this benefit that justifies mentioning this point of detail here.

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Definitive Guide to Project Management. The Fast Track to Getting the Job Done on Time and on Budget
The Definitive Guide to Project Management: The fast track to getting the job done on time and on budget (2nd Edition)
ISBN: 0273710974
EAN: 2147483647
Year: 2007
Pages: 217
Authors: Sebastian Nokes

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