Knowledge Area: Project Procurement Management

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Project Procurement Management includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team. The organization can be either the buyer or seller of the products, services, or results of a project.

Project Procurement Management includes the contract management and change control processes required to develop and administer contracts or purchase orders issued by authorized project team members.

Project Procurement Management also includes controlling any contract issued by an outside organization (the buyer) that is acquiring deliverables from the project from the performing organization (the seller), and administering contractual obligations placed on the project team by the contract.

Below are the Project Procurement Management processes:

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  1. Plan Procurement Management—The process of documenting project procurement decisions, specifying the approach, and identifying potential sellers.
  2. Conduct Procurements—The process of obtaining seller responses, selecting a seller, and awarding a contract.
  3. Control Procurements—The process of managing procurement relationships, monitoring contract performance, and making changes and corrections as appropriate.
  4. Close Procurements—The process of completing each project procurement.

 

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The Project Procurement Management processes involve agreements, including contracts, which are legal documents between a buyer and a seller. A contract represents a mutually binding agreement that obligates the seller to provide something of value (e.g., specified products, services, or results) and obligates the buyer to provide monetary or other valuable compensation. An agreement can be simple or complex, and may reflect the simplicity or complexity of the deliverables or required effort.

A procurement contract includes terms and conditions, and may incorporate other items that the buyer specifies as to what the seller is to perform or provide. It is the project management team’s responsibility to make certain that all procurements meet the specific needs of the project while adhering to organizational procurement policies. Depending upon the application area, a contract can also be called an agreement, an understanding, a subcontract, or a purchase order. Most organizations document policies and procedures specifically defining the procurement rules and specifying who has authority to sign and administer such agreements on behalf of the organization.

Although all project documents may be subject to some form of review and approval, the legally binding nature of a contract or agreement usually means it will be subjected to a more extensive approval process. In all cases, the primary focus of the review and approval process is to ensure that the contract language describes the products, services, or results that will satisfy the identified project need.

The project management team may seek support in early phases from specialists in contracting, purchasing, law, and technical disciplines. Such involvement can be mandated by an organization’s policies. The various activities involved in the Project Procurement Management processes form the life cycle of an agreement. By actively managing the agreement life cycle and carefully wording the terms and conditions of a procurement, some identifiable project risks may be shared or transferred to a seller. Entering into an agreement for products or services is one method of allocating the responsibility for managing or sharing potential risks. A complex project may involve managing multiple contracts or subcontracts simultaneously or in sequence. In such cases, each contract life cycle may end during any phase of the project life cycle.

The seller will typically manage the work as a project if the acquisition is not just for shelf material, goods, or common products. In such cases:

  • The buyer becomes the customer, and is thus a key project stakeholder for the seller.
  • The seller’s project management team is concerned with all the processes of project management, not only with those of this Knowledge Area.
  • Terms and conditions of the contract become key inputs to many of the seller’s management processes.

The contract can actually contain the inputs (e.g., major deliverables, key milestones, cost objectives), or it can limit the project team’s options (e.g., buyer approval of staffing decisions is often required on design projects).

 

Concluding Remarks: Many a times specialized teams will be performing the Procurement function but it is essential for the Project Manager/ Project Management team to understand the processes for Procurement which will help them manage and execute the entire Project.

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