The Complete Guide to Project Procurement Management

Project procurement management has all the processes that you as a project manager to deal with when you are outsourcing a part of your project work.

Sometimes you need to go to an outside organization to do some of your project work. In this case your organization is called buyer and the other organization is who is subcontracting from you is called as seller. The model is called procurement.

Eventually as a project manager you need to understand all the project procurement management processes to effectively deal with the procurement work.

Wait a minute!

So you mean the project manager has to have the knowledge to write the contracts and all the bond papers.

Not really. As a project manager you need to understand the process of project procurement management, its life cycle and also the processes involved in it.

However you are not alone. You need to work with the organization’s legal department to make the required contracts in agreement with the seller.

we have already seen the types of procurement contracts that are part of the project procurement management. So now we will go through what are the processes in the project procurement management and their ITTOs in detail.

Project Procurement Management Processes

There are 4 processes in project procurement management knowledge area. They are

Plan Procurement Management

Eventually plan procurement management is all about planning how to carry out the rest of the procurement management processes.

Inputs

Project management plan

Project management plan is an input to all the planning processes. So it means that other subsidiary plans may be of great help in developing the plan for a specific knowledge area. In this case it is project procurement management subsidiary plan.

Schedule

Eventually the schedule for the work can also play an important role in make vs buy analysis and other decisions pertaining to procurement. Schedule is part of time management knowledge area.

Activity cost estimates

The activity cost estimates can help to understand the high level cost estimates, which would be useful for both the buyer and seller to understand the high level costs in the project. Activity cost estimates are part of cost management knowledge area.

Activity resource estimates

The activity resource estimates are also of help in make vs buy analysis and any other decisions pertaining to procurement. Activity resource estimates are part of time management knowledge area.

Requirements documentation

Eventually you need requirements documentation to analyze what requirements will be part of procurement. Also requirements may have legal obligations which will help in making decisions pertaining to procurement.

Risk register

Risk register contains the project risks.  So it might include the risks pertaining to procurement also.

Stakeholder register

Stakeholder register contain the list of people and teams who are impacted by the project. From the context of procurement, stakeholder register might have external stakeholders.

Enterprise Environmental Factors

Enterprise environmental factors are common inputs to many project management processes. Please read through the blog post on common PMP ITTOs for more details on enterprise environmental factors.

Organizational process assets

Organizational process assets are detailed as part of common ITTOs blog post. Please read through the blog post on common PMP ITTOs for more details on organizational process assets.

Tools & Techniques

Make vs Buy analysis

Analysis on whether the work to be contracted or do it within the organization. This analysis will be based on lot of factors such as organization strategy and vision, cost benefit analysis, competencies, and also impact on other project constraints.

Market Research

Eventually market research of the available suppliers or vendors, and reviews given by the other organizations or people, and published reports, etc. will be of great help in project procurement management planning.

Expert judgment

You may need expert’s opinion to plan the project procurement  management for the project. Expert judgement is a common ITTO to most of the project management processes. Refer to common ITTO s for detailed explanation about expert judgment.

Meetings

Meetings to discuss and agree on the project procurement management plan with other stakeholders. Meeting is also one of the common ITTOs. Refer to common ITTO s for detailed explanation about expert judgment.

Outputs

Procurement Management plan

Eventually project procurement management plan is the primary output of this process. Procurement management plan contains the following things

• What work will be part of procurement
• What types of procurement contracts will be of use in the procurement
• Source selection criteria and how to manage them
• How would you measure the performance of the seller’s work
• How would you manager the risks in procurement

Procurement Statement of Work

The overall scope of the project is documented as part of Define scope process in scope management knowledge area. However a part or some sections of this document related to the work to be procured will be documented in procurement statement of work in a detailed fashion. Eventually this document is prepared by the buyer for the supplier to understand the actual work that the buyer wants to procure from the suppliers or sellers.

Make or Buy decisions

We have seen Make or Buy Analysis as a tools in this process. Using this analysis make or buy decisions are made.

Procurement Documents

There is a complete blog post written to explain the procurement documents that are part of project procurement management process. Please read through the blog post, just in case if you have not already read that.

Source selection criteria

A criteria planned early on how to select a seller from the list of sellers, based on various parameters such as capabilities, references, competencies, cost, sub-contractors involved, etc.

Change requests

Change requests may raise due to the procurements. Please refer to the common ITTOs for more details on change requests.

Project document updates

This is also a common ITTO. Please refer to common ITTO blog post for more details…

Conduct Procurements

Project procurement management plan helps to know what work to be procured (in the form of SOW) and also how the procurements needs to be conducted. And then the actual action happens here.

Conduct procurements process includes reaching to the potential sellers, getting proposal from them, shortlisting the sellers and finally choosing the seller to whom we wanted to contract the work.

Inputs

Procurement management plan

Eventually in every knowledge area the subsidiary plan always be the input to the remaining processes, as plan mentions how the rest the processes must be performed.

Procurement documents

There is a complete blog post written to explain the procurement documents that are part of project procurement management process. Please read through the blog post, just in case if you have not already read that.

Source selection criteria

A criteria planned early on how to select a seller from the list of sellers, based on various parameters such as capabilities, references, competencies, cost, sub-contractors involved, etc.

Seller proposals

These are the proposals sent by the sellers to the buyer as a response to the solicitations from the buyer.

Procurement Statement of Work

This is an output from the previous process plan procurement management.

Make or Buy decisions

This is an output from the previous process plan procurement management.

Project documents

Though the procurement generally initiated early in the project, whatever the project documents available at that time, should be considered as input.

Organizational process assets

Organizational process assets are detailed as part of common ITTOs blog post. Please read through the blog post on common PMP ITTOs for more details on organizational process assets.

Tools & Techniques

Analytical techniques

Analytical techniques are used to identify potential sellers, shortlisting the seller and finally choose the seller.

Advertising

Sometimes when finding the seller in that particular area or domain, buyers usually advertise the for the potential sellers.

Bidder conferences

Indeed bidder conferences are meetings organized by the buyer with all potential sellers and providing them with equal opportunity and information in an unbiased way.

Procurement negotiations

Negotiating with the seller on the contractual terms and conditions or any specific inclusions or exclusions, which are not agreed by the seller yet.

Proposal evolution techniques

Evaluating proposals from sellers on different parameters, reviewing proposal along with sellers to find out if there are any catches.

Outputs

Selected Sellers

Indeed selected sellers is the primary output of this process. Solicitations are completed, sellers submitted the proposals, negotiations are also completed by this stage. Then finally a seller is chosen for the fulfillment.

Agreements

Contracts that are signed by both buyer and seller for performing the procured work. As we have seen that contracts are formal legal documents between both the parties.

Resource Calendars

Eventually resource calendars in the procurement terms needs to be updated based on the availability of external resources.

Updates to Project documents

This is also a common ITTO. Please refer to common ITTO blog post for more details…

Change requests

Change requests may occur while conducting the procurement activities. For example during negotiations with the seller there could be change requests. You would document the change requests and send it to the perform integrated change control for the further action on the change requests.

Updates to the project management plan

Any changes to the plan, while managing the project would require updates to the project management plan.

Control Procurements

Eventually control procurements is to keep an eye on how suppliers are performing and correct, if something seems to be going wrong.

So from a procurement point of view the project manager needs to take contract as a reference to look at all the project constraints and figure out the corrective actions, if any.

Inputs

Project management plan

Project management plan is essential to compare with the actual results and find out the gaps.

Approved change requests

When something is going wrong in the procurement work, you would make the necessary corrections to the contract along with the seller.

Work performance data

As the work is happening at outside of your organization, you have no other way to know the project progress, hence work performance data is required from the seller during control procurement to make sure the procurement work progress is healthy.

Work performance reports

As the work is happening outside of your organization, you have no other way to know the project progress. Hence work performance reports from the seller are of help during control procurement to make sure the procurement work progress is healthy.

Agreements

Eventually agreements or contracts are definitely one of important inputs to control procurements, as this is the place you see all the agreed terms and conditions with the seller.

Procurement documents

There is a complete blog post written to explain the procurement documents and the project procurement management process. Please read through the blog post, just in case if you have not already read that.

Tools & Techniques

Payment systems

Eventually the payment system says how you pay to the seller. Hence this is usually handled by the accounts department of the organization.

Record management system

Indeed contracts produce lot of records. So you need to have a system in place to keep track of all these records. These records are such as invoices, bills, emails, memos, clarifications, etc.

Claim administration

Eventually the disputes between the seller and buyer are called as claims. Usually every contract must have clear defined sections on how to resolve the disputes or claims. So when there is a claim, both the buyer and seller simply have to refer to the contract and follow it.

Procurement performance reviews

Indeed one of the important sections in the contract is how to measure seller’s performance. So taking this as baseline, buyer initiates performance reviews along with seller and review the compliance and non-compliance from the work performed by the seller according to the contract.

Performance reporting

Performance reports contain information pertaining to project constraints such as variances in schedule, cost, scope, etc. which will be useful to compare with the plan and figure out the corrective actions, if any.

Inspection and Audits

As has mentioned in the contract the buyer may do inspection and audits to ensure the deliverables from the seller are of acceptable quality.

Contract change control systems

Eventually contract change control systems are the systems or procedures in your organization to handle the changes. This could be an application altogether or it could be the policies in procedures in the organization.

Outputs

Work performance information

Work performance data will produce work performance information is as output.

Project management plan updates

Any changes to the plan, while controlling the project would require updates to the project management plan.

Project document updates

This is also a common ITTO. Please refer to common ITTO blog post for more details…

Updates to organizational process assets

Overall the lessons and findings from control procurements process will need updates to organization process assets for future use in the projects.

Change requests

Change requests may occur while the controlling the procurements. This means when you see that something is not according to the contract that the seller is doing, this would trigger a corrective action as a change request.

Close procurements

Once the seller’s work is complete, both the parties need to close the procurement formally. Irrespective of whether the procured work ends successfully or disruptively, you still needs to follow this process to close procurements.

Inputs

Project management plan

Project management plan is essential to check nothing is missed out during the procurements closure.

Procurement documents

There is a complete blog post written to explain the procurement documents and the project procurement management process. Please read through the blog post, just in case if you have not already read that.

Tools & Techniques

Procurement audits

When everything in the procurement work is complete, you need to revisit the contract and the actual procurement deliverables to see any potential gaps, lessons that you have during the complete cycle of procurements, etc.

Record management system

Indeed contracts produce a lot of records. So you need to have a system in place to keep track of all these records. These records are such as invoices, bills, emails, memos, clarifications, etc.

Procurement negotiations

Just in case if there are still any outstanding claims or disputes between the seller and the buyer, both of them needs to negotiate and settle during the closure of procurements.

Outputs

Closed procurements

Contracts usually specifies what are the closing procedures. Accordingly the project manager may communication with the seller with a formal notice indicating the closure of procurement.

Updates to organizational process assets

All the lessons that you have learned from the project procurement management knowledge area needs to finally update in the organization process assets for use in the future projects as a referece.

Conclusion

To conclude with, we have seen a detailed blog post on difference processes in the project procurement knowledge area.

The risk in each type of procurement contracts are different and hence understanding the type of procurement contracts is also important for the project managers.

The key to success in the procurement is that both the seller and buyer should satisfy with the contract between them.

Also close procurements is an important and easy concept for the PMP exam and this is one of the two processes in the closing process group.