Project procurement management primarily deals with the procurement of the items/resources necessary for the successful completion of the project. The project manager must plan what to buy, conveyed through the Work procurement statement.
Procurement Statement of Work
Procurement Statement of Work includes all the details of the materials, goods, or services to obtain from the market:
There are 3 different types of Procurement statements of Work:
- Performance based
- Functional based
- Design based
- Performance-based
Performance-based procurement statement of Work is used when fewer details are known about the product, and it offers the most competitive.
- Functional based
Functional-based procurement statement of Work is used when partial information is known about the product and offers intermediate competition.
- Design based
Design-based procurement statement of Work is used when most details are known about the product and offers the least competition.
The procurement process has the most legal obligations, so it is always advisable that someone from the procurement team can help the project manager know how to buy and where to buy from.
Once it is decided, all the goods and services are bought according to the needs and timelines of the project from third-party vendors based on some contracts.
The project manager must manage the procurement relationship, make sure both parties (seller and buyer) are performing according to the contract, make changes/corrections in the contracts if necessary and close out the contracts.
Project Procurement Management is a crucial knowledge area in project management. This knowledge area includes three important processes: Plan Procurement Management, Conduct Procurement, and Control Procurement. Each process ensures procurement activities are carried out effectively and efficiently to meet project objectives. This article will discuss each process in detail, along with its inputs, tools, techniques, and outputs.
Plan Procurement Management process:
Inputs:
- Project management plan: This input provides an overall understanding of the project’s objectives, scope, schedule, and budget. It helps create a procurement management plan aligning with the project’s goals and objectives.
- Requirements Documentation: This input outlines the requirements for the goods and services that must be procured. It helps in defining the procurement requirements and developing a procurement strategy.
- Risk Register: This input provides information about the potential risks that could impact the procurement process. It helps in identifying and addressing risks that could affect procurement activities.
- Stakeholder register: This input identifies the stakeholders involved in or impacted by the procurement process. It helps develop a procurement plan that considers the needs and interests of all stakeholders.
Tools and Techniques:
- Make-or-buy analysis: This technique helps determine whether goods or services should be procured from external sources or developed internally. It considers factors such as cost, time, quality, and availability to make the best decision for the project.
- Expert judgment: This technique involves seeking advice from experts with experience in procurement management. It helps develop a procurement management plan that considers industry best practices and the project’s unique requirements.
- Contract types: This tool helps select the appropriate contract type for the goods or services procured. It includes fixed-price, cost-reimbursable, and time and material contracts.
Outputs:
- Procurement management plan: This output describes how procurement activities will be managed, including the procurement strategy, contract types, documents, and metrics.
- Procurement documents: This output includes procurement statements of work, proposal requests, and evaluation criteria. These documents help in communicating procurement requirements to potential bidders.
- Procurement strategy: This output outlines the overall approach for procuring goods and services, including selecting vendors and evaluating proposals. It helps ensure that procurement activities align with project objectives and stakeholder needs.
1. Conduct Procurement:
This process involves the procurement of goods and services from external sources. The inputs, tools and techniques, and outputs of this process are as follows:
Inputs:
- Procurement management plan: This input provides a detailed description of how procurement activities will be managed, including the procurement strategy, documents, and metrics.
- Procurement documents outline the procurement requirements and communicate them to potential bidders.
- Source selection criteria: These criteria evaluate bids from potential vendors. They include factors such as price, technical capability, and past performance.
- Seller proposals: These proposals are received from potential vendors in response to the procurement documents.
Tools and Techniques:
- Bidder conferences allow potential bidders to ask questions and clarify procurement requirements. They help in ensuring that all bidders have a clear understanding of the requirements before submitting proposals.
- Proposal evaluation techniques are used to evaluate and compare proposals from potential vendors. They include criteria such as technical capability, price, and past performance.
- Contract negotiation: This technique involves negotiating the terms and conditions of the contract with the selected vendor.
Outputs:
- Selected sellers: This output identifies the vendors who have been selected to provide the goods or services. It includes the selected vendor’s name, contract type, and pricing.
- Procurement contract: This output is a legally binding document that outlines the terms and conditions of the procurement. It includes details such as the scope of work, pricing, and delivery schedule.
- Resource calendars: These calendars identify when the selected vendors will work on the project. They help in managing project resources and schedules.
2. Control Procurement:
This process involves monitoring and controlling procurement activities to ensure they progress according to the procurement management plan. The inputs, tools and techniques, and outputs of this process are as follows:
Inputs:
- Procurement management plan: This input provides a detailed description of how procurement activities will be managed, including the procurement strategy, documents, and metrics.
- Procurement contract: This document outlines the terms and conditions of the procurement, including the scope of work, pricing, and delivery schedule.
- Approved change requests: These requests have been approved and may impact the procurement activities.
Tools and Techniques:
- Contract change control system: This system is used to manage changes to the procurement contract. It helps ensure that changes are properly documented, approved, and implemented.
- Procurement performance reviews: These reviews are conducted to evaluate the vendor’s performance and the procurement process. They help identify improvement areas and ensure that the procurement meets project objectives.
- Inspections and audits: These activities are conducted to verify that the vendor meets the procurement contract’s requirements.
Outputs:
- Work performance information: This output provides information on the vendor’s performance, including progress on deliverables, quality of work, and adherence to the procurement contract.
- Change requests: These requests may result from issues or changes that arise during the procurement process. They are documented, evaluated, and acted upon as necessary.
- Project document updates: These may include changes to the procurement management plan, documents, or contract. They ensure that project documentation accurately reflects the current status of procurement activities.