Project Procurement Management

The Procurement Statement of Work (SOW) is a document that outlines what a company needs to do when it wants to buy goods or services from an external supplier. It acts as a guidebook, clearly explaining all the details of the project, the requirements, and the expectations.

The Procurement SOW acts as a clear roadmap, aiding both the company and the supplier in understanding the project’s requirements. It outlines the scope of the project, the specific tasks that the supplier must perform, the timelines, and the quality standards. This comprehensive document ensures everyone is on the same page, fostering effective communication and collaboration. By using the Procurement SOW, companies and suppliers avoid misunderstandings and have a better chance of achieving project success. This way, everyone is on the same page, and there’s no confusion or misunderstanding.

Example

Think of it as a shopping list for the company and the supplier. It ensures that the company gets exactly what it needs, and the supplier knows what to deliver. It’s an essential document in the procurement process, making sure that everything goes smoothly, and both parties are happy with the outcome. Moreover, by using the Procurement SOW, companies can avoid misunderstandings and disputes with suppliers and ensure that the project progresses successfully.

It acts like a guidebook, explaining all the details of the project, the requirements, and the expectations.

The Procurement SOW acts as a clear roadmap, aiding both the company and the supplier in understanding the project’s requirements. It outlines the project’s scope, the specific tasks the supplier must do, the timelines, and the quality standards. This document ensures effective communication and collaboration between all parties, helping companies and suppliers avoid misunderstandings and achieve project success. This way, everyone is on the same page, and there’s no confusion or misunderstanding.

Think of it as a shopping list for the company and the supplier. It ensures that the company gets exactly what it needs, and the supplier knows what to deliver. It’s an essential document in the procurement process, making sure that everything goes smoothly, and both parties are happy with the outcome.

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:

1. Performance based
2. Functional based
3. Design based

Performance-based

Performance-Based Procurement Statement of Work (SOW) is a document that companies use when they want to buy goods or services from an external supplier, but with a focus on specific performance outcomes. Instead of just specifying tasks and processes, this type of SOW emphasizes the desired results or performance standards that the supplier needs to achieve.

In a Performance-Based Procurement SOW, the company defines its requirements in terms of measurable performance criteria, such as quality, speed, or efficiency. The SOW outlines the objectives and the expected outcomes, allowing the supplier to propose solutions and methods to meet those performance targets.

By using a Performance-Based Procurement SOW, companies can encourage suppliers to be more innovative and efficient in delivering the desired results. It shifts the focus from simply fulfilling tasks to achieving tangible and measurable benefits. This approach fosters accountability and drives suppliers to excel in meeting the company’s needs, ensuring successful project outcomes.

Functional based

Functional-Based Procurement Statement of Work (SOW) is a document that companies use when they want to buy goods or services from an external supplier, with a focus on specific functions or tasks that the supplier needs to perform.

In this type of SOW, the company defines its requirements in terms of the specific functions or activities that the supplier needs to carry out. It outlines the tasks, responsibilities, and deliverables in detail, allowing the supplier to understand exactly what is expected from them.

The Functional-Based Procurement SOW is like a detailed instruction manual that guides the supplier on what to do and how to do it. It ensures that the supplier understands the scope of work and can provide the necessary goods or services accordingly.

Companies find this type of SOW suitable for projects where they precisely know the required functions or tasks and desire the supplier to follow specific instructions. It offers clarity and guarantees that the project is completed as per the company’s requirements.

Design based

Design-Based Procurement Statement of Work (SOW) is a document used when a company wants to buy goods or services from an external supplier, with a focus on design and creativity.

In this type of SOW, the company defines its requirements in terms of the design and creative aspects of the project. It outlines the desired aesthetics, functionality, and innovative elements that the supplier needs to incorporate into the final product or service.

The Design-Based Procurement SOW is like a blueprint that provides a clear vision of what the company wants to achieve. It allows the supplier to propose creative solutions and present design concepts that align with the company’s vision and objectives.

This type of SOW is suitable for projects where the company values design and wants the supplier to bring fresh ideas and creativity to the table. It encourages suppliers to think outside the box and deliver unique and innovative solutions.

By using a Design-Based Procurement SOW, companies can ensure that the final product or service not only meets their functional requirements but also stands out with its design and aesthetic appeal. It fosters collaboration between the company and the supplier to create a distinctive and visually appealing outcome.

Importance of Project Procurement Management

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 the company decides, it buys all the goods and services from third-party vendors based on some contracts, according to the needs and timelines of the project.

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. This article will discuss each process in detail, along with its inputs, tools, techniques, and outputs.

Plan Procurement Management Process:

Inputs:

• Project 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: It is the list of procurement items. 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 tells to procure or build the goods or services required. 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:

• Project Procurement management plan: This tells us how to manage the procurement activitiesincluding 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.

Conduct Procurement Process:

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:

• Project 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 tells us us which vendor is selected. 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.

Control Procurement Process:

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:

• Project 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.