All businesses need resources, from raw materials to labour and equipment. These resources are used in order to ensure the smooth execution of a project and are an integral part of any good project management plan. This is the case whether they pertain to the making of the products required by your project or the providing of a service. These are the resources that must be purchased by a company and for which the stages of project procurement must be a carefully planned and well-executed. It is the job of a project manager to ensure this is done to aid the successful completion of the project.
Procurement management within projects refers to the strategies and actions that are related to the project cycle. This includes identifying, evaluating and selecting the suppliers for all of the necessary production inputs. It also includes the creation of a procurement management plan, contracts for both testing quality and managing procurement and the executing of purchases and other activities that are required in order to control how purchases are made within an organisation.
Procurement management is often confused with purchase management. However, they are not the same, so it is important to understand exactly which one you are talking about. Purchase management makes up just a small percentage of procurement management which is much larger and more strategic.
1. Plan procurement management
Any procurement that is required for a project is first identified during the planning phase of the project. If you are using external contractors for any aspect of your project, then you will need a statement of work (SOW) that will serve to identify the work for which they are being contracted. Before this can happen, however, it is necessary for there to be a request for proposal. This allows for several contractors to bid on a job and then for the project manager to make a decision on which of them will be awarded the contract.
These requests should be well-thought-out as they will be used as guiding documents throughout the duration of the project. The more specific they are the better this is for the project as it avoids confusion down the line. This helps produce plans that are more accurate. This entire process is collected within a procurement management plan which should include:
- Required documentation
- Risk register
- Activity resource requirements
- Project schedule
- Activity cost estimates
In order to help guide these decisions there are techniques and tools that can help to check whether something can be done in house or whether an external supplier is required. The decision can also be guided by meeting with stakeholders, doing market research and talking to experts.
2. Conduct Procurement
Once the paperwork is completed it is time to move to the next phase of the procurement process and study those bids that have been placed. This is where you will choose which one to accept. In order to do this you should have criteria in place that will help you to decide which is the best bid for your project and what fits with your logistics management. Having made your decision, agreements should be signed, and the project management plan can be updated.
In order to make your decision you may want to talk to those who are bidding, seek advice from experts in the areas you are looking for contractors from or even use analytical techniques. To make sure that you are casting your net for bids as wide as possible, you may also want to consider advertising.
A purchase order is required at this point to document quantities, prices, delivery windows and any terms of payment that are required for services and goods that you order. This is a document that is legally binding. It ensures that both you and your supplier are in agreement.
3. Control Procurements
Once contracts are signed, the management of contractors must be included into any overall management responsibilities. It is possible that contractors may have a negative impact on your schedules and budgets and can result in your project going off track.
It is important to have regular status updates to check your contractor agreements. That way, you can review work and look at progress to ensure all the requirements of the contract are being met. All of this is most easily done with regular procurement reviews which may include inspections, and audits to ensure that everything is going well. This type of reporting can also help to ensure that managers are kept informed at all times as well. It is necessary to make sure that you have a payment system in place as well as a claims administration and a records management system. All of the work orders that you process need details of all the work that is being done by contractors in order to help with the monitoring of performance.
4. Close Procurements
There is a process to complete procurement, and it is just as important as the one that starts it. Everything that is classed as completed work should be detailed within any initial agreement that is in place with the contractor. That way, everyone has the same understanding of what constitutes completed work.
A procurement audit can help with all stages of project procurement, as can having a well-structured procurement negotiation system in place. In order to manage all of the paperwork that is generated it is a good idea to have a record management system in place.
In the same way as they control other aspects of the project management process; the project manager is also involved in procurement. This means it is essential for them to know and understand all of the stages that are involved in project procurement. With a full and comprehensive knowledge of each aspect of the process, together with an understanding of the problems that can occur at each stage and how to resolve them a project manager should be in the best position to monitor the procurement and ensure that everything is running smoothly.