Procurement Management in Project Management - A Quick Overview

Procurement management in project management is vital throughout the project life cycle. By effectively managing project procurement, managers can stay within the project’s triple constraints and increase the chances of the project’s success. So, in this article, we’ll discuss what is procurement management, its processes, and its importance.

What Is Project Procurement Management?

Every project has uniqueness because it varies from industry to industry. To successfully achieve project objectives, project managers require materials and resources. Therefore, project procurement is obtaining the materials and services when necessary for the project. Moreover, project procurement management encompasses the processes used to ensure project procurement is successful. So, project procurement plays a crucial role in the project’s success.

Procurement management in project management refers to all the strategies and actions related to the project life cycle of identifying, evaluating, and choosing the right suppliers of production inputs. Typically, this involves activities as follows,

Creating a procurement management plan
Testing quality
Handing procurement contracts
Executing purchases and any other activity
Controlling how purchases are made in your organization

As a project manager, you need to purchase, rent, or contract with some external resources to meet your project goals. These relationships, like any phase in the project, need excellent management. In short, project procurement is a way to more productively and efficiently handle the process of sourcing, requisitioning, ordering, expediting, inspecting, and reconciliation of procurement.

Who Uses Project Procurement Management?

Project procurement management can be necessary for a variety of industries. After beginning the project, project managers require outsourced materials or services. Furthermore, it will help them achieve their project objectives effectively and efficiently. Here are some industries that use project procurement management.

Construction
Technology
Manufacturing
Finance
Healthcare
Engineering

Every industry has project managers who should estimate when they’ll need to purchase equipment, materials, or anything needed for their projects. So, project managers can use project management software to keep track of their production plans, for example, Gantt charts, Kanban boards, and timesheets.

Project Manager’s Role in Procurement

As a project manager, you’re responsible for managing project procurement in project management. However, the project manager’s responsibilities may vary depending on the project and its objectives. So, here are the common duties of project procurement managers.

Project Initiation

As a manager, you may begin the procurement process during the project initiation phase. Furthermore, you should effectively communicate with senior management and team members assigned to the project to discuss timelines and objectives. Moreover, this can also include discussing the project budget, high-level expectations, and internal capabilities.

Procurement Planning

This process is vital for any project because it helps to align expectations and organize processes effectively and efficiently. During the procurement planning process, project managers create lists and documents that outline required materials and resources, timelines, and milestones. Furthermore, you should contact the necessary vendors to fulfill your project requirements. Moreover, you can also advertise your need for contractors through classified ads, professional networks, and online networking sites.

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Coordinating with Project Stakeholders

Projects often involve primary and secondary stakeholders. And they are directly and indirectly impact on the project’s success. Therefore, you’re responsible for coordinating with these primary and secondary stakeholders to ensure a mutual understanding of project goals and objectives. As such, you should identify all necessary stakeholders and effectively engage with them throughout the project life cycle.

Coordinating with Vendors

Typically, multiple vendors may engage in a single project depending on the nature of the project. Therefore, as a procurement project manager, you should effectively coordinate the efforts of multiple contractors. During this process, you should create vendor schedules of collective meetings or demonstrations. Furthermore, conduct effective communication between contractors when necessary.

Effective Communication

As a manager, you should conduct an effective communication process throughout the project life cycle because it can directly impact the project’s success or failure. Therefore, the project procurement manager must communicate the project’s changes and advancements to all stakeholders involved. On the other hand, this will help you ensure that all team members and stakeholders working on the project remain informed on deadlines and schedule changes.

Before communicating, you should determine which information is necessary to communicate. Accordingly, you can collect essential data from stakeholders and vendors and circulate it to the required parties. Moreover, project procurement project managers often send weekly email updates to inform all primary and secondary stakeholders of the current project status.

What Are the 4 Main Processes of Project Procurement Management?

Procurement management in project management includes four processes, and every phase plays a crucial role throughout the project life cycle.

Plan Procurement

Planning is the first process of project procurement management. Planning procurement involves a vital series of steps that help understand which resources are needed for project completion and the extent of its budget. Therefore, project procurement managers usually consider the following steps when planning project procurement.

The project resources and materials required to complete the project
The resources and materials they already have and which need to be outsourced
Determine contract requirements for outside purchases
Legal terms and conditions
Determine delivery date requirements
Determine project milestones and their deadlines
Criteria for partnerships

As a procurement project manager, you should consider the above aspects when planning project procurement. Furthermore, for every external contractor, there needs to be a statement of work to serve as a document, and it can use outline contract work details.

However, before the contract, you should request the proposal in which multiple contractors get to bid on the job. After, you can determine from their bids who will get the contract. Therefore, these requests are well-thought-out as they work as guiding documents throughout the project life cycle. On the other hand, this avoids confusion later and helps create more accurate plans.

Conduct Procurement

During planning for project procurement, project managers assess bids from select partnerships and vendors based on their needs and requirements. Any vendor can negotiate and take place during this place of procurement, and all parties sign the agreed-upon contracts. Then, managers make payments for materials or services at this time.

Control procurement

Once the agreed contract becomes active, all procurement aspects control and management are vital to maintaining partnerships with vendors and suppliers. Therefore, the following are the common duties included in controlling procurement in project management.

Regularly monitoring and evaluating internal status updates
Reviewing contractor agreements
Conducting inspections and audits when necessary
Reviewing and determining progress and performance updates from vendors
Assessing work orders
Issuing additional payments when necessary

Close Procurement

Closing procurement involves all required steps in ending the contract. Typically, this may involve

Review of the work or services completed
Renegotiation of any changes to the original contract terms
Confirmation of payments issued and received
Filing a formal release of liability upon procurement
Confirming the vendors have fulfilled the terms of the original contract

Furthermore, project procurement project managers should be responsible for any additional involvement in the project throughout the project life cycle.

The Importance of Procurement Management in Project Management

Improved stakeholder satisfaction – A well-defined project procurement plan will help project managers to drive better stakeholder satisfaction scores.

Minimize risks – Drafting and negotiating service contracts can help clearly understand your vendors and suppliers’ options by outlining costs, processes, and service quality. It will help you minimize the risk of violation of contract terms, which could negatively impact a project’s success.

Improve quality – Project procurement management allows the negotiation of detailed service contracts according to your needs and requirements and could enhance the certainty of high-quality goods or services. An enhancement in certainty of quality could help stakeholders feel more confident in a project’s success. On the other hand, it may result in future funding and investments.

Controlled project cost – With carefully negotiated procurement terms, managers can reduce costs and control spending. Furthermore, project procurement management may help you understand the costs required to complete a project. On the other hand, it may help you select goods and services from vendors that fit your needs without exceeding your budget.

Conclusion

Project procurement in project management is vital throughout the project life cycle. It can vary from industry to industry, such as technology, construction, manufacturing, Finance, Healthcare, and Engineering. However, to ensure the success of procurement management, managers can follow these processes, including planning, conducting, controlling, and closing. By following these processes, project procurement managers can improve stakeholder satisfaction, minimize risks, improve quality, and control project costs.