What is procurement management?
Procurement management is a term that describes the process of managing and optimizing a project’s budget as it applies to the goods, services, and resources you’ll need to complete your project. Examples of resources include raw materials, building space, hosting, independent contractors, and intellectual property, many of which will be provided by third party vendors.
The team member in charge of procurement management, often the project manager, ensures resources are purchased, rented, or otherwise obtained as smoothly as possible. Priorities may include keeping costs low, selecting quality inputs, and selecting preferred vendors.
In many cases, procurement management requires negotiating with independent contractors and resolving disputes that may delay the project. In other cases, developing resources in-house might be preferable due to lower costs, faster turnaround times, or concerns regarding intellectual property ownership. It’s during the procurement management process that the project manager determines whether working with a third party is advantageous in the long run.
The project procurement management process
The project procurement management process includes three phases: procurement management planning, conducting procurements, and controlling procurements.
Procurement management planning
After determining that working with a third party is preferable to developing resources internally, the first step in your project procurement management plan is to send a request for proposal (RFP) to potential business partners. The RFP should outline your project’s requirements and ask contractors to submit bids and other information regarding their products or services. Include your highest priorities and expectations in your RPF, so everyone is on the same page.
When deciding between contractors, consider each company’s price, reputation, and responsiveness. You may want to bring in experts to help you evaluate each organization’s bids and capabilities. Don’t rush the decision, especially if you’re looking to form a long-term relationship.
Conduct procurements
Once you choose the best contractor for the job, draw up a legal contract to solidify your agreement. One common approach is to create a master service agreement that governs your overall relationship, with smaller statements of work describing the details for each project.
Often, you’ll need to negotiate your agreements with third parties. Carefully review the contract’s terms, indemnification provisions, and warranties. We recommend working with a business attorney to help protect your interests.
Control procurements
Once you’ve signed the final legal documents, regularly monitor your relationship with each third-party contractor. Unreliable vendors can result in low-quality final products, delays, and cost overruns.
While a contract can protect you in court as a last resort, you can avoid problems down the road by assigning someone to carefully oversee each vendor’s contributions and make sure they’re fulfilling your expectations. This oversight might include regularly scheduled meetings and quality-control inspections. Preventing a misunderstanding is much easier than cleaning up a disaster.
You’ll also need regular systems for payment, acceptance of deliverables, reviews and approvals, and dispute resolution. An enterprise work management platform can help simplify the process and clarify each party’s accountabilities and expectations.
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The project manager’s role in procurement management
While the project manager may oversee some aspects of procurement, they may delegate many functions to other individuals. For example, the project manager might provide crucial input when choosing a vendor and negotiating documents but assign responsibility for administering the relationship to a subordinate. All team members should keep the project manager in the loop when making major decisions.
Procurement management is essential to your project’s success
When you plan, conduct, and administer your procurement processes with care and attention, you ensure your team members have access to the goods, services, and resources they need to complete your project on time, on spec, and on budget.
