Project procurement management and its knowledge area mainly deal with procurement activities. The word “Procurement” means “the act of obtaining something”. If one needs help from external sources like vendors or suppliers then, one need to outsource a part of the project work to vendors in order to complete the project. Project procurement management is the process of collaborating with outside suppliers to purchase goods and services for projects.
Project procurement management mainly consists of four major processes.
In this phase, supervisors decide which work will be internally procured and which work should be outsourced. As the company is outsourcing a part of their work to vendors so, here the company is playing the role of buyer. Vendors as sellers. Here, all the verbal communication between the company and vendor should be documented known as Contract or Agreement. Procurement planning mainly decides what to buy (resources or service), when (timeframe) & from which sources (vendors). Risk factors and budgetary constraints are also considered.
As the name of the second phase suggest, selection means the action of carefully choosing someone or something as being the best or most suitable. Here we invite vendors to receive their offerings. The terms and conditions, advantages and disadvantages provided by different vendors are compared. Video conference with bidders is one of the tools that allow them to understand project requirements and ask questions. Then procurement contractors are decided and awarded. Project managers provide resource calendars that provide in-depth knowledge where, when and how resources should be used and managed. Performances are carefully evaluated and if no satisfactory results are obtained, the project managers may utilize online ads to hire new bidders.
This is one of the major step in project procurement management. Although we hire contractors because they are expert in their respective fields still there is a need to keep an eye on their overall work. Management of the contractors should check that the project should not go off the track due to the negative impact of budget & schedule. Management should keep regular work updates to review with contractor agreements and get progress update. Inspections and audits should be done to make sure that the work is going right. Performance report helps keep managers informed. According to work performance payment system is planned.
Every process has a start and an end. The closing process is not just about ending procurement contracts. Closing process include jotting down weakness, documenting successful processes and summarizing the project for future needs. Simple audits should be conducted to measure the overall project performance. Documentation is important in this step as it can help for future projects with new team members in different locations. Negotiations are also necessary for resolving disputes.
In this process, most companies prefer to use a small number of suppliers and try to maintain a long term relationship with them. Establishing and maintain a good relationship with those suppliers is important as this will allow various shareholders to work together on improving and coordinating activities.