Most projects require some form of outside procurement, that is, the purchase of external products, services, materials, equipment, and so on. Thus, a project manager must know how to obtain, control, and manage these purchases.
Whether the organization is the buyer or the seller, the project manager needs to understand the procurement processes and be familiar with the content of signed contracts. Negotiations often play a major role, therefore it is important that the project manager develop their negotiation skills.
The Project Management Body of Knowledge (PMBOK)’s project procurement knowledge area contains the following four processes:
- Plan Procurement Management
This is the planning phase where decisions are made regarding what purchases need to be made, how they will be made and who might potentially be on the other side of the transaction. Short lists can be developed, and basic criteria can be identified. The procurement management plan is drawn up, which can be a stand alone document or a part of the overall project management plan.
- Conduct Procurements
Once the required products or services are identified, they must be purchased. This usually involves a purchasing document such as a tender for construction services, Request for Proposal (RFP) for professional services, or a Specification Sheet for products. The type of payment structure must be decided upon, such as Fixed Price, Unit Price, or Cost Plus Fixed Fee. The process of obtaining responses from potential sellers, selecting one, and awarding the contract involves many contractual issues, and a lawyer is often required.
- Control Procurements
Once a vendor is in place, it is important to develop the relationship, monitor contract performance and manage contract changes as required. In my industry, it is a rare day when a project completes that didn’t have some sort of changes. Strong relationships can often smooth over the bad changes, but nonetheless it is important for the project manager to provide day-to-day management of all vendors.
- Close Procurements
As an often underrated step, closing contracts and providing completion certificates to vendors is important to a well functioning project. Often there are warranty items, or work items that might pop up after the contract is perceived to be complete. All further requirements need to be communicated and the project closure documentation issued.