Procurement management overview

April 6, 2010
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Introduction

Project related procurement process is quite an involved one and has four distinct stages that project leaders must be familiar with. The procurement processes are about both sides of the deal. The related processes must manage the buying of items, components and possibly services from others. Similarly processes must exist in an organization that’ll manage the related aspects of supplying a product or services to a buyer organization. The on-going project may be the outcome of the efforts to provide these to the buyer. Plan procurements, conduct procurements, administer procurements and close the procurements are the four different and distinct processes on which the complete procurement process rests.

A look at the processes and their different aspects

A plan for procurement needs to document the purchase needs, the complete requirements in terms of specifications of the items, what approach to adopt for doing the procurements and identifying the sellers. When conducting the procurements, the stages one has to go through are: obtaining responses from potential sellers, selecting one out of the responding vendors and may be award a contract to the selected supplier. A contracted supply does not take place instantly so there are some on-going management activities involved. These form the part of administering the procurement. Managing the relationship set up through the contract, checking if the contact is performing the right way and implementing changes and corrections as necessary. Getting a closure on the procurement activities initiated forms the fourth and the last pillar of the full procurement management process. These delineations are not sharp black and white. There is a lot of overlap and interactions that happen between them in real life. But it is possible to divide the activities into these four areas generally.

Plan procurements involve a range of inputs that must be considered to create a concrete plan. These include the project scope baseline, requirements’ document, teaming agreements, the risk register, risk related contract decisions, activity resource requirements, the schedule, cost estimates, cost performance baseline, etc. Organizational environmental factors and organization’s process assets bring in the specific context of the organization and the collective learning of the organization into the plans/decisions made in the process. The scope document and the requirements’ documents help decide what products or services will need to be obtained from external sources.

The tools & techniques you would use would involve make or buy decisions, expert judgments that help you make such decisions and different types of contracts to be used as appropriate.

The procurement management plan is produced as part of this exercise along with a specific statement of work or SOW for each item to be procured. Make or buy decisions are documented as are procurement documents and source selection criteria. Change requests, if any, complete the documents created in this process.

Conduct procurements is the process of actually distributing the RFP, soliciting responses from potential suppliers and then narrowing the choice and selecting one for the supply of the item. One may use vendor conference to explain the needs and obtain responses. The RFPs may be distributed to qualified vendors and their responses obtained. In either process evaluation of proposals offered by the vendors are made to arrive at a short list. Further queries and negotiations help the procuring party to arrive at a supplier. Vendor conferences may even be conducted after responses to RFQs have been made. Vendors are then asked to quote their best possible terms. They may just be told whether each needs to make a better offer. Sometimes it may be necessary to split the order between suppliers to cover risks.

Administer procurement is the process of nurturing the process, making sure contractual terms are observed and making sure the supply happens in due course of time and everything that needs to be done to ensure these goals. Whether the organization is a buyer or a seller, typically a buyer wants to ensure supplier meets the contract and seller needs to ensure his legal rights are protected. While, quite often, an administrative/legal group may take care of the contractual requirements, the project will need to be aware of the implications so tha appropriate procurement decisions are made.

Closing Procurement ensures that the procurement is completed. This process also has to make sure that all deliverable by the supplying agency is acceptable. The administrative activity of closing an open contract also is part of this process. In case of any outstanding claims against the supplier or an arbitration/litigation being involved the contract would specify the set of actins that are necessary to be taken. Usually early termination “with cause” and “without cause” clauses also are written into contracts to ensure systematic closure of procurement actions. While all these protections are essential, the primary aim of the closing procurement actions is to get the product, the component or the services required by the project team into their hands in time.

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