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Overview of the Procurement Process

Introduction | The Procurement Process | Roles and Responsibilities | Summary Introduction Back to Top

This week, we are going to start with two very important subjects of contract and procurement management: understanding the four fundamental procurement processes at a high level and the role of the project team in the procurement process. In the PMBOK Guide, each area of project management is broken down into what are known as knowledge areas. These knowledge areas are further broken down into processes. Procurement management is broken into four of these processes as shown below.

Above are the four processes involved in procurement management as they would appear in a linear order.

When managing multiple projects, a successful manager may be involved in all four processes for different projects at the same time.

The project procurement management includes the following processes. 1. Plan Procurements: This is the process of documenting and laying out strategies on what to purchase and when to purchase it, creating procurement documents, and seeking and identifying potential sellers. 2. Conduct Procurements: This is the process of getting and validating seller responses, selecting the

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right seller, and ultimately awarding the contract. 3. Control Procurements: This is the process of managing procurement (buyer/seller) relationships, monitoring and controlling contract performance, responding to unforeseen procurement events, and making corrections or adjustments. 4. Close Procurement: This is the last process in the procurement processes, with an emphasis on closing out the entire process. In the procurement process, it is important to remember that one creates a relationship with a third party. This relationship needs to be managed properly to prevent creating unwanted legal issues or other issues that may impact the success of the project. This makes it critical to set down and determine who does what with respect to the contract and contract issues on the project. These two subjects play a critical role in contract and procurement management, and it is important that we start the class with a good understanding of procurement processes and roles of individuals in the procurement process. Let's take a look at how each of these impacts the execution of a project.

The Procurement Process

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After reading Chapter 12 of the PMBOK Guide, one can see that the plan procurement, conduct procurement, control procurement, and close procurement processes interact with and support the other project management knowledge areas. One must understand the overall process of project management, to be able to fully comprehend procurements. At high level, the plan procurement process is concerned with documenting project purchasing decisions, creating the initial procurement documents, and seeking and identifying potential sellers. Every project must decide whether to acquire products or services outside of the project organization or provide these services internally. The plan procurement process helps the project determine which product(s) or service(s) to acquire, how to acquire it and how much is needed, and when to acquire it. This process also includes the analysis of the risks involved with each make-or-buy decision. This process creates the actual document, such as a request for proposal (RFP), which will be used to begin dialog with potential sellers. This RFP should form the basis for any subsequent contract. The conduct procurements process is primarily concerned with obtaining sellers' responses to the request to provide services, holding a bidders meeting, the selection of sellers, and ultimately the awarding of the contract. This is the process where the project team receives bids from prospective sellers, evaluates submitted bids or proposals, and then selects a seller based on well-defined selection criteria. The key to effective selection is the establishment of a negotiating sequence by ranking all proposals by sellers by well-defined weighted evaluation scores assigned to each submitted proposal. The control procurements process is concerned with the management of procurement relationships, including the controlling and monitoring of contract performance. As contract issues arise, this process allows for the effective response to contract issues as needed. The second goal of this process is to ensure that the buyer

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and seller understand the contract requirements and abide to them. A key element of the control procurements process is the financial component that involves monitoring payments to sellers and ensuring that the seller is performing, or has performed, based on the contract and establishes corrective actions when needed. The close procurements process is concerned with the completion of each project procurement contract. This process also involves administrative activities, such as finalizing open claims, documenting lessons learned, and updating records to reflect final results. Remember, it is good practice to maintain records associated with procurements should claims arise later. The goal of this process is the closure of procurement(s) applicable to the project.

Roles and Responsibilities

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With procurements on a project, we add a new team member to the project team: the contract administrator, or as the textbook calls him or her, the contract manager. So where does this individual fit into the project team? The answer is not all that clear. It really depends on the organization. But there are a few standard rules most organizations abide by. A contract administrator is concerned with compliance to the requirements of the contract. Are invoices being paid correctly? Are required meetings being attended? A project manager has a different set of responsibilities. The project manager is concerned with project and contract risks. The project manager may be concerned with the risks associated with the choice of seller. The project manager is involved with the work of the buyer and seller and its impact on the project. In other words, the contract administrator is concerned with the contract, and the project manager is concerned with the project. One area of primary importance in procurements is who speaks for the organization. Who answers questions about the project? Who answers questions about the contract? Who handles contract or project-related procurement issues? Every organization needs to select one person within the organization to speak for the organization on specific topics. This goes for both the buyers and sellers organization. More can be seen about this topic in Chapter 4 of World Class Contracting. In the end, it is so important that the project team functions as a team. Senior management needs to drive such concepts as teamwork, customer-focused teams, getting the project manager involved in the process early and often, and employing lessons learned from previous projects, to name a few. Without a cohesive team, a successful project is doubtful.

Summary

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In conclusion, the project procurement processes are fundamental to understanding procurement phases and mitigating some of the inherent risks associated with the procurement management. After all, much about procurements and procurement management on a project is to mitigate risks to a project. Regardless of the commodity or service, industry, or country, procurement is fundamental to most projects. Project managers and individuals must examine these fundamentals in order to grasp the essential elements of contract and procurement management. This course is not designed to make you a contract attorney. It is designed to make you familiar with the

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concepts of procurement and procurement management as seen on a project. In this way, the project manager and contract administrator can work together to ensure the projects success.

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