Project Procurement Management Guide

What is procurement in project management?

Project procurement management deals with the procurement of resources required for the successful completion of a project. In project management, procurement refers to the purchase, rent, or contract of external resources to meet the project demand.

The project procurement process is crucial to the success of a project and therefore needs proper management to ensure the success of the project.

Procurement projects are therefore overseen by the project manager to ensure the success of a given project. This makes project procurement management one of the key responsibilities of a project manager.

What is procurement management in project management?

Project procurement management deals with the acquisition of external resources that are necessary for the success of a given project.

The relationships with external resources have to be created and maintained as a part of project procurement management by the project manager.

The project manager has to communicate with vendors to rent, purchase, or contract resources to ensure the success of the project objectives.

The project manager is involved in the vendor selection process to determine the right partnership for the sake of the project.

The project manager further negotiates after vendor selection to ensure that the project’s interests are safeguarded. The vendor might seek a fair representation of their interests as well.

The project manager has to take the responsibility of managing the vendor relationships to ensure that the project gets the best quality from the vendors.

Constraints with vendors can revolve around time and cost and might affect the same. Therefore, project managers seek to maintain these relationships amicably as a part of the project procurement management process.

Project procurement management leads to higher levels of efficiency within a project and ensures that the desired outcome is safeguarded.

Therefore, the project manager needs to focus on sourcing, ordering, inspecting, and handling procurement projects.

What is the first step in project procurement management?

The first step in project procurement management is to make a plan. Things need to be discussed like what are the resources and services required in the project.

It has to be discussed the duration for which those resources and services would be required. Then the standard expected from these resources needs to be established.

Once these decisions are made it has been decided what would be the best course of obtaining the resource, purchase, rent, contract, lease, etc.

Only after all these things have been decided can one even start looking for vendors. Then the project manager needs to vet the vendors and pick the one most suitable for the project.

All this has to be accomplished for the project procurement plan to go ahead. So, the first step in project procurement management is forming a procurement plan.

What is a procurement plan in project management?

Forming a procurement plan is the first step in project procurement management. It is also one of the most crucial steps as the decisions taken in this phase can affect the project outcome.

The procurements (resources or services) are initially identified in the project planning phase. In that phase, all the required procurements, modes of obtaining, standards, and sourcing are decided.

Based on this data vendors are identified and negotiated with. For external contracts, documents such as SOW (statement of work) are drawn up.

The contracts are negotiated and drawn up before the start of a project. It is important to ensure that the contract protects all the interests of the project as it can have an impact on the project throughout its lifetime.

Project procurement management needs to ensure that the contracts are specific and serve the interests of the company.

These decisions are guided by analysis done on the project and previous similar projects. This helps ensure that stakeholders maintain trust in the project.

What are the 4 main processes of project procurement?

Project procurement management consists of 4 main processes. These are Planning procurement, conducting procurement, controlling procurement, and closing procurement.

Planning procurement

In this phase of project procurement management, various steps are carried out to help identify and zero in on the procurements that need to be made by the company.

These procurements are discussed to establish their sourcing, standard, vendor, etc. All the documents required for the procurement are also drawn up.

Conducting procurement

After the procurements are identified and discussed, the vendors need to be identified. Vendor negotiations commence during this phase.

Documents are drawn up suiting the specifics of the project. Project managers tend to initiate payment to vendors during this phase of project procurement management.

Controlling procurement

Once vendors have been identified and zeroed upon, it commences the relationship between the company and vendor(s). It is important in project procurement management to maintain this relationship.

This is to ensure that the vendors are offering the service in the manner dictated by the contract and required for the success of the project.

Project managers need to be vigilant and should evaluate periodically on basis of updates and analysis. The contracts should be gazed upon occasionally to ensure compliance.

Any additional payments to be made should be done promptly to ensure that procurements do not halt the progress of the project.

Closing procurement

At this stage of project procurement management, all partnerships and relationships are brought to a close.

All work is reviewed and payments are settled by the project manager. Documents such as the release of liability might be drawn up.

Some continued partnerships might be renegotiated for future projects. At this stage, the project manager ensures that the contracts were complied with and that the partnership is over.

Why is risk management important in procurement management?

In the process of project risk management, every facet of the project is analyzed for potential risks to control them and safeguard the desired outcome of the project.

Project procurement management is a key part of the project and can have a lasting effect on the project outcome. Therefore, risk management is of the utmost importance here.

Risk events can occur in various facets of project procurement management in the form of price instability, changing work environments, overshooting the budget, unethical sourcing, etc.

Each of these issues could occur in project procurement management. This is why risk management is very important in project procurement management.

You can learn more about managing risks in our article on Project Risk Management.

Responsibilities of Project in Project Procurement Management

The role of a project manager in project procurement management cannot be understated. They tend to focus here as this phase can have an impact throughout a project’s lifetime.

The responsibilities of project managers in project procurement management include:

Project initiation

The procurements need to be established at the project initiation. The procurement needs are discussed with members, stakeholders, and management. Experts might also be consulted and results are based on analysis and budget.

Procurement planning

This is one of the most crucial stages of project procurement management. The procurement plan is drawn up in a way that ensures the desired outcome of a project. Vendor requirements are decided at this phase.

Stakeholder coordination

Any project has various stakeholders. Project stakeholder management is also a crucial duty of the project manager. The project manager has to ensure cooperation between the various stakeholders. The project manager has to ensure that the concerns and needs of all stakeholders in the procurement projects are met.

Vendor coordination

At any given time, a project might depend on multiple vendors. Some of these vendors could be providing different components of the same process. Therefore, it is important to ensure vendor coordination.

Communication of progress

In periodical intervals, project updates have to be made and analyzed. This helps keep the stakeholders engaged. This also helps ensure all teams and vendors are aware of the deadlines.

Why is project procurement management important?

Project procurement management is one of the integral duties of a project manager. This is because procurement projects can have a lasting impact on the project outcome.

Ensuring that external resources and services are handled effectively ensures the overall success of a project. Furthermore, projects are made more efficient by having a project procurement management plan in place.

Some of the major advantages of having a project procurement management plan are:

Increased quality

Project procurement management makes it possible for the project manager to get involved and select the most suitable vendor for the project. Furthermore, project procurement management allows us to choose and demand the best quality of these resources and services.

An increase in quality leads to more confidence in project stakeholders which can, in turn, result in higher investment and security in future projects.

Decreased risk

Project procurement management involves drafting and negotiating contracts for the services and resources utilized. This helps scrutinize things like costs, processes, and service quality of vendors. This helps in better scrutiny of vendors as well as the ability to hold them accountable for violation of any project interests. This helps avoid any negative impact the vendors could have on the project.

Controlled cost

Having a project procurement management plan in place helps to better plan the budget required throughout a project. 

This helps in controlling spending during the project.

During the initial part of procurement projects, the manager can pick and choose from vendors based on costs, quality, and efficiency.

Carefully negotiated procurement terms are a great way to reduce costs and control spending.

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