What is Project Procurement?
Project procurement refers to the process of acquiring goods, services, or works
from external sources to meet the needs of a specific project. It involves identifying,
selecting, and managing suppliers or contractors who can provide the required
resources, materials, or expertise to successfully execute the project.
Project procurement is an essential aspect of project management, as it ensures
that the necessary resources are available at the right time, in the right quantity,
and at the right cost.
What is Procurement Management?
Procurement management is the process of meeting the requirements of
products and services for an organization. Any business requires a wide variety of
goods and services to manufacture its end products or to meet its day-to-day
requirements. Procurement management is responsible for ensuring that the
business can get the required goods and services at the right time, at the right
price, and with the right specifications.
What is Project Procurement Management?
The procurement management activities, when executed for a specific
project, are known as project procurement management. The activities of
procurement remain the same as in the case of the general procurement
process. However, in this case, the procurement activities are undertaken to
meet the needs of a particular project.
Procurement Management Plan Outline
A procurement management plan outlines the strategy, process,
resources, and governance for procuring goods and services required by an
enterprise. It connects short-term tactical purchasing with long-term
organizational strategy, suppliers, and stakeholders. The procurement
management plan also guides day-to-day actions while keeping focus on the
overall objectives for procurement.
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Steps and Processes in a Project Procurement Management Plan
There are several steps involved in building a project procurement
management plan. These steps can be explained as follows:
Step 1: Initiation
The first step in the process of a project procurement management plan is to
initiate the procurement exercise. In this stage, the procurement
management responsible for a particular project is expected to create a
business case, outline the scope and figure out the stakeholders.
Step 2: Preparation
The next step in this project procurement management plan is to prepare for
the task ahead. This can include preparing charts and tables such as the
GANTT chart, establishing deadlines, and breaking down the project
procurement and identifying the team members required to be involved.
Step 3: Implementation
This is the most critical phase in the project procurement management plan.
In the implementation stage, the procurement project manager is expected
to meet the procurement requirements of the project. In addition, this phase
needs managing teams and ensuring strong leadership throughout the
implementation stage.
Step 4: Performance Management
This step in the project procurement management plan includes checking
the planned procurement activities and if they can meet the designed goals
for project completion. The procurement project manager is also expected to
ensure that the planned budget for the procurement activities remains in
check.
Step 5: Completion
The completion phase may look like the end of the procurement project
management plan, but it is not the case. This stage is used to ensure that all
procurement activities for the project have been completed. If any gaps are
noticed, they are filled in this stage.
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Step 6: Documentation
After the procurement exercise for the project is complete, it is important to
document the journey properly. Documentation serves as a ready reckoner
and reference point, often acting as a benchmark for future projects.
These steps are typical in almost all procurement management plan
examples you would come across, but it’s important to realize that these
steps can be considered as the roadmap for setting the project procurement
plan in place.
Importance of Project Procurement Management Plan
A proper project procurement management plan in place ensures
seamless functioning during the project. Here are some key reasons why it is
important to have a project procurement management plan:
Increased Stakeholder Satisfaction
With the procurement plan in place for a project, the managers can drive
better stakeholder satisfaction scores.
Measurable Objectives
With a procurement plan in place for a project, the team can work with
tangible objectives. This helps in attaining success with a plan in place.
Profitable Outcome
With a predetermined plan in place, the outcome would likely be profitable
for all stakeholders involved. As managers have a better time planning,
implementing, and measuring, the roadmap helps improve the overall
success of the project.
Reduced Risk
The project procurement management plan helps reduce the risk involved in
the overall work of the organization and the specific project. As managers
can procure goods for the project with a pre-decided plan, the risk involved
in many parts of the activities is handled beforehand.
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Transparent Process
With a project procurement management plan, increased transparency is
maintained. All stakeholders are aware of the planned activities. At the same
time, project managers can share regular progress achieved.
Better Negotiation
A project procurement management plan enables you to have better
negotiation power with the suppliers and vendors. As there is improved
visibility about the next steps and involved risks, the procurement project
manager can use this information to their advantage and negotiate better
rates.
Role of Project Manager in Project Procurement Management
As one can see from above, a project manager is heavily involved in the project
procurement process, right from planning a project procurement to administering
and documenting it. However, they lack the same level of authority as they enjoy in
other aspects of the project. For starters, they cannot make agreements or sign
contracts with the suppliers on behalf of the company. In most situations, you would
have a dedicated project procurement team handling these processes.
That being said, procurement planning and controlling are two major departments
that the project managers control irrespective of the size or nature of the
organization. Hence, it is safe to say that they are involved in the core areas of the
process, and their inputs can make a world of difference in influencing the final
decision.
Conclusion
Project procurement management is becoming an increasingly important
component for the success of any project in the organization. As there are multiple
steps involved in project procurement, it is better to rely on modern procurement
software solutions that can make use of technologies like artificial intelligence and
machine learning for effective procurement during a project.
Such a solution can act as a single source for all procurement requirements of the
project. At the same time, procurement managers can make use of automation and
analytics to drive savings and make decisions that can increase profitability and
operational efficiency.
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