An Introduction to Procurement Management in Project Management

An Introduction to Procurement Management in Project Management
By Brian Egan – Global Knowledge

Project procurement activities are often managed by specialists. By this I mean that the procurement department takes over responsibility for purchasing and contract management from the project manager. As a result of this separation of responsibilities, the steps and stages of procurement are often poorly understood by PMs.

Procurement Steps

1. Make purchase decisions – Planning

   Purchase decisions follow from project planning and analysis. Project needs are analyzed and compared with available resources and skills. Anything the organization cannot provide must be procured.

2. Prepare bid documents

   These documents include a SOW statement (Scope of Work), general terms and conditions, bid response instructions, and an explanation of how proposals will be evaluated (source selection criteria).

3. Distribute bid packages to potential vendors

   Potential vendors can be identified through advertising, the internet, or through an organization’s qualified vendors list.

4. Bidder’s conferences

   Bidder or vendor conferences are used to efficiently deliver detailed information to potential vendors. The events offer an opportunity for vendors to ask questions and to hear questions posed by other potential vendors.

5. Receive responses from bidders

   A suitable time-frame must be given for vendors to prepare bids. Additional information and clarifications are often required by vendors.

6. Evaluate proposals

   After all bids have been received, they are evaluated on the basis of a predetermined scoring system referred to as ‘source selection criteria.’ The comparisons are typically performed by experts from various disciplines related to the type of procurement.

7. Interview bidders

   Short-listed bidders are interviewed to discuss details of their offers and to ensure a good fit with the purchasing organization.

8. Conduct negotiations

   The leading candidate is invited to discuss (negotiate) contract details. The issues that generally require clarification include such things as delivery date, shipping costs, warranty, and support.

Brian has graduate degrees in Oceanography (M.Sc.) and Finance (M.B.A.) as well as PMP certification. He has published numerous articles and manuals in the field of management science with particular emphasis on project management and decision making. Brian has been involved professional development training since 1999.

This article was originally published in Global Knowledge’s Project Management Blog. Global Knowledge delivers comprehensive hands-on project management, business process, and professional skills training. Visit our online Knowledge Center at www.globalknowledge.com/business for free white papers, webinars, and more.