Procurement Management - 7 Steps To Developing A Procurement Management Plan

Procurement Management

Procurement involves coordinating with suppliers to acquire (or lease) goods or services for the project. By definition, these relationships are contractual, and as with anything in project management, the process begins with planning and incorporating the plan into a statement of work.

Procurement Management Plan

Procurement Management Plan

The first thing that a procurement management plan does is to detail the procurements needed for the project. Expectations for these project procurements should be identified, specific schedules, and budgets.

A Procurement Management Plan is a document that identifies how an organization will conduct or manage its purchasing (i.e., procurement) process. Unlike the statement of work (SOW), which details any specific requirements, technical and otherwise, of the contractors, this document deals with the management of those contractors or vendors and their role in supporting the project's overall strategy. This document specifies the supplier identification process, keying in on specific points that should be considered during the selection process.
Because there are contracts involved, there is typically a bidding process when various providers bid for the project. Determining the right contractor is not simply a matter of price, rather a review of the price/value relationship. The bid document becomes one of the documents to be retained. It will be referred to determine whether a provider adheres to their promises regarding materials, schedules, and budget.

Components of Procurement Management Plan

The components of Procurement Management Plans typically include:

• Definition of roles and responsibilities.

• Schedules.

• Vendor control plans.

• Estimates.

• Vendor qualifications.

• Risk management assessment.

• Legal review.

• Definition of the payment process.

• Assumptions and constraints for the project.

Before we explore how these functions work together, it is important to define the following elements:

• Scope.

• Project scope statement.

• Assets.

• Procurement policies and documents.

• Procedures.

• Guidelines.

• Management systems.

• Seller database.

• Contractual relationships (fixed price, firmly fixed price, fixed price incentive fee, cost reimbursable, cost plus fixed fee, cost plus incentive fees, etc.)

• Requirements.

• Potential risk management issues.

• Costs.

• Constraints.

• Scheduling and performance reporting.

• Lead times.

• Multiple suppliers.

• Contingencies and their impact on incentives.

Roles And Responsibilities

Project Procurement Management

Properly done, project procurement management provides key functions that ensure the project management process runs smoothly. These functions include:

• Budgetary oversight by project managers who are responsible for ensuring that the project meets key markers.

• Technical management of contractors to ensure that they achieve the goals and requirements spelled out by the statement of work.

• Contract review and documentation to ensure that the contract provisions are detailed properly.

• Legal review of contracts and other documents by attorneys to ensure that all aspects of the process are executed properly.

Because aspects of these roles may overlap, it is imperative that the project procurement management plan delineates the authorities and boundaries for each of the involved parties. In the event of a disagreement, the procurement manager will be responsible for facilitating the review to establish a consensus so that the plan is sound and approved by key constituents.

What Makes A Project Procurement Plan Effective

The four processes of Project Procurement Management include planning, selection, administering, and closing. Because Project Procurement Management Plans support the overall Project Management Plan, it falls into a grid that, when organized, looks something like this:

	Plan	Conduct	Control / Administer	Close
Defining Roles and Responsibilities	Develop Project Procurement Plan	Direct and Manage Vendors	Monitor and Control Project Work Perform integrated Change Control	Close Project or Phase
Scheduling	Plan Scope  Define Contingencies Secure Commitments from Vendors	Review Activity Cost Estimate	Deliverables Status	Change Log
Vendor control plans	Plan Schedule Define Activities Estimate Resources Develop Schedule		Control Schedule
Estimating	Estimate Costs Define Budget		Control Cost
Pre-qualifying vendors	Plan Human Resource Management	Acquire Project Team Develop Project Team Manage Project Team
Risk Management	Plan Risk Management Identify Risks Perform Qualitative Risk analysis		Control Risks
Reviewing legal matters	Consider legal implications Obtain legal review Finalize contracts	Manage Communication	Control Communication
Defining the payment process	Stipulate payment plans and activities that drive alterations	Audit	Audit	Complete final review
Specifying assumptions and constraints for the project	Define project specifics	Review decisions against assumptions

 

Procurement Management

Project Procurement Management can be further explained in terms of inputs, tools, and techniques, and outputs based on the stage.

	Inputs	Tools / Techniques	Outputs
Plan	Project charter Statement of Work	Meetings Expert judgment	Project plan Work breakdown structure Budget
Conduct	Work performance  information Budget	Meetings Audits Project Management Information System (PMIS)	Project document updates Budget updates
Control / Administer	Assets Work performance information Budget	Meetings Audits Project Management Information System (PMIS)	Work performance report Project plan updates Budget updates
Close	Project charter Statement of Work Budget documents	Meetings Audits Project Management Information System (PMIS)	Closing summary

 

Why Does Having A Procurement Management Plan Matter?

Having a procurement management plan gives an organization key insights into an essential aspect of project planning. Stakeholders must be involved in both the bid development and review processes as the procurement management plan informs other aspects of the project plan.

Using the project procurement management plan, the project manager can effectively monitor the procuring process. When the project is executed, the actual procurement can be compared against the procurement plan to evaluate. If there are discrepancies, then the procurements can be adjusted.

Through the planning process, organizations ensure that they maintain control over the project costs and insight into resources' effectiveness. The Procurement Management Plan becomes a template that a project team can utilize for future projects.

Procurement Management Stages

Though projects differ in many areas, all aspects may be categorized into four common stages: planning, execution, monitoring, and closing.
During Planning, clear goals are defined, and aspects such as costs, resources, and the timetable are reviewed with consideration to the project as a whole. Accountability plans are also created to help keep the project on track.
Execution is when the work gets done. Some of the elements that go into this phase include:

• Developing the team

• Assigning resources

• Executing against plans

• Scheduling

• Status meetings

When the project's procurement is completed, time will be spent closing this aspect of the project. A review of activities will drive future improvements.

Procurement Management Planning

Project Procurement Management Planning Process

The 7 key steps of the strategic project procurement management planning process include:

• Conducting the needs analysis.

• Assessing the supplier's market.

• Compiling supplier information.

• Defining the sourcing/procurement strategy.

• Implementing the strategy.

• Negotiating with suppliers and selecting the winning bid.

Improve Project Procurement Management Planning With Techno-PM Project Management

Effective procurement management keeps projects on budget. Leveraging data visualization tools can be handy to ensure success in the project procurement management process.