What’s the difference between a project that is on time and on budget and one that suffers cost overruns, drama, and chronically missed deadlines? Well-executed project procurement management.
When a company fosters a well-oiled project process that makes sure resources are sourced and available when needed, the corporate bottom-line benefits. In fact, in last year's Supply Chain Resilience Survey, Quickbase found that almost 80% of organizations deem supply chain incredibly important to their organization.
So how do the best companies manage their procurement efficiently? In the following post, we will talk about how good project procurement must start with a plan, as well as how you can improve the process at your company by properly securing resources and managing them through a project's completion.
What Is Project Procurement Management?
Project procurement is the process of sourcing goods, services, and supplies. Unfortunately, these important items don’t manage themselves. In fact, in many projects—particularly fast-paced ones—they need to be wrangled, cajoled, and finessed into strict timeline and budget constraints. This is where the “management” part comes in. Here are the two main phases of project procurement management.
1. The Procurement Plan
While companies may have different methods for compiling this data, the inputs are roughly the same and are typically enshrined in a Project Management Plan. This includes:
- Materials and services required and their specifications.
- Format, timing, and criteria for requests for proposal, as well the processes to evaluate such proposals.
- Determination of what needs to be purchased and what can be leased from another company or reallocated from the company’s existing projects, plus information on preferred suppliers.
- Determination of contract types, whether fixed price contracts, reimbursable cost contracts, or others.
- Contract requirements for outside purchases, such as minimum specifications, specific product names, or other details given to the project manager to follow.
- Milestones and delivery dates established
- Legal conditions or programs that must be followed. For example, Environmental, Social, Governance (ESG) reporting, or perhaps a green building program, like LEED.
- Rules of the road for change requests and required documentation from vendors.
- “Plan Bs” for products and services that are delayed, canceled, or unavailable.
- Dovetail planning with global risk management plans, so procurement contracts will adhere to company risk tolerance.
2. The Procurement Execution
While proper planning of project procurement is an important first step, it leads into an equally important phase: the actual execution of procurement, usually by a project manager.
At this stage in the process, vendor contract terms have been approved, RFPs released, and product and other resources have been selected. In addition, payment for materials and leases/services come due.
The procurement team must monitor and control the project procurements. This requires maintaining strict control on the project progress via updates from vendors, as well as quality control checks on the work, products, and services that are delivered, as well as navigating change orders and cost overages or timeline delays.
Why Is Project Procurement Management Important?
Project management for procurement is important because there needs to be one source of truth for the parts, pieces, and people involved in getting a project off the planning board and to completion–whether that project is a commercial high-rise, a municipal building project, or a new home.
Having a strong, replicable process in place will help a project team plug in the realities of each new project the company produces. In general, the important parts of a management plan include mitigating risk, holding measurable objectives, and keeping all members of the project team—inside and outside the company—apprised of a project’s status and evolving requirements.
What Does Project Procurement Management Include?
Every procurement management plan has a single goal: Get clear on the objectives and requirements and then ensure the project management system is understood by all the participants and followed to the smallest detail.
During the process, a disciplined project manager will constantly monitor the project as shifts in schedule, budget, or quality can send the job into a freefall. And a seasoned manager will have contingency plans for just about any surprise that could befall a job.
Here is a shortlist of the major issues included in the project management process:
- Project scope—A key area to address early in a project, the scope is simply the purpose of the project, what it must achieve (complete a bridge, build a park, erect a skyscraper)
- Project Schedule—A missed project deadline is often equated with poor project performance, even if the ultimate project is successful. A project manager must create an accurate and reasonable schedule at the beginning of the project. This timeline must be scrutinized by all the participants so they can confirm it is achievable.
- Project Costs—This includes the budget and expenses and the general flow of money in and out of a project. It also involves slotting in grant money, donations, or other funds.
- Resources—People, services, consulting, products, and materials … a dizzying list of resources are necessary for a successful project, and all of them must be carefully selected and managed.
- Quality—This area is established at the planning stages and addresses the standards to which the project will be built, including the quality of the source's products, materials, and services. This is typically controlled through a quality assurance arm of the project team.
- Risk—Risks are determined at the outset of a project and address events that could cause negative impacts on the process and the end product. A good project manager will always have plans in place to mitigate risk and address problems should they arise.
Another way to look at procurement activities is to use the well-known “triple constraint” premise. The three parts of this project management axiom are time, cost, and scope.
When you consider these inputs, it helps to understand project goals and the relationship among them: If the timeframe changes, costs may go up; if the scope ratchets down, the schedule can be shortened, and so forth. Keeping an eye on these three areas and viewing them as a tightly integrated system can help a project stay on target.
What are the Four Main Processes of Project Procurement Management
project procurement management, consider it as four processes:
Planning involves the creation of an ironclad management plan. This includes gathering all the materials related to scope, schedule, costs, resources, and quality, among many other considerations. The point of this phase is to get all the information and requirements in one place and create a plan to execute the work. Companies use manual ways to create and manage this information, or, as part of the planning phase, they may opt to use technology to help create the workflow.
During this phase, the management team compares bids and request for proposal submissions from potential vendors, conducts vendor negotiations, rebids parts of the work if necessary, assesses the competency of vendor candidates, decides and awards contracts, and creates calendars and workflows to join all the information into one place that is accessible by the entire team.
This phase drills down on the tools and processes needed to manage the plan from beginning to end. As its name implies, this period is when administrative duties rev into high gear. All the paperwork, such as procurement contracts, spreadsheets, project schedules, contractor agreements, change orders, fixed price contract, cost reimbursable information, and others have to be carefully courted through the process by the management team. Most companies rely on a centralized system to keep track of this influx of important information, not just to keep the project running smoothly, but also to provide accurate information for inspections, reviews, audits, and third-party certifications or programs.
The wrap-up phase of any endeavor isn’t to sweep, turn off the lights, and call it a day. It regards a carefully evaluated assessment of the process. This is typically done using audits or performance metrics, which score a project and offer a treasure trove of useful data for the next project. Often, companies use software that prepares reports that they can then use during a retrospective meeting.
What Is the Project Manager's Role in the Procurement Process?
A project management team, often led by a manager, is responsible for the procurement management plan and its implementation. In other words, this pro is getting the whole team on the same page.
The manager must conduct procurements using a system that understands the project needs, manages the budget, organizes procurement documents, and tracks the project schedule, quality, and risk assessment, among a host of other duties.
Can Software Help a Project Manager With Project Management Procurement?
In today’s hectic project management arena, a business-savvy software is imperative. Look at Quickbase’s project management software, for example. With it you get broad visibility into the project schedule, process, status, and performance of ongoing initiatives. This gives you unfettered access to every aspect of your project, which in turn enables you to spot trouble in time to fix it.
Quickbase pulls all your data into one place so you can manage more efficiently and get insights at the project’s completion that can benefit your next project. During the project, you can share project requirements, files, photos, and other information that will help the team perform more efficiently.
Teams benefit from this type of technology because it offers helpful features such as interactive dashboards, automated reports, and the ability to assign roles and permissions.
High-performing procurement management teams are key to the success of any work. When project team members are provided with strategic plans, realistic requirements, an adequate amount of time to plan, and robust technology, they transform from back-office workers to front-line representatives of the firm. This means your managers can spend more time creating new relationships, learning first-hand about your industry, and providing insights into innovative ideas for future projects.
What is project procurement management?
Procurement for projects is the use of tools, technologies, techniques, and resources to address the requirements of any project and to manage it from start to completion while keeping it as cost effective as possible. It is typically handled by a project manager.
What are the 4 main processes of project procurement management?
Planning, Selection, Administration, and Closing are the four main processes for managing procurement work.
What does project procurement management include?
In general, handling a procurement project includes scope, schedule, cost, resources, quality, and risk. Projects can vary widely, but, in general, the best way to run a successful project is to spend time at the planning stage focusing on areas that ensure success.
What traits should project managers have to be successful in procurement projects?
Successful procurement employees should have a basic understanding of how to conduct procurements, have a grasp on technical aspects of the work being performed, understand contract requirements, and have a stellar performance record. A master's degree is not necessary to be successful at this type of job, but a proven record of excellent work performed managing contracts and multi-tasking is a plus.