Basics of Procurement Management?

Procurement management is one term which is used very often and one feel familiar with it. However this is not easy to understand for everyone. There are many industries where we don’t get exposure to procurement because there is a separate legal department to take care of the same.

To start with, what is Procurement?

Procurement refers to the aspects of project management related to obtaining goods and services from outside companies. It does not refer to other internal organizations within your own company.

Understanding of this management area depends on your exposure as a buyer or seller in your organization. PMP® certification demands you to think as PM of buyer organization.

The Project Management Body of Knowledge (PMBOK®) from the project Management Institute (PMI) describes four processes within the Project Procurement Management knowledge areas.

  1. Plan Procurement Management
  2. Conduct Procurements
  3. Control Procurements
  4. Close Procurements

Plan Procurement Management

The process of documenting project procurement decisions, specifying the approach, and identifying potential sellers. The key benefit of this process is that it determines whether to acquire outside support, and if so, what to acquire, how to acquire it, how much is needed, and when to acquire it.

Plan Procurement Management identifies those project needs that can best be met or should be met by acquiring products, services, or results outside of the project organization, versus those project needs which can be accomplished by the project team. When the project obtains products, services, and results required for project performance from outside of the performing organization, the processes from Plan Procurement Management through Close Procurements are performed for each item to be acquired

The Plan Procurement Management process also includes evaluating potential sellers, particularly if the buyer wishes to exercise some degree of influence or control over acquisition decisions.

Conduct Procurements

Conduct Procurements is the process of obtaining seller responses, selecting a seller, and awarding a contract. The key benefit of this process is that it provides alignment of internal and external stakeholder expectations through established agreements. During the Conduct Procurements process, the team will receive bids or proposals and will apply previously defined selection criteria to select one or more sellers who are qualified to perform the work and acceptable as a seller.

On major procurement items, the overall process of requesting responses from sellers and evaluating those responses can be repeated. A short list of qualified sellers can be established based on a preliminary proposal. A more detailed evaluation can then be conducted based on a more specific and comprehensive requirements document requested from the sellers on the short list.

Control Procurements

Control Procurements is the process of managing procurement relationships, monitoring contract performance, and making changes and corrections to contracts as appropriate. The key benefit of this process is that it ensures that both the seller’s and buyer’s performance meets procurement requirements according to the terms of the legal agreement. Both the buyer and the seller will administer the procurement contract for similar purposes. Each are required to ensure that both parties meet their contractual obligations and that their own legal rights are protected

On larger projects with multiple providers, a key aspect of contract administration is managing interfaces among the various providers

Due to varying organizational structures, many organizations treat contract administration as an administrative function separate from the project organization. While a procurement administrator may be on the project team, this individual typically reports to a supervisor from a different department. This is usually true if the performing organization is also the seller of the project to an external customer.

Close Procurements

Close Procurements is the process of completing each procurement. The key benefit of this process is that it documents agreements and related documentation for future reference.

The Close Procurements process also involves administrative activities such as finalizing open claims, updating records to reflect final results, and archiving such information for future use. Close Procurements addresses each contract applicable to the project or a project phase

Early termination of a contract is a special case of procurement closure that can result from a mutual agreement by both parties, from the default of one party, or for convenience of the buyer if provided for in the contract. The rights and responsibilities of the parties in the event of an early termination are contained in the terminations clause of the contract

About Dharmalingam N

Dharmalingam.N holds a master degree in Business Administration and writes on a wide range of topics ranging from technology to business analysis. He has a background in Relationship Management. Some of the topics he has written about and that have been published include; project management, business analysis and customer engagement.

0 thoughts on “Basics of Procurement Management?”

  1. Awesome overview! I recently came across this article that goes more in depth on risk management. It’s worth a read too

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