The purpose of project procurement management is to establish and maintain relationships with vendors of goods and services during the project life cycle. This unique function is an essential part of project management, which is concerned with overseeing designated sets of temporary operations. Project management for procurement purposes is an essential part of supply chain management.
The Planning Process
Project management for procurement is usually divided into four major processes: planning, selection, administering and closing procurements. The first part, planning, involves the creation of the official procurement management plan. The decisions made involve which items will be internally procured and which items will be externally outsourced. This information, in turn, will heavily impact the project's budget and financial scope. Sample procurement documents will be prepared and criteria frameworks will be developed to create a selection of potential vendors. This selection matrix is based on the project's scope, schedule, and requirements. Risk factors and budgetary constraints are also considered.
The Selection Process
The selection process involves comparing and contrasting vendors' advantages, disadvantages, and contractual offerings. Standard tools and techniques are used to select procurements, such as video conferences with bidders that allow them to understand the project requirements and ask questions. Procurement contracts are decided and awarded through collaborations between various managers. Resource calendars are then created that detail when, where and how resources will be used and managed. The corresponding project management plan is adjusted according to resource calendar updates. Proposals are carefully evaluated and if no satisfactory bids are available, the project management team may utilize online ads to solicit new bidders.
The Administration Process
The third major step is administration, which refers to the tools and processes used to manage relationships with vendors. The administration phase results in the continual creation of procurement documents and spreadsheets that may drive project changes. A centralized system of contract change monitoring and control will be used to evaluate and determine whether potential changes to contracts are needed. There are formal physical inspections, internal audits and reviews of procurement operations in order to generate synthesized performance reports that provide real-time feedback. The administration process is extremely important, so it's usually managed through supply chain or project management software.
The Closing Process
The closing process isn't just about ending procurement contracts; it's about noting weaknesses, documenting successful processes and summarizing the project for future needs. Some companies prefer to conduct simple audits using performance matrices in order to grade the overall project. Documentation is important for future projects, which may involve entirely different teams in new locations. During the closing process, negotiations may be necessary to resolve contract disputes. Ideally, potential issues will be noted during the administration process in order to begin the mediation process early.
When it comes to project procurement management, there are standard features and functions. For example, most companies prefer to use a smaller number of suppliers with long-term relationships instead of using a group of suppliers to outbid each other for the lowest price. Establishing and nurturing relationships with suppliers is important because this enables various supply chain partners and shareholders to work closely together on improvement and coordination activities.