The objective for this blog post is to provide a high level overview on this topic. This is appropriate for Project Managers that do not deal with this topic on a regular basis. To delve deeper into this topic you might want to start with this link . This is a bigger subject so take your time to follow up on the different Procurement Management Steps mentioned below in order to get a thorough understanding.
Definition: Procurement Management includes the processes required to acquire goods and services from outside the performing organization.
As always you start with a Plan. In this case a Procurement Management Plan . In an ideal world the Project Manager should be involved in the creation of a procurement contract . The Project Managers role should cover at least the following tasks
· Ensure Risk Management is incorporated in the Procurement Management Plan
· Ensure the Procurement schedule aligns with the project schedule
If the Project Manager was assigned to the Project AFTER the contract was signed a thorough check is recommended to ensure the tasks above are appropriately covered.
There are basically 2 different ways of procurement contracts: (for more info check this link, slides 18+19)
- Centralized – a department/team handles the contracts for all projects
- De-centralized – an assigned contract administrator handles the contract for 1 project
Step | What tasks need to be addressed? | What’s the result? |
Procurement Planning | Decided for Make or buy, Draft version for Scope of work is available | |
Solicitation Planning | RFP created | RFP ready |
Solicitation | Get Answers for open Questions | Proposal was created |
Select Source | Pick one | A signed Contract |
Contract administration | Admin | Contract is complete |
Contract closeout | Finish | Contract closed |
Different Contract Types
- Cost reimbursable
o Buyer has the most risk because the total costs are unknown
o Seller writes scope of work
o Buyer describes what they need
o The sellers costs are reimbursed
- Time and Material
o Price per hour/days or per SKU etc.
o Used for smaller projects
o Has elements of fixed price (per hour) and Cost reimbursable (cost unknown)
- Fixed Price
o Most common type of contract (one price for all the required work)
o Buyer has the least (cost) risk
o Seller will be most concerned about scope of work
o Buyer can completely describe the scope of work (very rarely the case!)
- Purchase Order
o Used for commodity procurements
The scope of work describes what work is to be completed for a contract. It should be
- clear (unambiguous)
- complete (e.g. describe all tasks that the seller is required to complete, performance expectations for Software Projects etc.)
- concise
