Basics of Procurement in Project Management

Procurement refers to obtaining goods and services from outside companies. This specifically refers to vendors and suppliers. It does not refer to other internal organizations within your own company. (For the purposes of this discussion, “purchasing” and “procurement” are equivalent terms.) This is an area that project managers definitely need to understand at some level, and it is an area into which the project manager will give input. However, in many, and perhaps most companies, procurement is an area that the project manager does not own. The project manager normally does not have the authority to enter into contracts on behalf of the company, and he normally is not asked to administer the contracts once they are in place. (In some organizations the project managers have this authority, but my perception is that in most organizations they don’t.)

If you are purchasing goods or services on your project, you should determine whether you will simply follow the procurement contracts and plans that are already established by your company or your organization.

Examples

• You may purchase hardware from companies using a pre-existing company contract.
• You may acquire contactors using a pre-selected preferred vendor list.

In some cases, the vendor identification and selection processes occur at an organization level.

For instance, your company may purchase a Customer Relationship Management (CRM) system based on high-level management requirements. This CRM system would then be used on all subsequent projects – regardless of the specific needs of each individual project.

If your project team is actually conducting the vendor identification and selection process, you have some flexibility on when it is done. Many project teams perform the vendor identification and selection processes during the project Analysis Phase. This would be the case if you need to better understand your business requirements before you determine the vendor that can best meet the requirements.

Once the vendor is chosen, there are many procurement processes that are part of project management monitoring and control. This includes monitoring the vendor progress, answering questions, validating invoices, paying invoices, managing contractual issues, etc. Ultimately the procurement process concludes when the project is completed and all project contracts are closed.

In general the processes and techniques for procurement are not so hard, but it is an area where many project managers don’t have a lot of experience. In fact, many project managers only acquire procurement knowledge as a way to pass the PMP Exam.