Editor’s note: This article was originally published May 7, 2007.
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. (For the purposes of this discussion, purchasing and procurement are equivalent terms.)
While procurement is an area into which a project manager will give input, in many, and perhaps most companies, it’s an area that the project manager doesn’t own. The project manager usually does not have the authority to enter into contracts on behalf of the company, and he is usually not asked to administer the contracts once they’re in place. But it’s still an area you need to know about.
The Project Management Body of Knowledge (PMBOK®) from the Project Management Institute (PMI) describes six processes within the Project Procurement Management knowledge areas.
Plan purchases and acquisitions
This is the process of determining the items to purchase for your project and when you need them. This is typically under the control of the project manager, since the centralized Purchasing Department is not going to know what each particular project team needs.
This is the process of creating requirements for all the products and services your project team needs, and it has to be performed by the project management team. You also need to start identifying potential companies that can supply the products and services.
Request seller responses
This is when you identify a list of vendors to consider and receive information on their capabilities and prices through vendor proposals and price quotes. You typically narrow down a long list of potential companies to a short list of qualified companies. Although the project team may perform much of the work associated with this process, it is typically a process that is owned by Purchasing.
Selecting sellers is the process associated with actually choosing the vendor that will provide the product or service. The project team may make the final selection, but usually within an overall process that is owned by the Purchasing Department. The Purchasing Department generally also signs the final contracts. Most companies don’t want the project manager to enter legal contractual relationships.
This is the process of managing the relationship with the contracted company. The project manager will work on a day-to-day basis with the vendor’s account manager.
This occurs if the contractual relationship existed only for the life of the project. For instance, if the contract was in place to provide raw materials for a particular project, then the contract will probably end after the project is over. The project team will be involved with the Purchasing Department to make sure all the contracted work was completed and to gather feedback about the vendor relationship.
The bottom line
In most organizations, the project manager should understand the basics of procurement management, but it’s usually a responsibility he or she shares with the Procurement Department. The project manager should provide requirements to the procurement specialist to make sure the correct vendor is chosen, and the procurement specialist in turn provides guidance to the project manager on managing the vendor relationship successfully.
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