September 23, 2020

Procurement Management - 7 Steps To Developing A Procurement Management Plan

Procurement Management  

Procurement involves coordinating with suppliers to acquire (or lease) goods or services for the project. By definition, these relationships are contractual and as with anything in project management, the process begins with planning and incorporating the plan into a statement of work.

Procurement Management Plan, Procurement Management
Procurement Management Plan

Procurement Management Plan

The first thing that a procurement management plan does is to detail the procurements that are needed for the project. Expectations for these project procurements should be identified, specifically schedules and budgets.

A Procurement Management Plan is a document that identifies the manner in which an organization will conduct or manage its purchasing (i.e., procurement) process. Different from the statement of work (SOW), which details any specific requirements, technical and otherwise, of the contractors, this document deals with the management of those contractors or vendors and their role supporting the overall strategy for the project. This document specifies the supplier identification process, keying in on specific points that should be considered during the selection process.

Because there are contracts involved, there is typically a bidding process, the time when various providers bid for the project. Determining the right contractor is not simply a matter of price, rather a review of the price / value relationship. The bid document becomes one of the documents to be retained and will be referred to in order to determine whether a provider is adhering to their promises regarding materials, schedules, and budget.

Procurement Management Plan,  project procurement management
Procurement Management Plan Excel

Components of Procurement Management Plan

The components of Procurement Management Plans typically include:
  1. Definition of roles and responsibilities
  2. Schedules
  3. Vendor control plans
  4. Estimates
  5. Vendor qualifications
  6. Risk management assessment
  7. Legal review
  8. Definition of the payment process
  9. Assumptions and constraints for the project
Before we explore how these functions work together, it is important to define the following elements:
  • Scope
    • Project scope statement
  • Assets
    • Procurement policies and documents
    • Procedures
    • Guidelines
    • Management systems
    • Seller database
    • Contractual relationships (fixed price, firm fixed price, fixed price incentive fee, cost reimbursable, cost plus fixed fee, cost plus incentive fees, etc.)
    • Requirements
  • Potential risk management issues
  • Costs
  • Constraints
  • Scheduling and performance reporting
    • Lead times
    • Multiple suppliers
    • Contingencies and their impact on incentives

Roles and Responsibilities

Project Procurement Management
Project Procurement Management


Properly done, project procurement management provides key functions that ensure the project management process runs smoothly. These functions include:

  • Budgetary oversight by project managers who are responsible for ensuring that the project meets key markers.
  • Technical management of contractors to ensure that they achieve the goals and requirements spelled out by the the statement of work
  • Contract review and documentation to ensure that the contract provisions are detailed properly.
  • Legal review of contracts and other documents by attorneys to ensure that all aspects of the process are executed properly.

Because aspects of these roles may overlap, it is imperative that the project procurement management plan delineates the authorities and boundaries for each of the parties that are involved. In the event of a disagreement, the procurement manager will be responsible for facilitating the review to establish a consensus so that the plan is sound and approved by key constituents.

What Makes a Project Procurement Plan Effective

The four processes of Project Procurement Management include planning, selection, administering, and closing. Because Project Procurement Management Plans support the overall Project Management plan, it falls into a grid that, when organized, looks something like this:



Plan

Conduct

Control / Administer

Close

Defining Roles and Responsibilities

Develop Project Procurement Plan

Direct and Manage Vendors

Monitor and control Project Work

Perform integrated Change Control

Close Project or Phase

Scheduling

Plan Scope 

Define Contingencies

Secure Commitments from Vendors


Review Activity Cost Estimate

Deliverables Status

Change Log

Vendor control plans


Plan Schedule Define Activities

Estimate Resources

Develop Schedule


Control Schedule


Estimating

Estimate Costs

Define Budget


Control Cost


Pre qualifying vendors

Plan Human Resource Management

Acquire Project Team

Develop Project Team

Manage Project Team



Risk Management

Plan Risk Management

Identify Risks

Perform Qualitative Risk analysis


Control Risks


Reviewing legal matters

Consider legal implications

Obtain legal review

Finalize contracts

Manage Communication

Control Communication


Defining the payment process

Stipulate payment plans and activities that drive alterations

Audit

Audit

Complete final review

Specifying assumptions and constraints for the project

Define project specifics

Review decisions against assumptions




Project Procurement Management can be further explained in terms of inputs, tools and techniques, and outputs based on the stage.

Project Procurement Management
Procurement Management


Inputs

Tools / Techniques

Outputs

Plan

Project charter
Statement of Work

Meetings
Expert judgement

Project plan
Work breakdown structure
Budget

Conduct

Work performance  information
Budget

Meetings

Audits
Project Management Information System (PMIS)

Project document updates
Budget updates

Control / Administer

Assets
Work performance information
Budget

Meetings

Audits
Project Management Information System (PMIS)

Work performance report
Project plan updates
Budget updates

Close

Project charter
Statement of Work

Budget documents

Meetings

Audits
Project Management Information System (PMIS)

Closing summary



Why Does Having a Procurement Management Plan Matter?

Having a procurement management plan gives an organization key insights into an essential aspect of project planning. Stakeholders must be involved in both the bid development and review processes as the procurement management plan informs other aspects of the project plan.

Using the project procurement management plan, the project manager can effectively monitor the procuring process. When the project is executed, the actual procurement can be compared against the procurement plan to evaluate. If there are discrepancies, then the procurements can be adjusted.

Through the planning process, organizations ensure that they maintain control over the project costs and insight into the effectiveness of resources. The Procurement Management Plan becomes a template that a project team can utilize for future projects.

Procurement Management Stages

Though projects differ in any number of areas, all aspects may be categorized into four common stages that include planning, execution, monitoring, and closing. 

During Planning, clear goals are defined, and aspects such as costs, resources, and the timetable are reviewed with consideration to the project as a whole. Accountability plans are also created to help keep the project on track.

Execution is when the work gets done. Some of the elements that go into this phase include:
  • Developing the team
  • Assigning resources
  • Executing against plans
  • Scheduling
  • Status meetings 
When the procurement for the project is completed, time will be spent closing this aspect of the project. A review of activities will drive future improvements.

Procurement Management Planning 

procurement management plan, procurement management planning
Project Procurement Management Planning Process


The 7 key steps of the strategic project procurement management planning process include:
  • Conducting the needs analysis.
  • Assessing the supplier's market.
  • Compiling supplier information.
  • Defining the sourcing/procurement strategy.
  • Implementing the strategy.
  • Negotiating with suppliers and selecting the winning bid.

Improve Project Procurement Management Planning with Techno-PM Project Management

Effective procurement management keeps projects on budget. Levering data visualization tools can be especially useful to ensure success in the project procurement management process.



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