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Procurement Management

Procurement Management consists of the following processes. See also Knowledge Areas - Procurement.

Process	Process Group
Plan procurements	Planning
Conduct procurements	Executing
Administer procurements	Monitoring & Controlling
Close procurements	Closing

Procurement Management involves getting work done by people outside the project team. Project Procurement Management includes administering contracts and change control process to manage contracts or purchase orders.

The project manager's role is to understand the procurement process, understand contractual terms, idenify risks and develop mitigations associated with the contract, adjust the schedule based on procurement process and/or contractual terms, etc.

Not understanding the terms of a contract can lead to potential issues on your project.

Plan Purchases

Procurement planning involves determining what purchases will be needed to complete the project work. Many projects involve work being performed by an outside vendor. Thus, the project manager needs to plan for how the work will be performed as per contractual agreements, how communications will be handled with the vendor, what measures will be taken to inspect the vendor's deliverables to ensure compliance to project requirements and contractual obligations, etc.

Contract Types

• Time and material (T&M) - The buyer agrees to pay the supplier or seller for work performed (usually an hourly rate) and for required materials.
• Fixed price (FP) - The supplier and buyer agree to a set price for the work.
• Cost reimubursable (CR) - The supplier or seller is reimbursed for their costs in undertaking the work.
• Cost Plus Fee (CPF) or Cost Plus Percentage of Costs (CPPC) - Seller is reimbursed cost of actual work plus a fee.
• Cost Plus Fixed Fee (CPFF) - Seller is reimbursed cost of actual work plus a fixed fee.
• Cost Plus Incentive Fee (CPIF) - Seller is reimbursed cost of actual work plus an incentive fee based on pre-defined performance targets.
• Cost Plus Award Fee (CPAF) - Seller is reimbursed cost of actual work plus an award/bonus based on performance.

Conduct Purchases

During the Conduct Purchases process, proposals from sellers are evaluated. Once evaluated, a seller is select to perform the work and a contract is awarded.

Bid Documents

Purchasing or bid documents are submitted by the buyer to the seller and are documents that serve as invitations to sellers, solicit offers and establish contractual terms.

• A request for proposal (RFP) is an invitation for suppliers to submit a proposal on a commodity or service.
• A request for information (RFI) is simply that, a request for more information. It is a request to a potential service provider to provide information on what products and services are available which would meet the buyer's needs.
• A request for quotation (RFQ) is a request for price quotes for services or goods.

Administer Purchases

The Administer Procurement process involves managing vendor relationships to ensure the seller's delivery meets the requirements as stated in the contract.

Tips for Managing Vendors

There are pros/cons associated with each contract type. Below are advantages / disadvantages to help you manage each type of contracutal relationship effectively.

      Pros & Cons of Different Contract Types

Close Purchases

The Close Procurement process involves verifying that all planned work has been completed as per the terms of the contract.

Additional Information

    Procurement on Wikipedia

    Procurement Management Sample Questions