Project Procurement Management Knowledge Area and Processes
Project Procurement Management is one of the important knowledge area of project management body of knowledge it includes the processes required to purchase or acquire products, services, or results needed from outside the project team. It also includes the contract management to contract with different organizations to acquire required things used in execution of the project. Products and things may be purchased from inside the city, country or may be outside the country. Some specific items may not easily available in the local and international market. These items are prepared orders. Administering and managing contracts to hire, purchase things or items is important process because awarding contract to the lowest bidding organization or company can save thousands or millions of dollars. In large multidimensional projects there is a need of many items to be procured and maximum share of project budget is consumed on procurement. There are numerous buyer or seller organizations operates in the world to provide products, services, or results of a project.
Every country or organization have their own rules and standard rules and regulations of procurement management and project organizations have to follow standard operating procedures (SOPs) of procurement. For example, in Pakistan, Public procurement regulatory authority (PPRA) has made ‘Public procurement rules, 2004’. Every procurement for projects or for organizations follow these rules. Following figure provides detailed overview of the project procurement management processes which are:
Here are the details of every process of project procurement management knowledge area:
1-Plan Procurement Management: This process includes documenting project procurement items, project procurement decisions, specifying the procurement approach, and identifying potential sellers. Procurement management plan provides an overall procurement plan which includes: which items we need to buy, from whom to buy, procurement approach (direct purchasing of items from seller, through contract or through bidding), and list of available and potential sellers etc. Project procurement management plan should be stringent and robust enough because it can save delivery time, save money and get quality products. Following are the tools and techniques used to plan procurement management: Make-or-buy analysis, Expert judgment, Market research, and Meetings etc. Every tool and technique has their own pros and cons, and project manager has to decide which tool or combination of tools is optimal to use according to the context of the project being undertaken.
2-Conduct Procurements: This process includes obtaining seller responses, selecting a seller, and awarding a contract. All procurements done in this process. Seller responses is comprehensively evaluated and terms and conditions are fully understood prior to awarding any contract. Procurement items quality and quantity is discussed with suppliers. Delivery timeline is finalized. Once everything is finalized and approved by the competent authority, contract is awarded to the appropriate seller or contractor. Following are the tools and techniques used to conduct procurements: Bidder conference, Proposal evaluation techniques, Independent estimates, Expert judgment, Advertising, Analytical techniques, and Procurement negotiations etc. Every tool and technique has their own pros and cons, and project manager has to decide which tool or combination of tools is optimal to use according to the context of the project being undertaken.
3-Control Procurements: This process includes managing procurement relationships, monitoring contract performance, and making changes and corrections as and when needed. Procurements control limits the procurement items to required and specified limit and avoid purchasing of unrelated and unnecessary items. Projects have huge sums of money and there is always a chance that unnecessary and unrelated items can be purchased. Project personnel may add their personal use items in the project required items list. It also ensures that only the items specified in the contract is delivered. It also monitors timely delivery and quality and quantity of the products. As the need arise of new product, it makes necessary changes to buy the needed item or product. Following are the tools and techniques used to control procurements: Contract change control system, Procurement performance reviews, Inspections and audits, Performance reporting, Payment systems, Claims administration, and Records management system etc. Every tool and technique has their own pros and cons, and project manager has to decide which tool or combination of tools is optimal to use according to the context of the project being undertaken.
4-Close Procurements: Close procurements process ensures completion of each project procurement. This process involves formal procurement contracts closure after clearing all payments. Delivery items record is verified from record management system. Procurement audit is done to check each and everything of procurements including contracts terms and conditions, procurement items list, pricing of each item, payment method and deadline etc. Following are the tools and techniques used to close procurements: Procurement audits, Procurement negotiations, and Records management system etc. Every tool and technique has their own pros and cons, and project manager has to decide which tool or combination of tools is optimal to use according to the context of the project being undertaken.
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