An Introduction to Procurement Management

Project procurement activities are often managed by specialists.  By this I mean that the procurement department takes over responsibility for purchasing and contract management from the project manager.  As a result of this separation of responsibilities, the steps and stages of procurement are often poorly understood by PMs.

In this and the next few blog submissions, I will attempt to shed light on procurement activities and relate these activities to the PMI PMBOK.

Procurement Steps

1. Make purchase decisions – Planning
Purchase decisions follow from project planning and analysis. Project needs are analyzed and compared with available resources and skills.  Anything the organization cannot provide must be procured.

2. Prepare bid documents
These documents include a SOW statement (Scope of Work), general terms and conditions, bid response instructions, and an explanation of how proposals will be evaluated (source selection criteria).

3. Distribute bid packages to potential vendors
Potential vendors can be identified through advertising, the internet, or through an organization’s qualified vendors list.

4. Bidder’s conferences
Bidder or vendor conferences are used to efficiently deliver detailed information to potential vendors.  The events offer an opportunity for vendors to ask questions and to hear questions posed by other potential vendors.

5. Receive responses from bidders
A suitable time-frame must be given for vendors to prepare bids.  Additional information and clarifications are often required by vendors.

6. Evaluate proposals
After all bids have been received, they are evaluated on the basis of a predetermined scoring system referred to as ‘source selection criteria.’  The comparisons are typically performed by experts from various disciplines related to the type of procurement.

7. Interview bidders
Short-listed bidders are interviewed to discuss details of their offers and to ensure a good fit with the purchasing organization.

8. Conduct negotiations
The leading candidate is invited to discuss (negotiate) contract details.  The issues that generally require clarification include such things as delivery date, shipping costs, warranty, and support.

9. Award contract
A contract is awarded for each procurement.  The contract is a legal document that clarifies the responsibilities and relationships between the buyer and seller.

10. Determine work start date

Work cannot begin until after the final contract has been signed by senior management of both the buying and selling organizations.  Delays in obtaining final signatures can result in delays to the start of work.

11. Manage contracts
‘Managing contracts’ is the supervision of actual procurement activities from both an administrative and a practical perspective.  Responsibility for ensuring that the right work gets done at the right time is typically left to the project team.  Administrative responsibility remains with the procurement department.

12. Review performance (extend or terminate)
Throughout the life of the ‘delivery’ of goods and services, the performance of the delivering organization (vendor) must be constantly reviewed and compared with contract terms.  A detailed SOW is a critical component of effective performance analysis.

If vendor performance falls below a specified standard, (such as schedule or quality) then the contract may be terminated according to terms established in the contract.  (Of course every effort should be made to correct the situation through negotiations and discussions before considering termination.)

13. Claims administration
Claims administration involves the management of conflicts between the buyer and seller.

How claims are administered is determined by the procedures set out in the contract.  When the remedies specified in the contract are insufficient to resolve conflicts, the issue may ultimately end up being settled in court.

14. End contracts
After all work is complete, or if the contract is terminated, the contract is formally ‘closed.’

Contract closure involves the formal notification of all parties regarding the status of the contract.  In addition, a contract archive is created that documents exactly what work was completed and what payments made. Records are kept of all correspondence generated during the life of the contract.

15. Lessons learned
An important part of helping an organization to avoid repeating mistakes is the gathering of ‘lessons learned.’  This includes an analysis of what went according to plan, what went wrong, and what should have been done differently.

16. Ongoing claim administration – litigation
Conflicts between the buying and selling organizations can continue long after a project is formally completed.  An organization’s legal and procurement departments take responsibility for ongoing claims administration, which can take years to be resolved.

2 thoughts on “An Introduction to Procurement Management

  1. Do you know where I can find some reliable information on how to cut costs during the procurement process? I am doing research on how cities procure services and supplies and I am looking into how they can cut costs and save money. I would appreciate any advice you might have for me. Thanks!


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