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Project Procurement in the Project Economy
By Jose Barato
September 30, 2020
3 minutes read
Project Procurement Management includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team. Project Procurement Management includes the management and control processes required to develop and administer agreements such as contracts, purchase orders, memoranda of agreements (MOAs), or internal service level agreements (SLAs). The personnel authorized to procure the goods and/or services required for the project should follow the agreement administration processes so that arranged goals are achieved and relationship ends in good terms.
Make or Buy?
One of the first decisions the project management team should make is about outsourcing some work packages or not. The project work done by a third party is not managed the same way. Fail in procurement management may even get to legal litigation! Project managers usually do not lead legal relationship, nor contract negotiation or contract closure, they have a supportive role. Other people involved are the legal department, purchasing department, contract managers, procurement managers, etc.Project work done by a third party is not managed the same way.The project seller should manage their own project. We as buyers will accept or reject their deliverables. Our WBS is not enough to specify seller’s work. We need a precise procurement statement of work for every and each part of the contract. If the contract does not include a work, then we are not supposed to ask for it. Communication is key. We need a separate log for procurement communications. In the worst scenario, these communications could be used as evidence in court. Procurement external dependencies have great implications on our project schedule. Project cost management is affected too: new indirect costs have to be taken into account. Risk and assumptions are also essential in procurement management, not to mention stakeholder expectations management. Assume you are the project manager for project P1, including six work packages. The performing organization decides outsource work package #6. One seller is chosen and a contract is signed. Seller will perform another project under procurement: P2.
Plan Procurement
Any work package can be outsourced under contract, or any other kind of agreement. This part of the project will be executed by a third party (contractor, other department, or other team) with their own resources. Make or buy decisions are key in project management because execution will be totally different in one case or the other. PMPeople allows to connect any work package to a procurement project. If the project manager is a stakeholder of the procurement project, then he or she can control procurement effectively. The procurement project can belong to another organization, another business unit, or the same business unit than the prime project. Project managers, or any other management role (PMOS, PMO, PfM, PgM), can plan procurement at PROCUREMENT >Plan Procurement:Conduct Procurement
The binding between the work package and the procurement project, if this project is also managed with PMPeople, can be done at PROCUREMENT > Conduct Procurement: Project manager can bind the procurement to any project he has access as a Stakeholder: