Procurement Management

I recall a time when I was managing a large-scale construction project. We were tasked with building a state-of-the-art facility, and it was clear from the get-go that we would need to procure a significant amount of materials, services, and results from outside our project team. This was my first deep dive into the world of Project Procurement Management.

Project Procurement Management, as I came to understand, involves all the processes required to purchase or acquire what you need from outside the project team. But it doesn't stop there. It also encompasses the management and control processes needed to develop and administer agreements such as contracts, purchase orders, memoranda of agreements (MOAs), or internal service level agreements (SLAs).

Specific personnel are authorized to procure the goods and/or services required for the project. These can include members of the project team, management, or the organization's purchasing department.

Project Procurement Management involves several key processes:

1. Plan Procurement Management: This process documents project procurement decisions, specifies the approach for procurement, and involves the identification of potential sellers.

2. Conduct Procurements: This process involves obtaining responses from sellers, selecting a seller, and awarding a contract.

3. Control Procurements: This process involves managing procurement relationships, monitoring contract performance, making changes and corrections as necessary, and closing out contracts.

While these procurement processes are presented as distinct processes with defined interfaces, in practice, they can be complex and interact with each other and with processes in other Knowledge Areas. The interactions between procurement processes and other processes can be so complex that they cannot be fully detailed in the PMBOK® Guide.

The procurement processes outlined in the PMBOK® Guide are primarily written from the perspective of obtaining goods or services from outside of the project. However, in practical application, the Project Procurement Management processes overlap and interact in complex ways. The interactions and overlaps of the Project Procurement Management processes cannot be fully detailed in the PMBOK® Guide.

Reflecting on my construction project, I can attest to the complexity and interplay of these processes. It was a challenging yet enlightening experience that underscored the importance of understanding and effectively managing procurement in project management.

Tailoring Considerations

Tailoring the application of Project Procurement Management processes is essential due to the unique nature of each project. Several factors influence this tailoring, including the complexity of procurement, physical location, governance and regulatory environment, and availability of contractors.

The complexity of procurement is a significant factor. It can be influenced by the number of procurements, their timing, and the number of different sellers involved. For instance, a project with multiple procurements from various sellers may require a more complex procurement management approach compared to a project with a single procurement.

Physical location considerations also play a crucial role. The proximity of buyers and sellers can significantly impact procurement management. For example, if buyers and sellers are in different time zones, countries, or continents, additional considerations such as communication, logistics, and legal aspects may need to be factored into the procurement management plan.

The governance and regulatory environment is another important factor. It involves the integration of local laws and regulations with the organization's procurement policies. This integration can impact contract auditing requirements and necessitate adjustments to the procurement management approach.

Lastly, the availability of contractors capable of performing the work is a key consideration. If there are limited contractors capable of performing the required work, the procurement management approach may need to be tailored to ensure the project's needs are met.

In conclusion, tailoring Project Procurement Management processes is a dynamic task that requires careful consideration of various factors. By understanding these factors, project managers can develop effective procurement management plans that align with the unique needs of their projects.

Considerations For Agile/Adaptive Environments

In agile environments, project procurement management takes on a collaborative approach. Specific sellers can be incorporated into the team to extend its capabilities, fostering a shared risk procurement model. This model is characterized by a collaborative working relationship where both the buyer and the seller share the risks and rewards associated with a project.

Larger projects may employ different approaches for various deliverables and components. For instance, an adaptive approach may be used for certain deliverables, while a more stable approach may be applied to other components. This flexibility allows the project to adapt to changing circumstances without compromising its overall objectives.

A governing agreement, such as a master services agreement, is often used in larger projects to manage the overall engagement. This agreement outlines the general terms and conditions of the relationship between the buyer and the seller.

The adaptive work in larger projects may be placed in an appendix or supplement of the master services agreement. This arrangement allows changes to the adaptive scope without affecting the overall contract. It provides the flexibility needed in agile environments, enabling the project to respond to changes quickly and effectively.

Trends And Emerging Practices In Procurement Management

Imagine you're a project manager for a large-scale construction project. As you begin to plan for procurement, you realize that the landscape of project procurement management is rapidly evolving. Emerging trends in software tools, risk management, processes, logistics, and technology are reshaping how procurement is handled.

For instance, the use of advanced procurement software can streamline the process of sourcing materials, comparing suppliers, and managing contracts. These trends significantly influence the success rate of projects across various industries, including construction.

Software tools have seen significant improvements, particularly in managing the procurement and implementation phases of a project. Online procurement tools provide a single point for buyers and sellers, streamlining the procurement process. In the construction, engineering, and infrastructure fields, the use of Building Information Modeling (BIM) can save significant time and money, and substantially reduce construction claims.

Risk management trends are shifting towards contracts that allocate specific risks to entities most capable of managing them. This approach often requires the buyer to accept risks outside the contractor's control, such as changing corporate policies or regulatory requirements. Contracts may also specify that risk management be performed as part of the contract.

Megaprojects, particularly in infrastructure development and engineering, have seen significant growth. These projects often involve international contracts with multiple contractors from many countries, making them inherently riskier than projects using only local contractors. To reduce problems and claims during execution, the use of internationally recognized standard contract forms is increasing.

Logistics and supply chain management are crucial for the successful completion of large engineering and construction infrastructure projects. Long-lead items, including their manufacture and transportation to the project site, can drive the project schedule. These items may be procured in advance of other procurement contracts to meet the planned project completion date.

Technology, including webcams, is increasingly used in infrastructure and commercial construction projects to improve stakeholder communications and relations. Webcams installed on construction sites allow stakeholders to view project progress online and store video data for analysis in case of a claim.

Reflecting on our construction project example, it's clear that some projects engage several candidate sellers for initial deliverables and work products on a paid basis before committing to a larger portion of the project scope. This approach, a trend in procurement management, allows you as the buyer to evaluate potential partners while making progress on project work.

By staying abreast of these trends and integrating them into your procurement strategies, you can enhance the efficiency and success rate of your projects.