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CONSTRUCTION, MANUFACTURING

Project Procurement Management: A Quick

Guide
by Peter Landau | Feb 10, 2023
Every business needs resources such as labor, raw materials, equipment and other
inputs. Your team uses resources to execute a variety of projects such as making
products or providing services. These resources must be purchased by your organization,
and the procurement process must be carefully planned and executed. That’s what
procurement management is all about.
What Is Procurement Management?
Procurement management refers to all the actions and strategies related to the cycle of
identifying, evaluating and selecting suppliers of production inputs. This involves creating
a procurement management plan, testing quality, managing procurement contracts,
executing purchases and any other activity that’s needed to control how purchases are
made in your organization.
ProjectManager is ideal to keep track of your production plans so you can better estimate
when you’ll need to purchase equipment, materials, parts or anything needed for your
projects. Use our Gantt charts to map out the tasks in your production process, automate
workflows with kanban boards and keep track of costs with workload charts and
timesheets. Get started for free today.
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The term procurement management is confused with purchase management by most

people, but there’s a big difference that’s very important in business, manufacturing and
project management alike. Here’s how these two similar concepts differ.
Procurement Management vs. Purchase Management
Purchase management is just a small part of procurement management, which is larger
and more strategic. Purchase management is simply the set of documents, tools and
procedures that are used to manage the purchase process, such as purchase
requisitions, requests for quotes and purchase orders.
What Is Project Procurement Management?
Procurement, in terms of project management, is when you need to purchase, rent or
contract with some external resource to meet your project goal. These relationships, like
any process in the project, need management.
Managing these relationships means getting the best quality from the outside vendors
employed by the company to assist in doing business. There are vendor management
constraints that revolve around cost and time Procurement management is a way to
constraints that revolve around cost and time. Procurement management is a way to
more efficiently and productively handle the process of sourcing, requisitioning,
Start free trial ordering,
expediting, inspecting and reconciliation of procurement.
However, before making partnerships or purchases, the question of whether the goods
and services are required from outside vendors must be answered. Weigh the pros and
cons of producing the goods or services in-house and contracting the workout. Is the
relationship with outsider companies necessary and cost-effective in the long term? Once
an informed decision has been made, only then can you move forward with confidence
that the steps you’re taking are financially sound and fit within your timeframe.
What Is a Procurement Management Plan?
A procurement management plan outlines the procurement requirements, guidelines and
overall process that’ll be followed by an organization for a particular project. The level of
complexity and detail of a procurement management plan varies from one organization to
another, but at a basic level, your procurement management plan should:

Define evaluation criteria for the selection of suppliers

Outline the bidding process
Identify the cost methodology to be used
Include a cost-benefit analysis
Explain why procurement activities are needed and how they align with the
organization’s strategic goals.
Set a timeline for procurement activities
Identify procurement management stakeholders
Define KPIs for procurement activities
List any resource constraints or project assumptions that might affect procurement
activities
Define general legal & payment terms
Explain the different procurement management roles & responsibilities
Include the estimated costs for the procurement project
List potential risks that might affect purchasing and any mitigation strategies
Include procurement contracts and documentation such as purchase requisitions,
purchase orders, requests for proposals and requests for quotes
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There are several documents that are needed for the procurement process. Here are
some of the most important ones.
Request for Information (RFI)
This document is used for a formal information-gathering process. It’s directed towards
those suppliers of goods and services with which you might want to contract. The RFI
helps procurement managers find the supplier who’ll deliver what they need and when
they need it for a price with which they’re comfortable.
Request for Proposal (RFP)
When an organization is looking to contract with a vendor or contractor, it’ll send out an
RFP that explains what they want to be done. The document then captures the
description and price of doing that work by a variety of entities, where one can be chosen
as they offer the best all-around deal.
Request for Quotation (RFQ)
This process is used to ask a vendor or vendors to submit their price quotes for items
that will be used in a project or other venture. This allows the sender to compare prices
with other potential vendors who are vying for the job. It’s an essential part of making the
right decision about who to contract with.
Procurement Management Process
Once you’re ready to procure goods from a vendor, project procurement management is
broken down into four processes.
1. Plan Procurement Management
Procurements are first identified during the planning phase of the project. For every
external contractor, there needs to be a statement of work (SOW) to serve as a
document outlining the work being contracted.
Prior to the contract, however, is a request for proposal in which multiple contractors get
to bid on the job, and the project manager can determine from their bids who will get the
contract.
These requests are well-thought-out as they work as guiding documents throughout the
 ese equests a e e t oug t out as t ey o as gu d g docu e ts t oug out t e
project. The more specific, the better. This avoids confusion later and helps develop more
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accurate plans. This process is collected in the procurement management plan, which
includes requirement documents, risk register, activity resource requirements, project
schedule, activity cost estimates and more.
To guide these decisions there are tools and techniques, such as make-or-buy analysis,
which helps to determine if the activity needs an external supplier or can be done in-
house. Seeking help from experts, doing market research and meeting with stakeholders
also helps guide this decision.
2. Conduct Procurements
After finishing the paperwork of the first phase, the conduct procurement phase is when
you study the bids that come back and determine which one to accept. Before deciding,
however, there should be a criterion in place to decide which bid is best for the project
and fits your logistics management. The agreements are then signed and the project
management plan is updated.
Decide the winner by conferencing with the bidders, having techniques for evaluating the
proposals and having independent estimates to make sure the bids are within the range
of normal. It doesn’t hurt to seek the advice of experts in the areas you’re contracting to
get their perspectives.
There are also analytical techniques you can apply. Advertising is a good way to make
sure you’re casting the widest net possible, so you can decide based on all potential
bidders. Then there are procurement negotiations that will be needed to tweak the final
contracts to meet your needs and the contractor. You should use a purchase order to
document the price, quantity, delivery window and terms of payment of the
goods/services you order. It’s a legally binding document that ensures that you and your
vendor are on the same page. Our purchase order template can help you create one that
fits your project.
3. Control Procurements
Once the contracts are signed, the management of those contractors must be folded into
the overall management responsibilities. Contractors can have a negative impact on
budgets and schedules, which can lead to a project going off-track or worse.
Therefore, regular status updates are necessary to review contractor agreements, get
progress updates and review work performance to make sure that the contractors are
meeting the requirements outlined in their contracts. Though you hire contractors
 g q g y
because they’re experts in what they do, you still need to monitor and track their work to
make sure it’s proceeding as planned. Start free trial

It’s best to contract a change control system and have regular procurement performance
reviews, including inspections and audits to make sure the work is going right.
Performance reporting helps keep managers informed, too. A payment system needs to
be in place as well as a claims administration and a records management system. Work
orders must include all the details about the work being performed by contractors to
facilitate performance monitoring.
4. Close Procurements
Just as there’s a process to start the procurement, there needs one in place to finalize it.
What constitutes completed work should be detailed in the initial agreement with the
contractor so there’s no confusion on either’s part as to when the work is done.
Insurance and bonding also usually require a formal release of liability. This makes sure
that there are no outstanding changes related to the value and completion date of the
contract.
Procurement audits help with this process, as well as having structured procurement
negotiations. A records management system will also be needed to manage all the
paperwork that’ll be involved with this stage of the procurement process.
What Is the Project Manager’s Role in Procurement?
The project manager is involved with procurement, the same as any other aspect they
control in the project management process. However, this is a process they might not
own with the same authority as other parts of the project.
While the project manager does have the authority to make agreements with contractors
on behalf of the company, the project manager is often not the person who administers
that contract once in place. Regardless, it’s important that the project manager is in the
loop.
That means knowing the six processes within the project procurement management
knowledge areas as outlined in the Project Management Body of Knowledge (PMBOK).
The first is the plan purchases and acquisitions, meaning determining what external
resources are needed for the project. The project manager has control over this, as
they’re more knowledgeable about overall project needs.
Plan contracting is the creation of requirements for whatever products or services are
needed, including what companies offer these products or services. They request seller
responses by narrowing down the companies to a handful and thenStartselecting
free trial the sellers,
which is usually the purvey of the purchasing department.
Contract administration is the management of the contract with the vendor. The project
manager works daily with the vendor’s account manager. When the contract is fulfilled,
there is contract closure. This is usually handled by the purchasing department.
How ProjectManager Can Help with Procurement
Like any part of a project, having the right tools can make project management
procurement more effective. ProjectManager offers an online Gantt chart that allows you
to plan the contract of your procurements, noting when they start and when they’re
planned to end. Status updates are instantly reflected, and you can track the progress of
your contractors to make sure the project remains on schedule. The Gantt chart can also
help with scheduling materials if they need to come on board at a certain time in the
project.

Because ProjectManager is online, all status updates, including procurement payments,

instantly reflect on the real-time dashboard. The real-time dashboard then takes those
numbers and crunches that data, which is delivered in easy-to-read graphs and charts.
Now you can see if the project is on track and manage whatever procurement has been
made for the project.
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Related Content
Purchase Management: A How-To Guide With Best Practices
Inventory Template
How to Make a Procurement Management Plan

ProjectManager is an online project management software that has online Gantt charts to
help with scheduling and a real-time dashboard that gives you an up-to-date picture of
the project’s progress. Managing project procurement has never been simpler. Try it for
yourself by taking a free 30-day trial.

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