Project Management Tips and Techniques:
The Procurement Process
Tom Mochal

Each month, Tom Mochal, President of TenStep, Inc. presents project management tips and techniques for planning and managing a project. TenStep, Inc. has a comprehensive, scalable project management process called TenStep (www.TenStep.com), as well as a project lifecycle process called LifecycleStep (www.LifecycleStep.com). Tom has also published a popular book called Lessons in Project Management that can be purchased at  www.TenStep.com.  Pipeline readers receive 20% off any TenStep or LifecycleStep purchase by entering the coupon code of "Pipeline" in their purchase.

In general, procurement refers to the aspects of project management related to obtaining goods and services from outside companies. This specifically refers to vendors and suppliers. It does not refer to other internal organizations within your own company. (For the purposes of this discussion, purchasing and procurement are equivalent terms.) This is an area that project managers definitely need to understand at some level, and it is an area that the project manager will have input into. However, in many, and perhaps most, companies, procurement is an area that the project manager does not own. The project manager normally does not have the authority to enter into contracts on behalf of the company, and he or she normally is not asked to administer the contracts once they are in place. Again, these are processes that the Purchasing Department typically owns.

The PMBOK® describes six processes within the Project Procurement Management knowledge areas. These are listed below to provide some explanation of the overall processes that are included in this area.

1. Procurement Planning is the process of determining the items to purchase and when you need them. This is typically under the control of the project manager, since the centralized Purchasing Department is not going to know what each particular project team needs.
2. Solicitation Planning is the process of creating requirements for all the products and services your project team needs. The project team needs to perform this function. You also need to start identifying potential companies that can supply the products and services. Most projects do not require unique products and services. Typically other projects have used similar products and services before. If they have, you most likely have a list of companies that already have contracts in place to provide what you need. This is typically the case for contract resources, supplies, computer hardware, etc.
3. If you determine that there are not companies available to supply a product or service you need, you need to go through the Solicitation process. In the Solicitation process you identify a long-list of vendors to consider and receive information on their capabilities and prices through vendor proposals and price quotes. You then typically narrow down the long-list of potential companies to a short-list of qualified companies. Although the project team may perform much of the work associated with the Solicitation process, it is typically a process that is owned by Purchasing. In other words, there should be a defined process, or someone from the Purchasing Department that will help guide you through the Solicitation process to ensure that the necessary factors are taken into account, and that viable companies are selected for the next step.
4. Source Selection is the process associated with actually choosing the vendor who will provide the product or service. Again, the project team may make the final selection, but Purchasing typically has defined the overall process. In some companies Purchasing may, in fact, make the final decision based on project team input. Most companies do not want to enter legal contractual relationships based on the expertise of a project manager. Normally companies will need Purchasing and perhaps the Legal Department to own the Source Selection and contract negotiation processes.
5. Contract Administration is the process of managing the relationship with the contracted company. The project manager may work on a day-to-day basis with the account manager from the vendor, but they should always work within the contractual relationship. If anything needs to change in the contractual relationship, the Purchasing and Legal Departments are probably the ones responsible for making the contract changes.
6. Contract Closeout occurs if the contractual relationship existed only for the life of the project. For instance, if the contract was in place to provide raw materials for a particular project, then the contract will probably end after the project is over. If you use the vendor to purchase other supplies, the relationship with the vendor is probably ongoing. If there are contracts that are closed at the end of the project, the Purchasing Department is typically the one that oversees final payments and formally closes the contract. The project team will be involved with the Purchasing Department to make sure all the contracted work was completed and to gather feedback about the vendor relationship.
    

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