12 Project Procurement Management

It includes the management and control processes required to develop and administer agreements: contracts, purchase orders, memorandum of agreements, service level agreement.

Key Concepts for Project Procurement Management

There can be significant legal obligations and penalties tied to the procurement process. The project manager should be familiar enough with the procurement process to make intelligent decisions regarding contracts and contractual relationships. The project manager is typically not authorized to sign legal agreements binding the organization; this is reserved for those who have the authority to do so.

Trends and Emerging Practices in Procurement Management

• Advances in tools. A single point where procurements can be advertised and provide sellers with a single source to find procurement documents and complete them directly online.
• More advanced risk management. To write contracts that accurately allocate specific risks to those entities most capable of managing them. No contractor is capable of managing all the possible major risks on a project. Contracts may specify that risk management be performed as part of the contract.
• Changing contracting processes. International contracts with multiple contractors from many countries => the use of internationally recognized standard contract forms is increasing in order to reduce problems and claims during execution.
• Logistics and supply chain management. For long-lead items, both the manufacture of the items and their transportation to the project site become schedule-drivers. Long-lead items may be procured in advance of other procurement contracts to meet the planned project completion date. It is possible to begin contracting for these long-lead materials, supplies, or equipment before the final design of the end product itself is completed based on the known requirements identified in the top-level design. Not only are primary sources of supplies identified early in the project, but secondary, back-up sources are also generally identified. Many countries around the world require international contractors to purchase certain minimum percentages of material and supplies from local vendors.
• Technology and stakeholder relations. Publicly funded projects are under increasing scrutiny. A trend in infrastructure and commercial construction projects is the use of technology including web cameras (webcams) to improve stakeholder communications and relations.
• Trial engagements. Some projects will engage several candidate sellers for initial deliverables and work products on a paid basis before making the full commitment to a larger portion of the project scopeTail

Tailoring Considerations

• Complexity of procurement. Is there one main procurement or are there multiple procurements at different times with different sellers that add to the complexity of the procurements?
• Physical location. Are the buyers and sellers in the same location, or reasonably close, or in different time zones, countries, or continents?
• Governance and regulatory environment. Are local laws and regulations regarding procurement activities integrated with the organization's procurement policies? How does this affect contract auditing requirements?
• Availability of contractors. Are there available contractors who are capable of performing the work?

Considerations for Agile/Adaptive Environment

Specific sellers may be used to extend the team. This collaborative working relationship can lead to a shared risk procurement model where both the buyer and the seller share in the risk and rewards associated with a project.

Larger projects may use an adaptive approach for some deliverables and a more stable approach for other parts. In these cases, a governing agreement such as a master services agreement (MSA) may be used for the overall engagement, with the adaptive work being placed in an appendix or supplement. This allows changes to occur on the adaptive scope without impacting the overall contract.

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