Project procurement management

Answer

Project procurement management refers to the processes involved in the acquisition or purchase of services, products or results for the project from an external source (Burke, 2013). It entails establishing, fomenting and maintaining the relationship with the suppliers of goods and services that are necessary for the project through binding contracts that stipulate the agreement between the buyer and the seller. Contract management and change control process are critical components of project procurement management as they facilitate the development and administration of contracts and other legally binding documents such as purchase orders by the project team, through authorized team members, to outside organization (Burke, 2013). Besides, it helps in the administration of any contract drawn by a buyer intending to acquiring the project from the seller, as well as ensuring the project team performs its contractual obligation as stipulated in the contract.

Project procurement management involve four major processes; plan procurement, conduct procurement, administer procurement and close procurement (Ojeda, Reusch, 2013). Each procurement process is critical in the project procurement management and must be conducted in accordance to the organizational procurement policies and procedures that defines its procurement rules (Ojeda, Reusch, 2013).

Plan Procurement

This is the first major process of project procurement management. It involves the formulation of a comprehensive plan that describes all the attributes of the intended project procurement process (Ojeda, Reusch, 2013). Such attributes detailed in the plan procurement process include the decision on the items to be made by the project team and those to be acquired from outside organization, the criteria for vendor selection and the preparation of necessary procurement documents. The plan is formulated through analysis of the project’s requirements that is conducted alongside consulting relevant documents like baseline scope, the risk register and the project schedule for more information that would promote adoption of the best strategy for the procurement process (Ojeda, Reusch, 2013).

Conduct Procurement  

This is the second major process of project procurement management. It involves selection of vendors and awarding of procurement contracts (Ojeda, Reusch, 2013). Conduct procurement process also entails obtaining seller responses, evaluation of proposals and applying a defined selection criteria to choose the right seller. In this process, detailed resource calendars that allocate timeframes for the utilization of resources in the procurement process are developed. Notably, this process requires various tools and techniques. For instance, briefing of bidders on the project requirements may call for a conference with such bidders, advertisements may be critical tool for soliciting bidders, careful evaluation of the proposals will be necessary, and internet may be a crucial tool for searching for vendors as well as for negotiations (Ojeda, Reusch, 2013). Similarly, make-or-buy analysis will be critical in determining how the resources would be used by comparing the outcome of either way.

Administer Procurement 

The third major procurement management process is the administer procurement. It encompasses all the processes directed towards managing the engagement with the vendors during the running of the project (Ojeda, Reusch, 2013). During this process, procurement documents are generated and changes to the project may occur as careful analysis and determination of necessary changes to contracts is done through a system of contract change control. This process ensures adherence to terms of the legal contract by both the buyer and the seller by ensuring the procurement requirements are met by the seller’s performance and that the buyer performs its contractual mandate. Besides, this process is critical as it provides the ground to monitor and control risks as well as managing project execution and performing quality control.  Moreover, the procurement performance is reviewed through inspections and audits and, the performance report is generated in this process (Ojeda, Reusch, 2013). Considering the fact that some payments may be done at this stage, this process also includes the formulation of systems tasked with ensuring payments are made to contractors as due and when appropriate. 

Close Procurement

This is the final major procurement management process. It entails all the processes necessary to terminate a procurement contract as appropriate (Ojeda, Reusch, 2013). The procurement contract may be ended at the completion of the project or upon mutual agreement by parties in engagement under conditions and guidelines spelt out in the procurement contract. In this process, project work may be audited, and any contract dispute is resolved through negotiations or litigation between parties involved (Ojeda, Reusch, 2013). For contract documentation, this process includes generation of detailed record management system that is efficient for record storage and data retrieval.

Importance of Procurement Management

Procurement management is an integral component of project procurement management process since many departmental decisions regarding the project posit procurement implications in one way or the other (Mohammadjafari, Ahmed, Zawiah Md Dawal, Zayandehroodi, 2011). Ultimately, the procurement implications impact directly on the overall cost of running and maintaining the project. In the private sector, procurement is regarded as a strategic function intended to improve the profitability of the organization. Procurement management is critical in managing the overall cost of the project by streamlining the processes, reducing the prices and costs of raw materials and, through bid evaluations, it helps in identifying the best supplier who fit the defined selection criteria (Manana, van Waveren, Chan, 2012). Thus, procurement management is crucial in reducing the bottom-line of the project. Notably, the importance of procurement in many organizations is displayed by having the head of procurement of the organization in the Executive Board level.

Although the public sectors are less concerned with the concept of bottom-line, they have the need to maximize output regarding teaching and research using the available resources in the form of funds (Brammer, Walker, 2011). Notably, these funds are sourced from the public through various ways including taxation, grants, and student fees. This, therefore, posits the taxpayers and students as stakeholders who would wish to have the public sectors prudently manage the funds. Consequently, procurement management is, therefore, of fundamental importance in the public sectors to uphold the inherent requirement that the management of funds availed at the disposal of public sectors is done with accountability and, in a manner that demonstrates probity and value for money during procurement processes (Brammer, Walker, 2011). The legislation requires transparency, openness and non-discriminatory actions at higher levels of expenditure. This implies that all project requirements needed from outside the organization as supplies must be advertised and tendered according to laid down rules of procurement. Therefore, procurement management will not only help an organization to utilize the resources efficiently but will also ensure adherence to the rules of procurement that would help the organization to avoid a breach of the law of contract. By avoiding a breach of the law of contract, the organization avoids losses that would accrue from compensations of the seller due to a breach of contract of engagement. Moreover, procurement management is critical in managing a significant portion of non-pay expenditure of an organization and in ensuring that the organization gets the best value for money when making such expenditure. Non-pay expenditure includes the cost incurred in the day-to-day running of the organization together with its capital expenditure. Notably, this expenditure includes cost of goods and services from suppliers as well as other payments made on customs and educational establishments (Brammer, Walker, 2011). Consequently, procurement management remains the only prudent route to take to ensure these expenditures posit the value for money spent. Without procurement management, organizations would lack explicit means to monitor and control risks and perform quality control of the project based on the project outcome and the cost of running the project. In essence, the procurement function is integral in determining potential suppliers and obtaining goods and services from such suppliers in a manner that enables the organization to realize its strategic goals and objectives more economically, efficiently and effectively.

Procurement management is significant in fighting and reducing corruption in tender awards. This is achieved when the procurement process follows the laid down procedure, and every major project procurement process is handled in adherence to procurement rules. This will ensure that the procurement process works for the advantage of the organization and its clients and not for a few corrupt individuals in the public sector (Brammer, Walker, 2011). Procurement management process involves procurement planning that is integral for an organization as it enables the organization to decide on what supplies are required for the project and helps to determine the best source of such goods and services. Procurement planning helps planners to evaluate the expectations and determine whether the expectations from the requesting realistic or not regarding their timeframe and cost. Besides, it posits an opportunity for an organization to evaluate the need for relevant expertise to develop technical specifications for the project's requirements and provide the scope and method of assessment of such requirements (Brammer, Walker, 2011). This is critical in ensuring that the procurement requirements are met by the seller’s performance.

Also, procurement management is significant in establishing supplier relationships given the legal nature of the contract of engagement between the seller and the buyer (Brammer, Walker, 2011). This relationship is critical or both parties as it promote trust and establishes close ties in which both parties seek to meet its contractual role. Consequently, the seller will ensure that the best quality of goods and services is offered to the buyer while the buyer will strive to fulfill its contractual obligation and commitment to the seller (Brammer, Walker, 2011). Ultimately, the organization's performance, efficiency, and effectiveness improve leading to profit maximization.

At a glance, procurement management is critical for any organization as contributes directly to the bottom-line of an organization. By reducing the cost of goods and service, establishing supplier relationships and identifying the best sources of supply of goods and services, procurement management helps organizations to economically, effectively and efficiently manage their resources and maximize profit.