2. Procurement Contract
April 30, 2010
A procurement contract is a written agreement between a buyer and a seller in which the buyer agrees to purchase goods or/and services from the seller in exchange for payment transactions. A procurement contract states each party’s obligations and usually includes detailed price lists, payment information, conditions of delivery and other legal terms and conditions. There are many types of procurement contract, including contracts with firm-fixed prices, time and materials contracts (T&M contracts), cost-reimbursable contracts, construction procurement contracts, etc.
The purchasing department is responsible for selecting a type of procurement contract to be used to establish relationships with vendors and suppliers. Depending on the items included in the procurement list, a type of procurement contract is to be selected. The buying department will consider all the items to be procured for current project by communicating with the project manager in order to define the item types, quantities, services and desired delivery dates. The project team will assist the department by providing technical specifications and requirements as to the items. Then the procurement management department will negotiate with various vendors and solicit their bids to select the most appropriate vendor(s). Once the vendor is selected, the department signs the agreement with that vendor and starts purchasing the items according to the specifications and quantities, within the required time frame and at reasonable prices. After the agreement is signed, the procurement management department reports to the project manager on timeframes and delivery terms.
Considering the mentioned, the purchasing department is responsible for the following:
- Selecting a type of procurement contract considering the items to be procured
- Communicating with the project manager to define the item types, quantities, services and desired delivery dates
- Communicating with the project team to receive technical specifications and requirements as to the procurement items
- Negotiating with vendors – potential suppliers – to discuss conditions and terms of the procurement agreement
- Soliciting bids from various vendors to procure the items
- Setting up the purchasing agreement and starting acquiring goods or services
Considering the mentioned, the project manager and the project team are responsible for the following:
- Providing the department with all technical specifications and requirements as to the procurement items
- Defining quantities, services and desired delivery dates for the items
- Communicating with the department to get procurement delivery schedules and find out when the items are due to be delivered