Organizing Procurement and Purchasing Activities in a Project
April 24, 2010
Key Points in Managing Procurements
Procurement and purchasing activities refer to the aspects of project management regarding acquiring goods and services from outside companies to provide a project team with all necessary inventories to produce the product of a project.
Procurement process management refers not only to internal units of an organization involved in project management activities but also to external suppliers and vendors.
Purchasing department takes responsibility for arranging and controlling inventory management activities, and in conjunction with the project manager it decides on what inventory items are to be supplied from external procurement contractors. For example, the department can cooperate with Armstrong Newman – procurement recruitment company which provides the full life-cycle of supply chain, including all areas of logistics management.
While the dept is responsible for negotiating with suppliers on price and delivery terms, project manager is responsible for generating a procurement list that contains technical specifications and detailed descriptions of the inventories required for fulfilling current project.
The project manager arranges meetings and conferences with project team members to identify the inventory items to be included in the procurement list, and to outline terms within which the items are to be delivered. Then the manager submits the procurement list and suggested delivery schedules to purchasing and supply chain management dept.
The department reviews suggested delivery schedules, communicates with the contractor, make revisions to the schedules (if necessary), and then send them back to project management team. By means of meetings, the manager and project team need to review the changes and revisions of the delivery schedules and approve them if project activities can be accomplished under new conditions.
Although project manager takes the primary authority over project, this person usually has no authorities as to entering into purchasing contract management activities directly on behalf of the company. However, appropriateness of the procurement list and its compliance with project deliverables will have a great impact on the vendor selection process particularly, and on the procurement management process in whole.
The department head should negotiate the price, delivery schedules, and other purchasing contract details with vendors in order to obtain the most suitable conditions of logistics and delivery. While negotiating with inventory suppliers and vendors , it can discuss any issues regarding purchasing and supply management activities with project manager. Such negotiations may result in generating change requests for revising and modifying the procurement inventory list. The department also takes responsibility for managing purchasing risks and delivering the inventories on time.
The bottom line of procurement and contract management activities is that in most companies project manager needs to understand the basics of supply chain management and procurement activities.
The project manager should provide inventory requirements and specifications to procurement specialists of the department to ensure the correct supplier is chosen and the guidance on managing vendor relationships is successfully provided to project manager.