Everything you need to know about project procurement management
October 23, 2020
Part of being a successful project manager is knowing when to cast the net out and find extra help. Making do with what you have may seem thrifty, but it could do more harm than good. Think overworked teams, missed deadlines, shoddy work, stretched budgets — not to mention unhappy customers.
Project procurement management is a process that helps you source the resources you need and manage them throughout the project’s lifecycle. As you’ve probably guessed, it’s a complex process with lots of things going on. So it’s important for you to set off on the right foot.
In this article, we’ll take a closer look at everything involved, plus share tips on how to do it right.
What is procurement management?
Every project relies on resources — and procurement management is all about how you efficiently obtain, request, order, expedite, and inspect these. And, like every other process in a project’s lifecycle, it needs strategic management.
Here are some typical questions project managers need to ask during the procurement process:
- What do I need to rent, buy, or contract to meet my goals?
- How do I ensure the best possible quality from outside vendors?
- How do I manage these relationships to ensure quality?
But… not so fast. Before the project manager does any of this, they first need to ask themselves one important question: Can it be done in-house? There are pros and cons to each option, and it’s the PM’s job to work this out before they do anything else.
What role does the project manager play in procurement management?
The project manager is involved in arranging things with outside vendors, but there are usually others handling the finer details, like making payments and creating contracts. The project manager can do these things, but usually, another team member can take care of this and keep the project manager up to date. The more knowledge they have, the more in control they are of the project.
What are the different stages of procurement management?
Once you’re ready to begin purchasing goods and services, you’re ready to begin your procurement journey.
There are four different stages: planning, selection, administering, and closing procurements.
The project manager needs to create the procurement plan. This details which items are internal or external, as well as how each of these items affects the budget.
Next, vendors and contractors need to know what’s expected of them — this will be outlined in the Statement of Work (SOW). Before signing a contract, you will ask potential contractors to bid for the job. The more detailed the plan, the better and more detailed the responses, which in turn will make selection easier.
Managers need to select their contractor based on various criteria, including the project’s budget, requirements, and scope. This stage of the process involves detailed analysis of each vendor’s offering. Managers use different techniques to narrow their choices down, including video conferencing, market research, independent bid estimates, and meetings with stakeholders.
Once managers are in agreement, contracts can be awarded and calendars and timelines are drawn up. The project calendar is then populated with resource information, including when things are available, for how long, and when the work will be carried out.
If there aren’t any bids that meet project requirements, the project manager may solicit more via advertisements and start the process again.
Contractors and vendors can be a real drain on budget if you don’t carefully manage them throughout the project, so this stage is about incorporating important tasks into the overall project management plan.
Managers should set up regular check-ins to make sure everything is on track, including reviewing quality, requirements, and making sure agreements are all as they should be.
A centralized project management tool can help with performance reports and audits, while ensuring project members are kept informed and deadlines are being met via real-time reporting.
The project’s drawing to a close and contracts are ending. As part of the closing process, there needs to be something in place that details when the work is finished and what that looks like so there’s no ambiguity as to when the job is done.
This stage is about more than contracts ending: It’s an opportunity to review your project. Documentation at this stage could include audits, performance reviews, and, in the event of conflict, contract dispute documents. A records management system can help you keep track of all the paperwork involved during this stage.
The case for digitizing procurement management
It’ll come as no big surprise to learn paper systems are not the most efficient way to do procurement management. Unfortunately, too many organizations rely on chaotic processes that allow chaos to flourish.
Procurement management is an incredibly complex job. It includes numerous documents, deadlines, people… it’s a lot to keep track of. Misplaced documents, unmonitored costs, and slow approval cycles could end up compromising the project or costing you business money. This is where a digitalized system can really help. Let’s go into more detail on some of the main benefits.
A 360-degree view
Shifting all this information over to a project management tool means all the relevant information is accessible in one single dashboard that offers a 360-degree view of everything, from budgets and quality standards, to legal compliance information and deadlines.
Having all this information in one place makes it easier to manage while reducing the likelihood of potential problems like off-contract purchasing and dips in quality.
Using project management software means you also have a wealth of information at your fingertips. All that data feeds into real-time reports on budgets, progress, and contractor performance — meaning managers can be flexible and agile, and stop problems early before they snowball into bigger issues.
Automating your workflow means managers don’t need to track purchase orders, invoices, and purchase requisitions because it’s all done via the software. Having this information on a digital system also ensures you send documents on time, to the right people, with the right information. This has the added benefit of keeping relationships strong with contractors and vendors, who rely on timely, accurate documentation for payments.
As with all projects, the better people work together, the higher your chance of success. Using cloud-based project management software means everyone can check in from wherever they are and access the information they need. Plus, with notifications, real-time charts, and schedules in one place, it’s easier to keep everyone on the same page.
Arming yourself with the right tools will make procurement management that little bit easier. With Backlog, our own project management tool, every bit of information is trackable via one single dashboard. You can display data in easily digestible charts. Plus, managers can keep an eye on everything at once thanks to real-time notifications and progress updates. Having all this information in one central hub makes it easier to manage multiple documents and workflows with ease. All that while making sure the project runs smoothly from start to finish.