Project Procurement Management includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team. The organization can be either the buyer or seller of the products, services, or results of a project.
Project Procurement Management includes the contract management and change control processes required to develop and administer contracts or purchase orders issued by authorized project team members.
Project Procurement Management also includes controlling any contract issued by an outside organization (the buyer) that is acquiring deliverables from the project from the performing organization (the seller), and administering contractual obligations placed on the project team by the contract.
The Project Procurement Management processes involve agreements, including contracts, which are legal documents between a buyer and a seller. A contract represents a mutually binding agreement that obligates the seller to provide something of value (e.g., specified products, services, or results) and obligates the buyer to provide monetary or other valuable compensation. An agreement can be simple or complex and may reflect the simplicity or complexity of the deliverables or required effort.
A procurement contract includes terms and conditions and may incorporate other items that the buyer specifies as to what the seller is to perform or provide. It is the project management team’s responsibility to make certain that all procurements meet the specific needs of the project while adhering to organizational procurement policies. Depending upon the application area, a contract can also be called an agreement, an understanding, a subcontract, or a purchase order. Most organizations document policies and procedures specifically defining the procurement rules and specifying who has the authority to sign and administer such agreements on behalf of the organization.
Although all project documents may be subject to some form of review and approval, the legally binding nature of a contract or agreement usually means it will be subjected to a more extensive approval process. In all cases, the primary focus of the review and approval process is to ensure that the contract language describes the products, services, or results that will satisfy the identified project need.
The project management team may seek support in early phases from specialists in contracting, purchasing, law, and technical disciplines. Such involvement can be mandated by an organization’s policies.
The various activities involved in the Project Procurement Management processes form the life cycle of an agreement. By actively managing the agreement life cycle and carefully wording the terms and conditions of procurement, some identifiable project risks may be shared or transferred to a seller. Entering into an agreement for products or services is one method of allocating the responsibility for managing or sharing potential risks.
A complex project may involve managing multiple contracts or subcontracts simultaneously or in sequence. In such cases, each contract life cycle may end during any phase of the project life cycle. Project Procurement Management is discussed within the perspective of the buyer-seller relationship. The buyer-seller relationship may exist at many levels on any one project and between organizations internal to and external to the acquiring organization.
Depending on the application area, the seller may be identified as a contractor, subcontractor, vendor, service provider, or supplier. Depending on the buyer’s position in the project acquisition cycle, the buyer may be called a client, customer, prime contractor, contractor, acquiring organization, service requester, or purchaser. The seller can be viewed during the contract life cycle first as a bidder, then as the selected source, and then as the contracted supplier or vendor.
The seller will typically manage the work as a project if the acquisition is not just for shelf material, goods, or common products. In such cases:
It is assumed that the buyer of an item for the project is assigned to the project team and that the seller is organizationally external to the project team. It is also assumed that a formal contractual relationship will be developed and exists between the buyer and the seller. However, most of the discussion in this section is equally applicable to non-contractual work entered into with other units of the project team’s organization.