Project Procurement Management

Project Procurement Management

​Project procurement is the process of acquiring goods and services. There are many ​ways to go about this, but project procurement has more to do with negotiating a contract for a project rather than products or raw materials.

​Project procurement is an integral part of the successful operations of a business.

The process involves many different specific processes that must follow a logical order. This involves planning, contracting, sending out contracts to sellers, then allowing different contractors to bid on the job.

Once all applicants to the position have been reviewed and vetted, the business owner or COO (Chief Operations Officer) will choose a contractor to sign the contract with. Paperwork must be filled out to set the project in motion.

But this is not the end.

​Constant monitoring of the job must be done to ensure that the criteria are being met and that the contract is being followed. Once the work is finished, you close out the contract and close the deal by finalizing the paperwork.

​Steps to Procurement Management

​In addition to these necessary steps, there are also specific components of project procurement that must be done. Below is a list of the most important steps in acquisition that should occur when working with contractors.

​​Plan Procurement Management

​The planning phase for procurement management is a critical phase just as all operations of a business are.

During this phase, you will decide whether you should source the contractors within your operation or outsource them to another company or even another country. You should consider what your resources are, how much it will cost to hire outside contractors, and how long the job will take.

​Conduct Procurement

During this phase, business owners must put the job out there and study the bids that come in. Then they will choose the best one for the project. This involves more than this, though.

Agreements must be worked out that explain how contracts will work, what is expected, and how much the contractors will be paid.

Like a delicate international treaty, every detail should be worked out to the benefit of both parties so that there is no disagreement about the terms.

​Control Procurement

Once work has begun, constant vigilance must be paid by the business owner so that they know the contractor is fulfilling the obligations they have to the contract.

Projects usually involved a great deal of money, so it is vital to make sure the job is being completed according to the plan you have to justify the expenditures.

Contractors may have creative ideas, and that's okay. But the quality of work and the final result should be under your command.

​Close Procurement

Once the work has been checked for quality and all of the work is completed, you can close the job.

You do this by finishing the final paperwork and settling with the contractor through the payment as agreed.

Careful documentation should be kept to prove that the person was paid and that the job was completed according to specifications.

​Importance of Planning Project Procurement

​Planning is critical in every phase of project procurement as adjustments may need to be made along the way in order to achieve the final result.

Flexibility is essential because problems can arise during a project that are not accounted for during the initial planning.

The goal is to keep operating costs to a minimum while still achieving the goals you have for the project.

​Risk Assessment During the Procurement of Projects

​In addition to estimating the costs for the project, it is crucial to do a risk assessment of the project, including the risk to investors, owners, and contractors.

Anyone who has a vested interest in the process should be invited to take part in the risk assessment process.

Risk management should involve calculating financial risk as well as the risk to people who are working on the project, then steps to be taken to minimize the risk.

​Different Approaches to the Project Procurement Process

​There are a number of different approaches to project procurement.

One way is to manage a large project by putting contractors for various services into categories or industries.

For example, with a huge project such as building a bridge, you can be sure that you will have to work with a wide variety of contractors.

From building site managers, builders, raw material suppliers, land ordinance specialists, and even government officials, many kinds of people will be involved in the process.

​Categorization Method

​Categorization is a technique whereby specific categories of work and materials are grouped together so that work can proceed naturally through a series of functions and processes that complement, rather than detract, from each other.

For example, you can group production, manufacturing, and retail into one category and building, legal, and site management into another category. Both groups can then pool their resources and work together within the contract as smaller teams to get the job done more efficiently and with less overall costs.

​Public Sector vs. Private Sector Procurement Planning

​Another approach to project procurement management is to think about whether the project you are doing involves private or public sector resources.

If the public sector is involved, there will be more "red tape" you will have to go through such as local government or city ordinances to make sure you are in compliance.

Additionally, public tax dollars are usually involved in these types of projects so every dollar must be accounted for.

​With private sector procurement, these projects are dependent on dealing with private business only and do not involve public funding.

There is more freedom to follow one's own standards with private sector projects such as real estate development that is not under the jurisdiction of local or state governments.

Profit drives projects in the private sector so contracts and plans must show how all parties will benefit.

​Finalization of a Procurement Project

​It is important to be up to speed on every stage of the procurement process, whether you are dealing with a regular procurement of products and services from an overseas vendor, or working out contract agreements with building contractors.

Projects cost a lot of money and they must be handled with as little waste of time and resources as possible.

​Summary

​By cultivating the best sources whether from government or private entities, companies can collect all of the materials and manpower they need to build something great.

As President Trump, a builder himself for many years has stated, "Under budget and ahead of schedule!"

This should be the goal of every company owner when dealing with contractors. Using the best AI automation tools and the smartest people to plan out the strategies, you can do it, too!

​Don't Get Left Behind

​Schedule a free consultation with Visichain to ensure your supply chain and procurement operations continue to evolve and remain competitive in today's dynamic ​environment.

Richard McGirr

Do you need to create value and deliver change in your enterprise?With Visichain as your partner, you can leverage over 1 million hours of supply chain transformation experience from some of the largest companies in the world.Visichain drives visibility, productivity, and efficiency throughout your entire supply chain.Supply chain visibility at scale is essential to your business. Starting with the production of products all the way through free on board receiving, your business needs real-time data to help you minimize risk, drive efficiency, and make better decisions.Visichain designs, develops, and implements powerful yet easy to use software. Powerful solutions crafted to help your executives and supply chain managers leverage multiple data systems to partner with sourcing suppliers in real time.When you're ready to kick your procurement transformation strategy into high gear, send me a message through LinkedIn.