Procurement and the Project Manager
How much do project managers need to know about the procurement process in the organization? It depends upon whether they handle most of the procurement, some of the procurement, or none of the procurement related to projects. In some cases, the organization’s purchasing or contracting department deals with most of the procurement.
Regardless of the situation, when procurement results in hiring vendors who will complete all or some of the work on a project, project managers need to understand their role in the procurement process. This article summarizes ten important procurement concepts about which project managers must be knowledgeable.
- Procurement documents: Who develops the procurement documents? Procurement documents such as the requests for bids, requests for quotes, requests for proposals, etc., may be created by the purchasing or contracting department, by the project manager, or by a team that includes the project manager. In any case, it is the project manager’s role to ensure that the documents accurately describe the work to be completed by the vendor, the evaluation techniques to be used to select the vendor and the methods by which the contracted deliverables will evaluated.
- Scope: What will the vendor provide for the project? The project manager must ensure that both the product scope and project scope are addressed in the vendor’s contract. In other words, the project manager should be involved in preparing the statement of work (SOW) and the portion of the contract that includes what goods or services the vendor will provide. And, if the vendor’s work must be completed in a specific way, the project manager must also be involved in describing how the vendor should complete the job. If the vendor develops its own statement of work, the project manager must ensure that the SOW includes all of the necessary scope and that additional work has not been included in the vendor’s SOW.
- Staffing: Who determines what human resources the vendor will hire or use? As part of human resource planning, the project manager should develop the list of the roles and responsibilities for the members of the project team – both the internal team members and those provided by the vendors. This means that the project manager should also provide input for the staffing details of the vendor’s contract.
- Schedule: When will the vendor’s work occur, and how will it fit into the overall project schedule? Are other components of the project dependent upon the vendor’s deliverables? The project requirements for which the vendor is responsible will interface with other project components, so it is important for the project manager to request a copy of the vendor’s schedule and include that in the overall project schedule. The project manager must also track the vendor’s progress against the original and/or revised schedule.
- Costs: Who reviews the vendor’s proposed costs before the contract is signed, and who tracks the vendor’s costs to ensure that the vendor stays within the agreed-upon allowance? The project manager should be consulted before the contract is signed with the vendor, because he or she brings expertise in looking at the costs on prior projects, understanding the components of the WBS on which the costs have been estimated, and knowing the number and skill levels of human resources that will be needed for a project. When costs changes are proposed after the work has begun, the project manager and the project team may be able to provide cost-saving alternatives to the vendor’s proposed changes.
- Performance reports: Is the vendor completing the work on time? It is the project manager’s role to understand and review the vendor’s reports on the project work, because the overall scope and schedule are affected just as much by the vendor’s work as by the work performed by the in-house project team. Although the vendor manages its own work and schedule, the project manager must carefully monitor work and performance reports to ensure that the vendor’s work is being completed as scheduled; initiate discussions with the vendor when schedules are not being met; and/or notify senior management about unresolved issues regarding the schedule.
- Changes: Who receives, processes, and finalizes changes to the contract? When a purchasing or contracting department handles contract changes, it is essential that the project manager have ongoing communication with this department. As with any changes that affect the project, the project manager should be the first person consulted to determine the impact of the proposed changes to the project. Ideally, the project manager will be involved when the change request is submitted, so that the contracting or purchasing department can make final decisions about the change, based upon the input of the project manager. If these proposed changes involve additional costs, the project manager and the project team should be consulted, as well, because they may be able to generate less costly alternatives to be considered by the vendor.
- Deliverables: Who verifies and accepts the deliverables produced by the vendor? When these deliverables constitute all or part of the project, the project manager should be involved in the ongoing process of verifying that the deliverables conform to the defined requirements and that they truly are fit for use. These deliverables, like those in a non-contract situation, must be evaluated against any quality standards or metrics detailed in the vendor’s contract.
- Payments: Who established the payment schedule, and who approves the payments, by schedule or by deliverables? In most cases, it is the project manager who will verify and accept deliverables for a project. And, per most contracts, payments are made by the organization only after someone – typically the project manager- has accepted the deliverables and notified the appropriate department that payment should be made.
- Procurement Audits (or lessons learned about contracts): Who documents the lessons learned from dealing with vendors? In many cases, the purchasing or contracting department maintains a file on the vendor, but who documents what has been learned from a project perspective? Such documentation becomes invaluable to project managers who will deal with vendors on future projects. Project managers and the project team who have worked closely with the vendors have the best perspective on documenting lessons learned about procurement.
Although project managers have much to learn and share about procurement, they should be a key member of the procurement team. Even when they handle most of the procurements for projects, they must often rely on others with legal and purchasing expertise to develop and manage projects in a contract situation. When a purchasing or contracting department handles most of the procurements for projects, they must understand the value the project manager can bring to the process. Procurement for projects is ultimately the organization’s responsibility, but knowledge about the process is the responsibility of a successful project manager.
Gloria C. Brown, PMP, has more than forty years of professional experience and is a full-time instructor for Global Knowledge. Her passion for project management is expressed through her love of teaching, developing courses, writing white papers, and mentoring students. She is member of the Atlanta Chapter of PMI. Global Knowledge is the worldwide leader in IT and business training. Its more than 700 courses span foundational and specialized training and certifications. For more information, visit www.globalknowledge.com.