ROCUREMENT MANAGEMENT PLAN

ENGR. MICHAEL L. NULLAS

 The procurement management plan is part of the
overall project management plan. Over the life cycle of a
project there are likely to be many points where it will
intersect with vendors. This process needs to be managed. To
manage these relationships and keep the flow of those goods
and services moving without interruption requires a
procurement management plan.
What Is Procurement in Project
Management?
 Procurement is when the project is working with outside
suppliers to buy or rent goods and services for the project.
These relationships are usually contractual to make sure that
the goods and services work within the timetable of the
project.
 In project management there is a process for project
procurement, and it begins with planning. This is where you
identify what resources outside of your organization will be
needed for the project. These are collected in a statement of
work.
Bidding & Contracts
 Once you have a list of what external resources you need, then
you can start the work to acquire them. This is called the bidding
process, where contractors bid for your work. Once you have
some bids in house, then they must be studied to determine which
is the best fit for the project.
 When you go into a contractual agreement with these suppliers,
they require management just like every other aspect of the
project. It’s crucial to the well-working of the project that these
contractors are doing what they were contracted to do, on
schedule and within the allotted budget.
 Finally, once the procurement is done, the contracts must be
closed properly. This is yet another process that makes sure
everything has been delivered as stated in the contract before
being signed off on.
Why Do You Need a Procurement
Management Plan?
 The importance of having a procurement management plan is
that it defines what you need from the project that cannot be
provided by the organization. This means that you have a
greater understanding for planning the whole project. That
includes managing the suppliers, who are key to keeping
your project schedule.
Incorporates Stakeholders
 Another positive is that a procurement plan can involve
stakeholders and get their input in the process. Stakeholders are
the reason for the project and their satisfaction is the measure of
success of that project. They can express requirements they want
for procurement.You can use a RACI chart to identify
stakeholders and their involvement before contacting them about
procurement needs.
Informs Strategy
 Without a procurement management plan there can be no
procurement strategy and without a strategy there can be no plan.
They both inform the other and involve things like market surveys
to better define the procurement necessary to fulfill the project.
What Does a Procurement
Management Plan Do?
 The most important thing that a procurement management
plan does is list all the procurements needed for the project
and what requirements are expected to be associated with
them. This is a key part of schedule development. It creates
timelines for implementing a procurement for the project
and therefore helps with estimating the larger project
schedule.
 A procurement plan helps monitor the whole procuring
process. When the project is executed, the actual
procurement can be compared against the procurement plan
to track progress. If there are discrepancies, then the
procurements can be adjusted to right those wrongs.
Eight Steps for a Procurement
Management Plan
The procurement management plan can be broken down into
these eight steps.
1. Define Terms
2. Outline Type of Agreement
3. Identify and Mitigate Risks
4. Define Costs
5. Identify Constraints
6. Get Contract Approved
7. Make a Decision Criteria
8. Create a Vendor Management Plan
Eight Steps for a Procurement
Management Plan
1. Define Terms
To begin, start by defining the procurement terms. This means listing what you need to procure in
detail: how many, what size, for how long, etc. Then you want to know what service is provided to the
project and why this is important. Now add a date of use to each of these procurements and who on the
project team is authorized to make these purchases.
2. Outline Type of Agreement
The contract is how everyone agrees on the terms of service. There are different types of contracts, for
instance a fixed price and cost reimbursement are two. Therefore, the type of agreement must be
decided on and how it will be managed.
3. Identify and Mitigate Risks
Risks are inherent in every part of a project process, and so they lie dormant in procurement until they
show themselves. It is now time to figure out what those risks might be and list them. Once a thorough
list has been collected, each must have a way to resolve them. It’s also good to assign a team member
with the task of mitigating those risks, so they have ownership to follow through on closing them. A risk
register template can help.
4. Define Costs
What are the costs involved with the project procurements? Once those have been figured out, it is
likely that a request for proposal will be issued, with the needs outlined and requesting bids from
suppliers. Be thorough and note everything required. The suppliers will come back with their cost for
products or services.
Eight Steps for a Procurement
Management Plan
5. Identify Constraints
It helps to try and identify any project constraints before starting the project to avoid getting blindsided
by unforeseen limitations during execution. Once this list is complete it can be looked at throughout
the project phases. Constraints related to procurements include cost, scope, limited resources and
technical specifications.
6. Get Contract Approved
Review the bids and do a service and cost analysis. Then have a list of who the decision makers are in
the project group and pass the bids on to them for review (a DACI framework can help identify
decision makers). This process makes sure that everyone who needs to oversee the contract approval is
involved and can provide input.
7. Make a Decision Criteria
You have a workflow, but now you need a criteria by which to decide on which bid to go into contract
with. Every person who reviews the bid should have this criteria at hand to measure their response.
8. Create a Vendor Management Plan
Once a contract is signed, the procurement management plan will segue into a vendor management
plan. The terms of the contract must be met. And, to make sure that happens, a management plan
surrounding the suppliers will help ensure that goods and services are delivered as specified and on
time. It is a good idea to add a performance metric to rate how well each supplier does their job, so you
can improve relations on the next project and know who is worth contracting with again.
Procurement Management Tools &
Techniques
a. Make-or-buy analysis
This decides whether a particular part of the project can be accomplished by the project
team or should be purchased from outside sources. After all, if no procurements are
needed and the entire project can be done by the project team, then there is no need for
procurements management. This knowledge area is then the only truly optional
knowledge area in that there are some projects for which it is not needed.

b. Expert judgment, meetings

By now, you should be familiar with the fact that when you doing a planning process, you
are doing knowledge gathering to develop the management plan. That’s where expert
judgment comes in, by asking the people who either are expert at a certain subject matter
area, in this case procurement management, or who are expert regarding procurement
management with similar projects in the past.
In this case “meetings” can refer to meetings of the project team to develop the management
plan, but it can also include meetings with potential bidders to exchange information, a
process which is continued in the Conduct Procurements process.
Procurement Management Tools &
Techniques
c. Market research
This is an examination of the capabilities of vendors within the
industry in general, and specific vendors that would be possible
candidates for vendors on this specific project.

d. Meetings
Research alone may not provide specific information to formulate a
procurement strategy without additional information interchange
meetings with potential bidders. By collaborating with potential
bidders, the organization purchasing the material or service may
benefit while the supplier can influence a mutually beneficial
approach or product.
Plan Procurement Management:
outputs
The procurement management plan is a component of the project management plan that describes how
a project team will acquire goods and services from outside the performing organization. It describes
how the procurement processes will be managed from developing procurement documents through
contract closure.
The procurement management plan can include guidance for:
•Types of contracts to be used;
•Risk management issues;
•Whether independent estimates will be used and whether they are needed as evaluation criteria;
• Those actions the project management team can take unilaterally, if the performing organization has a
prescribed procurement, contracting, or purchasing department;
•Standardized procurement documents, if needed;
•Managing multiple suppliers;
•Coordinating procurement with other project aspects, such as scheduling and performance reporting;
•Any constraints and assumptions that could affect planned procurements;
•Handling the long lead times to purchase certain items from sellers and coordinating the extra time
needed to procure these items with the development of the project schedule;
•Handling the make-or-buy decisions and linking them into the Estimate Activity Resources and
Develop Schedule processes;
Plan Procurement Management:
outputs
•Setting the scheduled dates in each contract for the contract
deliverables and coordinating with the schedule development and
control processes;
•Identifying requirements for performance bonds or insurance
contracts to mitigate some forms of project risk;
•Establishing the direction to be provided to the sellers on
developing and maintaining a work breakdown structure (WBS);
•Establishing the form and format to be used for the
procurement/contract statements of work;
•Identifying prequalified sellers, if any, to be used; and
•Procurement metrics to be used to manage contracts and evaluate
sellers. A procurement management plan can be formal or informal,
can be highly detailed or broadly framed, and is based upon the needs
of each project.