Project procurement management

Project procurement management includes the processes necessary to purchase or acquire products, services or results needed from outside the project team. It covers purchasing agreements, contracts and the management of relationships with sellers (suppliers, vendors, contractors). The organisation can be either the buyer or the seller.

Processes (PMBOK 5th edition)

1. Plan procurement management (Planning): decide what to buy, how and when; make-or-buy analysis; select contract type; prepare procurement management plan, SOW, procurement documents and source selection criteria.
2. Conduct procurements (Executing): obtain seller responses, select sellers and award contracts (bidder conferences, advertising, proposal evaluation, negotiation).
3. Control procurements (Monitoring and controlling): manage the procurement relationship, monitor contract performance, make changes, and handle payments.
4. Close procurements (Closing): complete each contract, verify delivery, settle claims, archive.

Plan -> Conduct -> Control -> Close
 (make-or-buy)  (select, award)  (administer)  (settle)

Key concepts

• Make-or-buy decision: build in-house or buy outside.
• Contract types: fixed price (FFP), cost reimbursable (CPFF), time and material (T&M).
• Procurement documents: RFP, RFQ, IFB (bid), RFI.
• Source selection: weighted scoring, independent estimates, price, technical capability.
• Legal aspects: contract terms, conditions, penalties and law (in Nepal, the Public Procurement Act 2063 and Rules for public bodies).

Importance

• Gets needed expertise, equipment and services not available in-house.
• Transfers some risk to sellers.
• Controls cost through competition.
• Clear contract avoids disputes.

Example: A university buys 200 laptops and hires a firm to develop a student portal. It prepares an SOW, invites bids, selects a vendor by evaluation criteria, signs a fixed-price contract, monitors delivery and closes the contract after acceptance.