What Is Project Procurement Management?

With an abundance of choices of where–and how–to shop, the need to oversee everything a company purchases is more important than ever. Project procurement management has arisen not only to supervise what businesses spend money on but also how they allocate budgets for projects, processes, and more. Read on for an in-depth guide on all things project procurement management, including who manages which aspects of the process, the steps involved, and finally, the important differences between project procurement management vs. project management.

What Is Project Procurement Management?

Starting with a foundation in definitions, exactly what is project procurement management? According to Adobe, the field is essentially the process of obtaining goods, services, and materials to carry out your desired project. Similarly, Wrike succinctly describes it: “Project procurement is obtaining all of the materials and services required for the project. Project procurement management encompasses the processes used for making sure project procurement is successful.

What Are the Three Main Processes in Project Procurement Management?

There are three main processes in project procurement management. They include:

1. Planning procurements 
2. Conducting procurements 
3. Administering (controlling) procurements

It should be noted that in previous editions of the Project Management Book of Knowledge, an additional fourth process was included: closing procurements. However, the sixth edition removed this process.

Why Is Project Procurement Management Important?

With an understanding of how the project procurement management process works, let’s move on to why organizations have a team of procurement managers to handle these responsibilities. Project procurement management is beneficial to organizations for a number of reasons, most notably because it leads to:

1. Increased stakeholder satisfaction: Effective project procurement management ensures that the right goods and services are procured from the right sources. This, in turn, contributes to the overall success of projects, meeting stakeholder expectations. When stakeholders receive the expected quality of deliverables on time and within budget, their satisfaction increases.
2. Measurable objectives: Project procurement management involves defining clear requirements and objectives for the goods or services to be procured. This clarity enables the establishment of measurable criteria for evaluating the performance of vendors and the project overall. Measurable objectives provide a basis for assessing progress and success throughout the project lifecycle.
3. Profitable outcomes: By carefully managing procurement processes, organizations can optimize costs and enhance profitability. This involves selecting suppliers based on factors such as cost-effectiveness, quality, and reliability. Effective negotiation and contract management contribute to achieving favorable terms, ensuring that the project outcomes are not only successful but also financially beneficial for the organization.
4. Reduced risk: Project procurement management includes risk assessment and mitigation strategies. Through careful vendor selection, evaluation of supplier capabilities, and the inclusion of risk management plans in contracts, organizations can reduce the likelihood of disruptions and unforeseen issues. This proactive approach contributes to a more predictable and stable project environment.
5. Transparent process: A transparent procurement process fosters trust among stakeholders. When the criteria for selecting vendors, the evaluation process, and decision-making are clear and open, it enhances accountability. Transparency in project procurement management helps in building confidence among stakeholders, as they can understand and trust the methods used to make procurement-related decisions.
6. Better negotiation: Skilled project procurement management involves effective negotiation with suppliers to secure favorable terms and conditions. This includes negotiating prices, delivery schedules, and contractual terms that align with the project's goals. Better negotiation skills enable project managers to strike mutually beneficial deals, maximizing value for the organization and ensuring successful project execution.

In summary, project procurement management is crucial for achieving project success by aligning procurement activities with project goals, ensuring stakeholder satisfaction, optimizing costs, mitigating risks, maintaining transparency, and enabling effective negotiation with suppliers. These factors collectively contribute to the overall success and profitability of the project.

Why Is Risk Management Important in Project Procurement Management?

Risk management is critical to project procurement management because unexpected disruptions, such as delays in deliveries, or possibly avoidable issues, such as detecting a fraudulent vendor before signing a vendor, can significantly impact a company’s finances and operations. Quandary Consulting Group outlines 10 common risk to watch out for in project procurement management:

1. Price instability: Managing the risk of fluctuating prices is crucial in project procurement management to avoid budget overruns and financial instability.
2. Supply chain disruptions: Identifying and mitigating potential disruptions in the supply chain is essential to ensure a consistent flow of goods and services.
3. Complex projects: Effective risk management is necessary for handling the complexities inherent in projects, minimizing potential complications and delays. 
4. Fraud: Vigilance against fraudulent activities is paramount to prevent financial losses and maintain the integrity of procurement processes.
5. Changing work environments: Adapting to evolving work environments requires proactive risk management to address unforeseen challenges and ensure project continuity.
6. Poor supplier performance: Mitigating the risk of subpar supplier performance is crucial for maintaining the quality and timely delivery of project components.
7. Unethical sourcing: Identifying and preventing unethical sourcing practices is essential to uphold ethical standards and corporate responsibility in procurement.
8. Overspending: Managing the risk of overspending involves careful budgeting and monitoring to avoid exceeding allocated financial resources.
9. Inaccurate supply chain forecasts: Effective risk management includes addressing uncertainties in supply chain forecasts to prevent disruptions due to inaccurate predictions.
10. Manual procurement processes: Automating procurement processes reduces the risk of errors and inefficiencies associated with manual methods, enhancing overall project efficiency.

What Is the First Step in a Project Procurement Management Plan?

GEP highlights six steps to a project procurement management plan, and the first step of the plan is initiation. In this stage, the procurement management team is responsible for making a business case for why the procurement should happen, what the scope of the project is, and what stakeholders need to be involved. The other steps of the plan include preparation, implementation, performance management, completion, and documentation.

Who Handles Project Procurement?

As you might expect, the responsibilities of project procurement management will fall to different teams for various reasons. Depending on the organization, as well as the source you consult, anyone from the project manager to a team of procurement specialists or procurement managers may handle project procurement.

Project Procurement Management vs. Project Management: What’s the Difference?

Project procurement management and project management are two closely related fields with notable differences. Project management is the broader discipline that encompasses all activities involved in successfully completing a project. Project procurement management is a subset of project management that specifically deals with the processes related to acquiring external goods and services necessary for the project's success. As Oboloo summarizes: “Project management encompasses various aspects of a project, including time, cost, quality control, risk mitigation, stakeholder communication, etc. Meanwhile, procurement primarily deals with sourcing suppliers/vendors for required materials/services at competitive prices while maintaining quality standards.”

Overview: What Is Project Procurement Management?

Project procurement management is a critical aspect of project management that specifically deals with the processes related to acquiring goods, services, or results from external sources. It involves systematically identifying, obtaining, and managing external resources to meet the project's requirements and objectives. The goal of project procurement management is to ensure that the project obtains the necessary resources from external vendors or suppliers in a timely, cost-effective, and quality way.