Project Procurement Management Tips

by Project Management Process Group

1. Plan Procurement Management

• Buyer Vs. Seller Perspective. On the PMP exam, if a situational question on procurement does not describe explicitly a scenario from a buyer’s or seller’s point of view, assume that you are in the role of the buyer
• Centralized Vs. Decentralized Contracting Environment. Topic not in the PMBOK Guide but possible on the PMP exam. In a decentralized contracting environment, a procurement manager is assigned to one project full-time and reports only to the project manager. In a centralized contracting environment, a procurement manager is assigned to one procurement department and reports directly to the head of this procurement department.
• Contract Vs. Agreement. A contract is typically created with an external entity and can be considered an agreement.  An agreement outlines internal or external relationships and may not necessarily be a contract.

• Selection Criteria of Each Contract Type.
  • Fixed-price – favored when the scope of the project is clearly defined and not subject to change.
  • Cost-reimbursable – used when the scope of work is not well defined or is subject to change.
  • Time and material – used for smaller contracts when there is not a firm scope of work, or when the work is scheduled for an indefinite period.

• Size of Procurements. On the PMP exam, assume that procurements are large and based on contracts. Thus, unless indicated otherwise, the seller provides all of the work external to the buyer’s team rather than supplying only some resources to supplement the team.
• US Contracting. The PMP exam is based on US contracting laws and customs.

2. Conduct Procurements

• Letter Contract. An agreement that lets you start work before the contract is finalized, by identifying the work that will be done and outlining the payment structure for the time that the agreement is in place – usually, 30 days.
• Privity. The legal term used to indicate a legal relationship – e.g., contract privity.
• Sole Source Vs. Single Source. In both instances of procurements, you do not need to compete for a bid. In the sole source type of procurement, you have one source only for a given product, from which you are forced to procure from – e.g., a company that owns a patent. In the single source type of procurement, you have multiple qualified sources for a given product, but you contract directly with your preferred seller, waiving the opportunity to hold a competition.
• US Government Advertising of Bids. By law, all US government agencies, as well as counties, states, and federal governments, are required to publicize most of their procurements.

3. Control Procurements

• Aspects of Procurements Closure. Procurements are closed:
  • Legally – statement of work completed and deliverables accepted
  • Administratively – terms and conditions of contract followed and procurement documentation archived
  • Financially – payments made.

• Audit Vs. Inspections. You audit processes and inspect deliverables (or products).
• Closed Project or Phase Vs. Closed Procurements. Projects not performed under contract do not require a formal procurement closure process but projects with many procurements have many procurement closures. On the other hand, all projects do require the Close Project or Phase process and it only happens at the end of the project or phase.
• Contract Interpretation of Entire Agreement Clause. In accordance with the entire agreement clause, the contract supersedes any prior agreements the contracting parties might have made with regard to the subject of the contract. On the PMP exam, therefore, you need to remember that a requirement not in the contract does not have to be met, even if it was agreed upon prior to signing the contract.
• Formal Record of Contract Changes. Any and all changes to the procurement contract need to be recorded formally and in writing to reflect the formal nature of the contract.
• Performance Review Vs. Audit and Inspections. Performance reviews are about the work and focus on the agreed processes contained within the negotiated contract. Audits and inspections are about the processes and deliverables.
• Roles and Responsibility in Contract Change. Depending on the size of an organization, the procurement manager may be the only person with authority to sign and approve any change to the negotiated contracts.
• Roles and Responsibility in Contract Closure. Since contracts are legal documents, the contract administrator is the person who formally closes out contracts, once informed of the contract project work completion by the project manager.
• Roles and Responsibility in Contract Monitoring. All parties to the contract – buyer and seller – are equally responsible for carrying out work to ensure that the terms and conditions of the contract are being fulfilled.
• Time Is of the Essence. A contract clause that indicates that on-time delivery is mandatory and, therefore, contractually binding.

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