8+ Sample Procurement Management Plan
What Is a Procurement Management Plan?
A procurement management plan is a business plan that identifies and defines the specific requirements for a business project, laying down the necessary steps towards getting into the final agreement or contract. It involves the entire project process, from drafting and collecting the necessary documents leading to the signing of the contract. The project that the procurement management plan describes refers to the procedure of purchasing and obtaining products and services within the industry of the organization. The procurement management plan aims to set and define every aspect of procurement, including the procured items, associated contracts, contract approval process, cost determination, and conclusion criteria. In simple terms, the procurement management plan serves as the framework for a project. It acts as a guide for the organization and the stakeholders throughout the project timeline. Remember that the procurement management plan is flexible. The business can modify, revise, and enhance the document throughout the project according to the changes happening for smoother business operations.
According to the Supply Chain Magazine, more or less 73 percent of contract management processes are under the execution of silos. These silos refer to finance leaders and procurement teams that communicate between different documents and other sources of information to get the essential data they need to move forward, more likely losing most of the documents and giving up along the way.
Components of a Procurement Management Plan
Procurement management plans play a vital role in the operations of an organization. It documents how a project unfolds through its purchasing decisions. It is a component that deals with the external procurement process for a particular project. Procurement management plans are separate from statements of work or terms of reference in the sense that they focus more on overall strategies and vendor management. This section of the article describes different and essential elements of a procurement management plan with descriptions to understand them better.
Roles and responsibilities: The procurement management plan details the project procurement roles of various individuals to ensure that the purchasing process runs smoothly. Project managers oversee the process and manage the project schedule, budget plan, and associated risks. The technical managers determine the statement of work and handle all associated technical requirements and specifications from contractors. Contract managers provide the necessary contractual insights and documents relating to the provisions and terms of the contract. Corporate executives give advice and spearhead the decision-making and negotiation processes about contract issues. They are also responsible for reviewing and approving contracts. On the other hand, legal attorneys or lawyers are responsible for advising on legal provisions and contract documents. Many of these roles have the chance to overlap, and the procurement management plan helps define their responsibilities, boundaries, and authorities from each other.Project scheduling: More often than not, external contractors, suppliers, vendors, and service providers influence the project schedule. Take note that a contractor must handle one task at a time in the project schedule since handling more than one project will result in poor contractor relations due to micromanaging tasks. An exception to this rule is when a contractor manages and performs two parallel tasks. The organization also develops and produces the statement of work or terms of reference that details the required work of contractors, while the contractor provides a price quote and project schedule. The procurement management plan identifies the implications of the schedule, possible constraints, and assumptions.Vendor control: When performing projects with contractors, the project owner or organization gives up daily activities and operations to accommodate project contractors, emphasizing project control. Vendor control guarantees that the work of vendors, service providers, suppliers, and contractors is acceptable. The techniques for vendor control must be available in the procurement management plan, the statement of work, or terms of reference. The section includes relevant information regarding product quality and measurements, site inspections, external facility inspections, and regular project meetings. There must also be regular updates from the vendor to the owner, and these must be comprehensive with information to update the management and organization.Estimates: Procurement management handles plenty of estimating processes. In most cases, estimates are available to project owners before the start of any project bids to ensure that finances are in line. During the lifetime of the project, changes to the work statement need estimations and budgeting as necessary. Once the work is complete, final costs go on record for data analysis and future reference. If projects last for more than a year, net present value analysis and capital budgeting techniques guarantee that the time and value of the project went through proper accounting methods. If a project is non-tangible, a cost-benefit analysis is the best estimating tool to use.Prequalified vendors: Prequalification is a concept developing in various industries, corporations, and businesses that identifies prequalified vendors lists. Owners spearhead the method of selection that identifies trusted contractors through requests of qualifications. The contents of the request include past projects, project team descriptions, and methodologies. The request for classification serves as a shortlist of contracts for various projects, especially if the company is part of a large organization, government agency, or NGO.Risk management: By utilizing external vendors, procurement activities are open to various types of risks. The organization must identify all possible risks that can happen from utilizing external vendors to accomplish a project. Despite it taking more time than usual, it is advantageous to list all potential risks that can arise. The level of detail in the work structure heavily depends on the time and detail that the organization puts in its planning stages. Contract legal disagreements involve project and non-project work that require resources for resolution. The procurement management plan must consist of risk profiles, including risk tolerance, types of contracts, risk severity, risk probability, detailed work statement, policy and procedures, and the review and approval of requirements. Legal jurisdiction: The procurement management plan must contain the legal and proper jurisdiction of the project that must translate into contract documents. The document must immediately tackle various legal issues, including environmental requirements, regulatory inspections, and reviews. The minimum legal requirements must be within the procurement management plan to guarantee that all the stakeholders are aware of their existence and act accordingly.Payment: Procurement management plans hold information about payment methods, schedules, and currencies. Most project contracts follow a progress basis. The owner pays the vendor upon an agreed-upon period, usually every month. Many projects utilize the payment schedule as it is the most convenient method for both parties. However, there are instances where conflicts arise despite working smoothly if the contractor feels like the inspectors give them less credit when they are working at their best performance.Constraints and assumptions: Most procurement management plans and contracts operate in an environment that contains various constraints and assumptions, including legal matters, external stakeholders, budget assumptions, schedule constraints, standards and specifications, geographical and physical restrictions, ground conditions, air, and data quality, and security constraints.
How To Create a Procurement Management Plan
Procurement management plans take time to develop and require much thought. The project manager holds the responsibility of overseeing the entirety of the procurement management plan, but it does not mean they are the only ones who work. Procurements are project-wide, and everyone must be on the same page as it involves approving and managing contracts. The document is in a step-by-step process that identifies different parts of the project procurement process. A procurement management plan follows the steps below that you can use for your next project.
1. Define the Roles and Responsibilities of Individuals
The first step of building the procurement management plan is to identify the people working on the project. It guarantees that all members of the project team understand their responsibilities and the scope of work they handle. The step eases out the process that individuals need to fulfill while also setting boundaries to their roles to ensure there are no overlapping responsibilities and duplication of efforts. The section must identify the roles of different individuals, including the responsibilities of project managers, contract managers, corporate executives, vendors, and suppliers.
2. Develop a Work Schedule for Days of Operation
Scheduling the operation days for the project equates to setting up various timelines to accomplish work according to the project. Breaking out the tasks with a certain set of estimates of the start and end dates helps the organization better understand the procurement process and the dates of completion. You can use project management software to help manage and organize schedules in different task levels.
3. Identify and Mitigate Associated Project Risks
Risks are inherent to any task, plan, or project that the organization engages in to develop. These risks have a high probability of manifesting, and businesses encounter can still encounter them. A procurement management plan helps the organization to identify the types of risks and the possible occurrence and minimize their impact by setting up risk management plans. After creating a comprehensive list of potential risks, the plan you create helps mitigate them. Assigning a team member to deal with specific risks allows them ownership over closing.
4. Specify the Involved Costs
Determining costs is essential in the procurement management plan because it directly affects the project budget. The procurement process involves issuing a request for a proposal that asks the vendor for a bid proposal for products and services. The estimated costs in the proposal come from the project timeline, scheduled due dates, vendor work arrangements, instrument proposal, and project bids.
5. Establish a Decision Criteria and Approval Workflow for the Project
The fifth step of the procurement management plan explains the significance of creating the decision criteria and approval workflow for different contracts for the project. It helps the organization to specify the elements for the final approval of the plan, including proposal reviews, document analysis, and cost analysis. The detailed workflow ensures that the contracts during the procurement process undergo thorough evaluation and review before the final stage of approval. The decision criteria represent the standards vendors or suppliers must meet in each contract. It ensures the capability of these individuals to follow work schedules and provide the necessary products on time.
6. Set Up Vendor Management
Vendors are key stakeholders that are responsible for the success of the entire procurement process. This step identifies the strategies and protocols for managing the vendors. In this step, the organization ensures that the vendors or suppliers with detailed information about the type of work and delivery timeline to produce the goods. Vendor management includes processes that involve invoices, statements, and timesheets to produce better workflows and process responses.
What are the four main processes of a project management plan?
When it comes to project management and procurement, it involves four principal processes. These include planning, selection, administering, and closing procurements.
What is a procurement plan?
A procurement plan is another term for a procurement management plan. Similarly, it details all the procurements processes relating to finding and selecting a vendor or supplier.
What is the main purpose of procurement management?
Procurement management guarantees the items and services the company must acquire for the projects and processes to efficiently and successfully promote the plan. The process is also responsible for negotiations between suppliers or vendors to optimize the use of time, money, and resources.
Procurement management plans are essential documents to guarantee the success of a project. As it is, the document incorporates the step-by-step process of acquiring products or services from suppliers and vendors. Organizations must be familiar with the procurement management plan to guarantee that all their projects become successful by identifying the roles and responsibilities of team members, setting up work schedules, specifying risks and how to mitigate them, estimating costs, establishing criteria and workflow, and promoting vendor management. Start making a procurement management plan for your next project by downloading the 8+ SAMPLE Procurement Management Plan in PDF samples today!