Procurement Planning Basics

Summary

This video covers the fundamentals of project procurement management, emphasizing the importance of planning when acquiring external resources like labor or tools. It introduces key concepts such as procurement planning, contract formation, and the make vs. buy decision. The script explains the roles of the buyer and seller, the significance of clear contracts, and the tools for decision-making, including expert judgment. The key documents for procurement, such as the procurement management plan and statement of work (SOW), are also discussed, highlighting their importance in ensuring a successful procurement process.

Takeaways

• 😀 Procurement management involves acquiring goods or services from external vendors to meet project needs.
• 😀 The project manager (or scrum master) plays a key role in managing procurement and vendor relationships.
• 😀 Contracts are essential in procurement, as they legally bind the buyer and seller to agreed terms and conditions.
• 😀 A clear and detailed contract helps to avoid disputes by setting clear expectations for payment, delivery, and quality.
• 😀 The make vs. buy decision is crucial for determining whether to procure externally or develop internally, based on factors like cost, risk, and capacity.
• 😀 A procurement statement of work (SOW) is an important document that outlines the seller's responsibilities and necessary details for proposals.
• 😀 Expert judgment from stakeholders can be used to guide procurement planning and decision-making.
• 😀 Procurement management requires careful planning and documentation, such as the procurement management plan and SOW.
• 😀 Procurement processes follow a cycle: identifying sellers, selecting a vendor, managing payments, and eventually closing the procurement once the work is completed.
• 😀 Effective procurement planning leads to a mutually beneficial relationship between the buyer and seller, ensuring successful project outcomes.
• 😀 When dealing with third-party products or services, it's vital to ensure there are no conflicts with end-user customer requirements or licensing obligations.

Q & A

What is project procurement management?

Project procurement management involves obtaining labor, resources, or other tools from external vendors. It's designed to help protect the project, company, and vendors during the procurement process.

What is the purpose of the planned procurement planning process?

The planned procurement planning process helps outline how to acquire necessary products or services for the project, ensuring everything is properly planned before procurement occurs.

What are the four key procurement processes covered in this tutorial?

The tutorial focuses on planned procurement planning. It briefly mentions other processes like conduct procurements, administrate procurements, and close procurements.

What is the role of the buyer in procurement?

The buyer, typically the project manager or scrum master, is responsible for managing procurement activities, selecting vendors, and ensuring the contract terms are met.

What is a contract in the procurement process?

A contract is a legal document that defines the agreement between the buyer and the seller. It specifies the product or service to be provided, payment terms, delivery schedules, quality expectations, and dispute resolution procedures.

What are the main characteristics of a procurement contract?

Key characteristics include being a legal document, specifying obligations for both parties, including delivery schedules, quality expectations, and payment terms, and outlining dispute resolution procedures.

How do you decide whether to make or buy a product or service?

The make vs. buy decision is based on factors like the seller’s capacity, cost, risk, and skill. These criteria help determine whether it's more beneficial to create the product or service internally or procure it externally.

What is the significance of the Statement of Work (SOW) in procurement?

The SOW defines the scope of work and details the tasks that the seller will perform. It ensures the seller understands the project requirements, helping both parties agree on the deliverables.

What is included in a procurement management plan?

A procurement management plan includes guidance on contracts, standard terms, procurement schedules, and supplier handling. It also helps manage assumptions, constraints, and inter-project dependencies.

What is the purpose of the procurement statement of work (SOW)?

The procurement statement of work provides a detailed description of the work needed from the seller, ensuring they have the skills and resources to meet the project requirements.