Project Procurement Management

Summary

In this episode of 'Fundamentals of Project Management,' Betty, newly promoted at Super Toy World, learns about project procurement management while overseeing a project to design a stuffed horse. When she realizes she needs to source materials like glass eyes and yarn, she discovers the importance of working with outside suppliers. The video explores procurement planning, conducting procurements, contract management, and handling changes. Key concepts include procurement relationships, contract privity, and closure processes. It emphasizes the significance of managing external suppliers to ensure projects are completed on time and to specification.

Takeaways

• 😀 Procurement management involves collaborating with external suppliers to obtain necessary goods and services for a project.
• 😀 Procurement planning helps decide what to buy, when, and from which source, and results in the creation of a procurement plan.
• 😀 Conducting procurements includes obtaining bids, selecting suppliers, and awarding contracts in a fair and transparent manner.
• 😀 A procurement management plan guides the bid and award process, outlining roles, responsibilities, and documents needed.
• 😀 Legal 'privity' refers to the formal relationship created by a contract, and it only exists between the buyer and the seller.
• 😀 Control procurements ensures the proper management of supplier relationships, monitoring contract performance, and handling contract changes as needed.
• 😀 Both the buyer and seller must fulfill their contractual commitments, including appropriate and timely payments and addressing contract change management.
• 😀 Changes during procurement should follow the change process outlined in the contract, with the buyer focusing on changes affecting contractual terms.
• 😀 When closing contracts, it's important to resolve claims and review the entire procurement process for continuous improvement.
• 😀 Early termination of a contract may occur by mutual agreement or convenience, with the buyer potentially compensating the seller for preparatory work and completed deliverables.

Q & A

What is Project Procurement Management?

Project Procurement Management involves collaborating with external suppliers to acquire goods and services needed for a project. This process includes obtaining and managing the necessary materials through contracts to ensure timely delivery and meeting the project's standards.

What was Betty's first challenge in managing the project?

Betty's first challenge was realizing that her company, Super Toy World, did not carry the materials she needed for the stuffed horse project, such as glass eyes and yarn for the tail and mane.

What is procurement planning?

Procurement planning is the process of determining what goods or services to buy, when to buy them, and from which sources. The result of this process is the creation of a procurement plan.

What happens during the procurement process?

During the procurement process, potential suppliers are given the opportunity to bid. Sellers are selected, and contracts are awarded to ensure that required items and services are received on time and meet the project’s expectations.

What is 'privity' in the context of procurement?

Privity refers to the legal relationship established by a contract. If a buyer signs a contract with a seller, they have contract privity. If the seller then signs a contract with a subcontractor, the buyer does not have legal privity with the subcontractor.

What does controlling procurements entail?

Controlling procurements involves managing relationships with suppliers, monitoring contract performance, and making any necessary changes to the contracts to ensure that both parties fulfill their obligations.

What should happen if changes are required during contract performance?

Changes to contracts should be managed through the change process outlined in the contract and must be reviewed through the project's integrated change control process. The buyer is only concerned with changes that affect the contractual terms.

What is the purpose of closing contracts in procurement management?

Closing contracts involves ensuring that all claims are resolved, and reviewing the entire procurement process. This helps to ensure that all work and deliverables are acceptable and provides insights for future procurement processes.

What is an early termination of a contract, and how is it handled?

Early termination occurs when a contract is ended before the project is completed. This can happen due to mutual agreement or if stipulated in the contract. The buyer may need to compensate the seller for any preparations and completed work up to the point of termination.

Why is procurement closure important?

Procurement closure is essential because it verifies that all procurement work and deliverables meet the agreed-upon standards. It ensures that any unresolved issues are addressed and provides valuable lessons for future procurement processes.