Procurement is the process of purchasing, renting, or contracting with some suppliers to meet the requirements. The process of procurement also required proper management to achieve optimal performance, efficiency, and return by smart sourcing, continuous improvement, and proactive management of the vendors.
Managing the relationship with the suppliers and vendors will ultimately result in getting the best quality and optimization of our processes.
What is a Procurement Management Plan?
Procurement management planning helps to handle all the processes of procurement more efficiently and effectively.
There is a number of processes involved in the management of procurement such as outsourcing, asking for requisitions, expediting the function, inspection of the product, and reconciliation of the procurement activity.
However, the feasibility of partnering or purchases from vendors depends on the pros and cons of producing goods in-house. How long the relationship is required and on what basis are the major questions to answer.
Once the decision has been made, only then a trustful relationship with the vendor can be established on the basis of cost and time.
In project management, the procurement management plan defines how goods and services will be purchased, rented, or contracted for the project needs and how the vendors will be managed.
Key Elements of Procurement Management Plan Template Excel
There are several components of procurement management planning. Some of the major ones are;
Procurement Process: In this section, the necessary requirements to manage the project needs are identified. It includes; initiation of the procurement demand request, development of the needs in technical, quality, and delivery terms, approval of the requisition, bidding process, contract management responsibility, and contract closure.
Roles and Responsibilities: It defines the roles of different resources of the project, and who is responsible for which stage of the procurement process.
Identified Procurement Needs: In this section, the feasibility of outsourcing goods or services is calculated and a list is made to include the final decision with justification statements.
Timing: It defines the timeframe in which requested goods or services are required for backward calculation on when to start the procurement process.
Change Approval Process: It defined the system from making changes in the procurement documents to ensuring that the changes are understood and approved by the authorized persons.
Vendor Processes: It defines the system for the management of vendors and how they will process invoices, negotiate, update status, and find approved changes.
How to Create Procurement Management Plan in 8 Steps
There can be different approaches to making a procurement management plan depending on the nature of the business or project. But by following the below guidelines an efficient project management plan template can be created;
- Define all the procurement terms in simple jargon
- Determine the type of agreement to use with vendors
- Identify the risks involved in out souring or partnering with certain vendors
- Plan strategies for the mitigation of involved risks
- Define the formats and template to be used for documentation
- Identify and state the constraints
- Identify the decision criteria and define the approval rules
- Develop a vendor management plan
It is recommended to go above guidelines step by step and ensure the reflection of these in the procurement management plan for approving its rigidness and effectiveness.
Standard Procurement Management Documentation
Standardized procurement documentation is the part of the procurement management plan that helps workers and managers to understand a complex project mechanism better. Although, this project documentation provides assistance to the proper understanding of the project work hierarchy.
As we know that in the process of procurement there are several phases, and other project management activities are underprocessed. For the betterment of the project, we make smart plans to achieve our goals and provide ease to make our project-related contract successful.
In other words, we make simple tasks that involve purchasing any item or service outside the firm. This approach accelerates the process of procurement. And that’s why we make this procurement documentation.
This documentation also provides brief info about proposals, price details and comparisons, kinds of vendors, and their contact details.
This procurement plan template provides data that is based on deep analysis, which helps to understand what is our procurement documentation requirements.
This Procurement management plan Template excel includes the following processes:
- Identification: what to procure and then give a timeline or due date for purchasing.
- Identification and selection of external service providers and items suppliers.
- Proposal or bids and selecting a supplier and service provider.
- A good professional relationship with the service provider/supplier.
- Contract terms and conditions.
Conduct Procurement Management in PMP
A procurement management plan organizes all vendors and contractors and gives you peace of mind. The main components to conduct a procurement plan for project manager professionals are explained;
The key elements are;
- Procurement management plan
- Selecting or creating the templates for the procurement process management
- Figuring out the type of contract
- Doing documentation regarding the procurement process
- Looking for the source selection area
Here are a few steps to conduct an effective procurement management plan;
Define Roles and Responsibilities
The first step is to clarify the roles of all the parties involved in a project. Their involvement will help you to figure out their share in work and interest in the project. To run a project smoothly, the roles and responsibilities are defined for project managers, corporate executives, and contract managers.
To keep the roles and responsibilities apart the boundaries are defined to run a project smoothly without interruption and hassle. Read more RACI Matrix.
Creating a Schedule
A procurement management plan requires efficiently scheduling the processes of the project right according to the timeline of the project.
Proper scheduling will help you to know the demands at the right time. More on Project Scheduling.
Identify and Manage the Risks
Risk identification is done by locating the problem areas where there are chances of procurement imbalance. Knowing the risks beforehand will save you a lot from mishaps and unprecedented situations. All the risks are collected and the senior management then plans alternatives to avoid those risks. Risk Management.
It is a crucial step where most problems are likely to arise. It affects the budget of the project. The step includes bidding from different vendors. Request for a proposal is issued to ease this delicate step and make arrangements under the supervision of experts. Project Costing.
Establish Decision Criteria
This step includes the workflow approval criteria. Further cost analysis and performance measurement are done on these made criteria.
A good procurement plan has a vendor management system as well. It helps you to set protocols to keep the timeline and goods under check. The status of the delivery is also managed under the vendor management step.
Review and Approval Process
Approval of all the contracts and reviewing the changes in the procurement plan will help you to amend the scope of the project.