Article Overview 

Most projects need you to buy things. You probably don’t have all the equipment, physical resources, raw materials or even skills required to deliver the project – and that’s where procurement comes in.

Table of Contents

  1. Step 1: Understanding Requirements
  2. Step 2: Selecting a Vendor
  3. Step 3: Negotiating and Contracting 
  4. Step 4: Delivering and Monitoring the Service
  5. Step 5: Renewing or Exiting the Service

The procurement process is the effort involved in buying things that your project needs. The procurement lifecycle has five steps:

1. Understanding requirements
2. Selecting a vendor
3. Negotiating and contracting
4. Delivering and monitoring the service
5. Renewing or exiting the service.

Let’s look at each of those.

Step 1: Understanding Requirements

First, you need to know what it is that your project requires. Once that’s clear, you might decide to build or source the requirements in-house, or to outsource it to a supplier. In my experience, we often buy in software packages ‘off the shelf’ for implementation because we do not have a software development team in-house to build them ourselves.

You may be in the same situation – or you may be wanting to hire in equipment that you don’t have on-site or something else.

This is called the ‘make or buy’ decision. When you know what the requirements specification is, you can make an informed choice about whether you are going to stick with in-house resources making the solution for you, or whether you are going to buy in the service or equipment you need.

Step 2: Selecting a Vendor

If you can’t source what you need internally, then you have to buy it in from a vendor. But which vendor should you choose?
Vendor selection can be a complicated process. You’ll want to consider how quickly a vendor can meet your requirements and whether they can hit your project deadlines. There are also commercial factors like the viability of the company and what credit terms they offer.

It’s useful to work with your procurement team to review potential suppliers and narrow down the list. You may find they have a list of preferred suppliers which is a good starting point, and in some cases, there may be restrictions on what companies you can buy from.

There are a number of different ways to select a vendor including a Request for Information or a Request for Proposal. Vendors can then bid for the work and pitch to you. Often, the shortlisted companies will come to your location and present their solution or describe how they would work with you during the project if you were to choose them.

Step 3: Negotiating and Contracting

Once you have chosen a vendor who can fulfill your requirements, it’s time to negotiate the finer details and get the contract written. 
Typically, either your procurement team or theirs will have a template contract, and you will then have to go through it and work out which are the configurable clauses – the ones that you want to review, update and amend to reflect the deal you are going into with this supplier. There is always scope for negotiation, so if they present you with a contract and you don’t think it 100% fits your needs, then say so. 

Again, it’s helpful to have the support of your procurement or legal teams so you can adequately negotiate the contract to the benefit of the company and not get yourself into any trouble later on! Sometimes project managers won’t get involved in this step at all.

Step 4: Delivering and Monitoring the Service

Project managers will definitely get involved in this step. Here, the vendor does the work and you check that their work is to the required standard.
They deliver and work alongside your project team to complete their assigned tasks – usually delivering the service or implementing the tool or whatever it is that you have bought from them. 

You’ll continue to carry out performance monitoring all the while the project has a dependency on their ability to deliver. Use the terms in the contract as a benchmark for assessing whether or not they are delivering to your required plans. You’ll have a schedule or some kind of write-up in the contract that talks about deadlines, quality measures, and anything else they have to stick to. 

Step 5: Renewing or Exiting the Service

Just like the project has a close, your procurement activity on the project also has to close. 

At this point, the contract may naturally close – for example, if you hired a cement mixer and you don’t need it any longer. It’s quite easy to wrap up the procurement in that case: just pay the bills and you’re pretty much done!

But some contracts are entered into for the long term, for example, if you buy some software, you’ll probably enter into a maintenance agreement that ties you in to support the software for a certain period of time. That contract may need to be renewed or canceled outside of the lifecycle of the project (in other words, when the project is already closed). In those cases, you’ll have to hand over contract administration to the operational team who is going to be responsible for the contract services going forward, once the project is finished. They’ll take over handling the contract and making the decision, when the time comes, to renew or exit from the arrangement.

As a project manager, you might not have a lot to do with contract close-out, but you should make an effort to pass all relevant procurement information on to the operational team, so they have the full history.

That’s the procurement lifecycle in five steps!