In this article, I will explain what a procurement strategy is, what it should contain and why it is valuable to a project. This is important knowledge for any project manager who may need to buy or rent goods or services for their project, and it is a common topic in project management exams – like APM’s Project Management Qualification (PMQ).
What is a Procurement Strategy?
Put simply the procurement strategy is the plan for how goods and services that are needed to deliver the project will be secured (either by buying or renting). In this article, I use the word strategy but I could just as well say “plan”. The strategy (plan) should detail what will be procured, how and when. It forms one section of the PMP (Project Management Plan). The procurement strategy should be created along with all other project plans (such as schedule, budget, risk management plans etc).
What should a procurement strategy contain?
- Make or buy decision: i.e for the item we need (be it equipment, material or services) do we need to purchase it or can we make it in-house? To make this decision the project manager must consider several factors, including cost and budget, quality requirements and time. It can save cost to make things in-house, but it could be expensive in terms of time.
- Vendor (or supplier) selection process: how will you go about selecting the best vendor (i.e the one that you can say will bring the most value to the project?). A robust selection process ensures that you have done due diligence to evaluate different options and that your eventual decision can stand up to scrutiny. A typical process should involve:
- Research to identify potential vendors and understand the marketplace
- (Potential) Pre-qualification whereby potential vendors are sent a questionnaire where they provide essential information to check if they could be in the running for becoming your vendor
- Tender: the shortlist from pre-qualification is invited to submit a proposal where they detail how they can meet your requirements and usually provide some sort of cost description
- Award contract: the type and terms of the contract are agreed with the preferred vendor (this usually involves contract specialists or legal experts)
- Manage contract: as the work is performed both sides should strive to manage the contractual relationship in a positive manner
- Post-contract: close out all administration, pay all invoices and potentially set up supper contracts
- Preferred contractual relationship: what type of relationship with a vendor is best for this project and this particular item that is being procured? Is it best to have one single integrated vendor, is that the entire work goes to one vendor? Whereas this has the advantage that it limits the effort to coordinate different relationships it does also involve “putting all eggs in one basket” so if something goes wrong with the vendor the project will suffer! So for some projects, it is best to have multiple vendors, either working in parallel to complete work or in different stages – although this will require more effort in terms of coordination so an informed decision has to be made for every single project.
Does my project need a procurement strategy?
Will you need to purchase tools, equipment or material to deliver your project? Will you need to hire staff, or engage consultants or contractors? Or will you need to engage external services in any other form, such as surveyors, advisors, support or training?
Well… if you answered yes to any of those you do need a plan for how to go about securing those resources. Plan = strategy.
You might not need to make the strategy overly detailed, as always each plan has to be proportionate to the work that it supports. Hence, for major or strategic procurements the procurement strategy needs to be a significant document (or collection of documents) and for smaller procurements, you might just need a simple checklist or include procurement activities as line items in your project schedule.
What happens if I do not have a procurement strategy?
Poor decision-making about what to procure
Because the procurement strategy should outline what to buy vs what to make, it ensures there is a conscious and proactive decision about what items will be procured. By making informed decisions ahead of time the project manager can ensure the right decision about what to make or buy is made, taking into consideration all aspects of the project – not just cost, but also quality, requirements and scope. Without a procurement strategy, there is a risk that these decisions are rushed, or not actively made, and it comes down to a last-minute desperate dash which can be costly both in money, time and quality!
Lack of time and resources to do procurement properly
By including a procurement strategy in the overall project plan, and by factoring in procurement activities in the overall planning activities, there is a greater chance that sufficient time and resources to do all the procurement activities properly. If procurement hasn’t been factored into the plan, or the procurement strategy does not fully detail what needs to be done, odds are the project will not have time or resources (people and money) available and therefore decisions may have to be rushed or made on unfounded assumptions, or the project has to go with “whatever vendor is available right now”. This can cause delays, cost overruns and failure to meet quality criteria.
Also, don’t forget that procurement can take a very long time and there is a real threat of delay to your project if you have not understood and factored in the time needed for the different activities and decisions.
Questionable decision making
A good procurement strategy ensures proper considerations have been made for how vendors will be selected. This means that there will be time and resources to do due diligence which should ensure you objectively select the supplier that will bring the most value, and you can spot the dodgy dealers, the risky options and the ones that promise everything and deliver nothing. It also means that, if at any point in the future it would turn out that your vendor is less than spot-less at least you can say that your decision to work with them was based on your best efforts.
A robust procurement strategy also ensures that you can show that your decision was based on facts, and best value, and not about which vendor took you to the best lunch, or whom you might have to go to school with. In short; a robust procurement strategy protects you and the project from future accusations of wrongdoing and corruption.
Who is responsible for procurement in my project?
If the project includes procurement activities then those fall under the overall responsibility of the project manager – just like any other activities in the project.
It is important to note that the project manager is not expected to be a contract specialist or legal expert so it will likely be necessary to engage someone who is to ensure the right types of contracts and terms are selected.
In this article, I have outlined what a procurement strategy is and why it is important. If you are interested in learning more about this topic, or other aspects of planning a project check out our APM accredited “Project Management for Practitioners” course