What Is Procurement?
Most projects require resources that are obtained through purchasing or subcontracting; this is called conducting procurement. Most organizations have individuals or entire departments dedicated to the task of purchasing what the organization needs to run its daily operations. When a project manager has outlined all of the work activities and resources required to complete each activity, she submits a list of all items that need to be purchased and/or contracted throughout the project lifecycle. Procurements can be classified into two general categories: items that need to be purchased and resources that must be managed through a contract agreement.
Items that need to be obtained for project activities are simply purchased through suppliers or vendors. This can be accomplished by the purchasing agent selecting items through a catalog or website, contacting the supplier/vendor, placing the order, establishing delivery requirements, and agreeing on payment terms and conditions. As soon as the item has been delivered and it is confirmed that it meets expectations, payment can be made and the transaction closed.
Another form of obtaining resources is the use of a contract agreement. In many cases, contracts are used to acquire external human resources needed for special tasks on work activities or perhaps the lease of equipment or facilities that will be used on work activities. As there is a certain amount of risk for both the buyer and seller in acquiring these type of resources, outlining the conditions of the contract is important and must cover the following:
- Scope of work to be performed
- Specific identification of a piece of equipment or facility
- Terms of its use or environment
- Duration that the buyer plans to have the resource
- Agreed upon price
- Special terms or conditions that would address risk for the buyer or seller
An agreement signed by both parties forms a legal binding contract requiring both parties to fulfill their responsibilities identified in the document(s).