The Beginner Guide to Project Procurement Management

Project procurement management enables efficient purchasing and resource allocation for projects. Learn the basics of building a procurement plan here.
Written by:  Mark Saltarelli
Published:  April 22, 2024
project management team for procurement

Successful projects require a coordinated mix of people, processes, and materials. Even a relatively simple project, like baking a cake, can only be done well with the right supplies and steps. You may be tempted to pick a recipe and hope you have enough flour and sugar in the pantry (we’ve all done it). However, the process goes a lot smoother if you confirm you have all the ingredients and necessary tools in advance. This is the essence of project procurement management.

Project procurement management helps a project manager or team understand their procurement needs, streamline contract management, and conduct purchasing quickly and efficiently. It results in better planning, less waste, and optimized budgets for procurement management.

This article covers the knowledge you need to develop a project procurement plan. It highlights the steps and benefits of planning and offers tips for improving your project procurement management outcomes using simple strategies and the right tools.

Download the Free Ebook: 5 Ways Your Purchasing Process is Leaking Cash (and How to Fix It)

What is a project procurement management plan?

Project procurement management is the process of acquiring and managing resources, goods, and services for a specific project. It is a multifaceted procurement management approach that ensures stakeholders can access all required resources at the best price and value. 

Common activities in project procurement management include:

  • Identifying procurement management needs
  • Soliciting bids
  • Selecting and evaluating vendors
  • Managing procurement contracts
  • Overseeing materials deliveries 
  • Inventory management and integration
  • Spend analysis
  • Project and purchasing reporting 

Effective procurement management helps project managers achieve project objectives within budget and timeline constraints. Streamlining supply chain processes also enhances operational efficiency and stakeholder satisfaction.

5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
Ebook

5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)

Identify top areas where your current purchasing process might be falling short—and costing you BIG.

Download the ebook

How the project procurement management process can make you more efficient

Procurement management activities create visibility into the needs, purchases, and deliveries that affect the project timeline. They ensure financial and operational efficiencies that preserve company cash while enabling people to do their best work. Procurement management also reduces many external risks that commonly derail project delivery times and blow up budgets.

The following efficiency benefits are the most compelling reasons to adopt project management practices for project procurement:

Reduced costs: Effective procurement management leads to better total value and often results in better per-unit pricing on goods. It can consolidate purchasing into fewer vendors to unlock volume pricing and discounts. It also reduces costly issues like shipping delays, quality problems, and third-party risk.

Improved quality: Careful evaluation and vendor selection result in procuring higher-quality materials and services. Sourcing the best goods at a competitive price improves project outcomes and enables better top-line performance.

Minimized delays: Delays in delivery and quality can seriously impact project timelines. Working with high-quality suppliers reduces the likelihood of delays and issues, keeping the project on time and within budget.

Optimized resource allocation: Efficient inventory management and allocation practices such as just-in-time (JIT) mean goods appear at appropriate milestones. Optimized resource allocation reduces waste, avoids shortages, and eliminates warehousing challenges. 

Increased flexibility: Effective project procurement management strategies allow for more flexibility in project management by identifying multiple sources for critical supplies or services. They reduce dependency on single vendors, avoid frustrating backorders, and provide redundancy for mission-critical goods.

Enhanced vendor relationships: A good project procurement management plan includes building strong relationships with suppliers. These partnerships lead to better service, reliability, and negotiations in future projects than transactional supply relationships spread across a wide pool of vendors. Thorough vendor analysis can help quantify vendor relationships and identify the best candidates for strategic sourcing.

Ensured compliance: Proper procurement processes can help projects ensure compliance with legal and regulatory requirements. They enable proper reporting and open the door to procurement analysis and vendor performance management. 

Steps in a successful procurement management plan

When building a project procurement management strategy, a simple plan is best. With just a few steps and attention to the data and details, you can reduce the most common challenges in procurement and ensure the timely receipt of materials and deliverables.

1. Establish project scope

A well-developed procurement management plan begins with fully understanding project goals and desired outcomes. Procurement management should consider the complexity of materials and supplies needed for successful project completion and the time horizons for acquiring goods. It must also account for the priority for materials procurement management, such as delivery speed, item cost, contract terms, and product quality. 

A high-level understanding of the project will help craft a feasible plan for procuring items and understanding their priority in a project. A Kraljic matrix is one tool that helps procurement planners understand the impact and importance of different supply classes.

2. Outline milestones and purchasing timelines

Large projects often require regular purchasing to ensure resources are available when needed without causing storage or cash flow issues. The procurement project manager must build a detailed schedule identifying key milestones, project phases, or deliverables deadlines. This plan helps align procurement with proper supply delivery. 

A detailed purchasing timeline should outline dates for all procurement tasks. This includes issuing purchase orders, documenting expected delivery dates, and adding buffers to accommodate potential delays. Effective timelines consider supplier lead times and contingencies within the project lifecycle to ensure that procurement activities minimize bottlenecks and delays. 

3. Identify stakeholders and champions

Every project has a group of leaders and stakeholders who enable the procurement process. These could be project managers, the project management team, suppliers, or end users. By identifying such individuals, the procurement team can tailor communication strategies, foster collaboration, establish approval workflows, and ensure decisions align with project needs and objectives. Engaging stakeholders early and often helps reduce risk and increases project support.

4. Define vendor evaluation criteria

All vendors in a successful procurement project management plan should meet the organization's quality, reliability, and cost-effectiveness standards. Establishing clear benchmarks for these aspects enables an objective comparison between potential suppliers. Procurement can use a vendor scorecard or criteria outline to evaluate vendor history, financial stability, delivery timelines, product or service quality, and customer service. This process streamlines vendor selection and fosters long-term partnerships that can improve procurement efficiency and effectiveness.

5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)
Ebook

5 Ways Your Purchasing Process Is Leaking Cash, (and How to Fix It)

Identify top areas where your current purchasing process might be falling short—and costing you BIG.

Download the ebook

5. Create the bid and purchase process

After the procurement project manager establishes criteria for selecting suppliers, they can outline the bidding procedure and purchasing protocols that guide the procurement process. A clear bid and purchase process ensures transparency and fairness in vendor selection, promotes competitive pricing, and sets clear guidelines for selection criteria.

Building a bid and purchase process may include:

  • Preparing requests for proposals (RFPs)
  • Evaluating bids based on predetermined criteria
  • Negotiating terms with selected vendors
  • Finalizing and executing contracts

A systematic approach to gathering bids and creating purchasing protocols enhances efficiency, reduces costs, and ensures quality in the procurement management cycle.

6. Build an approval workflow

A structured approval process for procurement requests enhances the purchasing process and reduces friction and delays. A strong approval workflow delineates the hierarchy of decision-makers and specifies the thresholds for different expenditure levels. It ensures that every expenditure follows established purchasing policies and falls within predefined spend limits. A digital tracking system to document and forward approvals provides transparency and accountability beyond what’s possible with manual methods. 

7. Track key performance indicators (KPIs) 

Establishing key performance indicators helps monitor the effectiveness of a project procurement management plan. Depending on the specifics of the project goals, tracking several metrics may be helpful. 

When determining which KPIs to track, consider those that measure cost, delivery speed, performance, and compliance, such as:

  • Cost savings
  • Cost avoidance
  • Delivery costs
  • Invoice processing cost
  • On-time delivery
  • Delivery exception rate
  • Damage rates
  • Supplier performance
  • Contract compliance rate

Tracking these indicators helps a project manager or team identify areas for improvement, make informed decisions, and enhance the overall cost-efficiency and success of the procurement processes. It ensures that projects come in under budget while maintaining high performance standards.

3 Best practices for a successful project procurement management plan

The right process is foundational to the long-term success of a procurement management project. It puts every stakeholder on the same page, communicates policies and prerequisites, and outlines process guidelines. Using the following best practices to guide procurement plan development can make the process easier for everyone.

Start with a strong procurement policy: Maintaining efficiency and cost controls in a purchasing process is easier with a well-defined procurement management policy. To build a strong procurement policy, begin by establishing proper channels for requisitions. Be sure to document the guidelines all employees should follow when requesting materials or approving purchases. Then, identify the process for approving different request levels (by project priority, dollar value, terms, or other parameters). Remember to establish strong communication systems to educate stakeholders on the process and expectations. 

Eliminate manual processes: Eliminating manual procurement processes is necessary to enhance efficiency, accuracy, and transparency. Manual processes are fraught with delays and prone to human errors. They lack scalability and make it harder to administer complex projects. By automating procurement, organizations streamline the process, reduce potential mistakes, and free up valuable time for more strategic activities. This ensures the project's success and keeps the whole project cost effective and in line with measurable objectives.

Automate procurement systems: Automated platforms greatly increase visibility in the procurement process. Centralized platforms allow for guided procurement, real-time tracking of orders and expenses, budgetary control, and spend management. They also facilitate increased compliance with established procurement policies by automatically enforcing predefined rules and workflows. 

Centralize project management with Order.co

Procurement project management is easier when you have the right procurement software tool to manage the process. A platform like Order.co creates the perfect balance between empowering the project manager or team and maintaining budgetary control. It allows multiple stakeholders to request project supplies, get their purchases approved, track the order process, and manage the project budget — all in one place. 

Order.co has features and reporting tools that make it easier to use preferred vendors, track progress, report on spend, and ensure cash efficiency without manual processes or gaps in project information.

To see how the power of Order.co can help manage your next procurement project, schedule a demo today. 

Get started

Schedule a demo to see how Order.co can simplify buying for your business.

"*" indicates required fields

This field is for validation purposes and should be left unchanged.