Procurement in Project Management

Whatever the project is, you will invariably need to procure something to get the work done. It might be materials, software, equipment, airline tickets, or even staff, but you will need to acquire resources to complete your project. And this can be a daunting task sometimes, but especially so when you are procuring human resources, such as subject matter experts or regular staff to help you execute the project work. Of course, the reason is that oftentimes you need to acquire services externally and that carries a risk. As opposed to your team and/or other staff within your organization, outsourcing work is complicated when you have not worked with this staff before.

Procurement in Project Management

If your company has a “selected seller” or “preferred seller” list, it helps to mitigate the risk since the vendors on the list would have been vetted and/or, in some cases, have worked with your organization before, which sets a precedence and there will be past evaluations through the “lessons learned” technique. In this case, there is an advantage to rehire the same vendors, unless you are looking for someone or something new. If that is the case, you will need to start the vetting process from the start and pre-select your vendors based on organizational and project-specific criteria.

Each organization typically has its own vetting and evaluation system, but in general, you want to look for the following qualifications:

  • Years in business
  • Geographic location
  • Specific skills and competencies
  • Management and customer service approach
  • Experience related to your industry and/or project
  • Liability insurance (usually set at $1,000,000 minimum per incident)
  • Certifications required, such as from the FDA, OSHA, PMI, etc.
  • Specific languages (Chines, English, Mandarin, Russian, etc.) required in both written and spoken form
  • References
  • Staff hourly rates; especially if you have to obtain competitive bids from vendors

Whether you outsource the work to a “selected seller” from your organization, or you need to find someone new, you always need to identify the risks, both positive and negative, associated with outsourcing the work, such as:

Positive Risks:

  • Less cost if outsourced to a vendor with lower charge-out rates
  • More available staffing resources may ease pressure on your team’s workload.
  • Specific expertise acquired from sub-consultants.
  • The vendor may already have a good relationship with your project’s client. Therefore, this may increase client confidence and satisfaction.

Negative Risks:

  • An unknown entity, if you have never worked with the vendor before
  • You will lose some, if not all, control of day-to-day efforts done on your project if work is performed at the vendor’s office.
  • Different management styles between you and vendor, which might not work well with your team and/or organization
  • Additional management efforts required for overseeing and controlling project baselines, such as scope, budget, and schedule, at the vendor’s place of operations, which may already tax your existing workload

There are many ways to mitigate negative risks, as well as exploit positive ones, depending on your project or industry, such as increased monitoring and controlling efforts; requiring more communication from your vendors regularly, such as weekly meetings, progress and status reports, etc.; and, as required, employing co-location between your and your vendor’s teams, which means placing someone from your staff in their office or vice versa; and so on. However, one specific strategy I always use is a “Plan B vendor,” which means that I always have a back-up replacement should the client-vendor relationship start to fail with the original vendor, and the discrepancies seem insurmountable. Therefore, I set some milestones along the project lifecycle and, if it looks as though the vendor is not performing effectively and efficiently, then it may trigger approaching the replacement vendor to begin the transition. Mind you, this strategy is used only in extreme cases, but it is helpful to have it in place, just in case.

Procurement in Project Management

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