The procurement effort on projects varies widely and depends on the type of project. Often the client organization will provide procurement services on less complex projects. In this case, the project team identifies the materials, equipment, and supplies needed by the project and provides product specifications and a detailed delivery schedule. When the procurement department of the parent organization provides procurement services, a liaison from the project can help the procurement team better understand the unique requirements of the project and the time-sensitive or critical items of the project schedule. On larger, more complex projects, personnel are dedicated to procuring and managing the equipment, supplies, and materials needed by the project. Because of the temporary nature of projects, equipment, supplies, and materials are procured as part of the product of the project or for the execution of the project. For example, the bricks procured for a construction project would be procured for the product of the project, and the mortar mixer would be equipment procured for the execution of the project work. At the end of the project, equipment bought or rented for the execution of the work of the project are sold, returned to rental organizations, or disposed of some other way.
More complex projects will typically procure through different procurement and management methods. Commodities are common products that are purchased based on the lowest bid. Commodities include items like concrete for building projects, office supplies, or even lab equipment for a research project. The second type of procurement includes products that are specified for the project. Vendors who can produce these products bid for a contract. The awarding of a contract can include price, ability to meet the project schedule, the fit for purpose of the product, and other considerations important to the project. Manufacturing a furnace for a new steel mill would be provided by a project vendor. Equipment especially designed and built for a research project is another example. These vendors’ performances become important parts of the project, and the project manager assigns resources to coordinate the work and schedule of the vendor. The third procurement approach is the development of one or more partners. A design firm that is awarded the design contract for a major part of the steel mill and a research firm that is conducting critical subparts of the research are examples of potential project partners. A partner contributes to and is integrated into the execution plan. Partners perform best when they share the project vision of success and are emotionally invested in the project. The project management team builds and implements a project procurement plan that recognizes the most efficient and effective procurement approach to support the project schedule and goals.
KEY TAKEAWAYS
- During the start-up phase, the project leader develops the project infrastructure used to design and execute the project. A team is formed to create agreement among project stakeholders on the goals, cost, and completion date. Plans for executing the project, managing the schedule and quality, and controlling the budget are created.
- The scope statement establishes project parameters that define what will be done.
- The project schedule begins with a milestone schedule followed by a WBS and a project diagram. The longest path through the project diagram is the critical path, and the difference between the completion of the critical path and the project finish date is the float. Shortening the critical path is called crashing the project.
- Cost estimating begins with a conceptual or ballpark estimate that is followed by a ROM estimate. A project budget is determined from the cost of the tasks in the WBS. Costs are monitored during the project and estimates updated if the costs vary from expectations.
- Project quality begins with the specifications of materials and labor. A quality plan creates a process for assuring the requirements and specifications of the project are met. Quality improvement tools can be applied to projects if the company has several similar projects.
- Team members are selected to manage functions and processes. The staffing plan assigns people as needed. Sources of team members are company employees, contractors, new hires, and partners.
- The risk on a project reflects the number of things that can possibly happen that will have a negative effect on the project and the probability of those events happening.
- The provider of procurement management depends on the size of the project and the organization. Commodities are purchased from the lowest bidder, while specialty items are purchased from bids or from partners.
EXERCISES
- During the start-up phase, the first estimate of the cost of the project is called the or ballpark estimate.
- Shortening the schedule to meet the project completion date is called the schedule.
- Why would it be important to get the stakeholders in a project to actually sign the scope statement?
- What is the difference between a milestone schedule and a work breakdown schedule?
Areas of Knowledge
Write one or two sentences in which you describe each area of project management knowledge—as defined by the Project Management Institute.
- Start-up
- Scope
- Time
- Cost
- Quality
- Team selection (human resources)
- Communications
- Risk
- Procurement
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