Procurement refers to the process of material and technical recourses provision in the enterprise in order to make its performing and management effective. The purpose of procurement is adequate and effective material, technological, information, etc. needs satisfaction of the projects with the highest possible economic efficiency.
The project procurement management is the sufficient part of the whole project management process that require the products/services purchases from outside the company world in order to solve or complete the project or task effectively. The project procurement management is done through the process of contract signing with the company’s partners by the company’s teams or by the responsible employee (from the web-source). The process of project procurement management is rather simple: at first company perform the planning process of the project, its main tasks, objectives and goals; then it decide if it is better to hire someone to accomplish the project or it decides to make it by their own resources; next stage is legal documents preparation and the project is offered to people who are interested in it, by the bid and proposal requirements; then company decides what is the offer and give for the supplier or team it to perform; the last stage is controlling and assessing of the project performance.
Nowadays the topic of outsourcing in the project procurement management is rather debatable. There are a lot of arguments for the outsourcing performance. Most of them are related to the case that information technology project outsourcing reduces the fixed and recurrent costs of the company. This point is about cost minimization and profit maximization for the company, because is many cases it is better and cheaper to give someone to make the work than to do it by oneself. Information technology outsourcing also gives the domestic organization opportunity to focus on its core businesses performance and make it the best that it is do. Likewise, outsourcing gives the access for the skills and technologies of another company or even country that raise the effectiveness of the information technology projects. This factor also provides the performance flexibility for the company, as it should not concentrate on the minor processes. As a result, outsourcing increases the accountability of the company that gives opportunity for better analysis, cost reduction and profit maximization. However, information technology project outsourcing can increase the costs and decrease the effectiveness and efficiency of the company’s performance. Therefore, all project offers, risks, expenditures should be assessed carefully in order to minimize risks.
Now it is to understand that the project procurement management is based on the contracts signing processes. The contract is an agreement between two or more parties, aimed to the creation, modification or termination of civil relations. It also can be seen as the main legal act that regulates civil relations, that submitted by the contracts areas. Any contract has certain content, it also depict the conditions provided by law or by the agreement of the parties that define the rights and obligations of the sides, order of these rights and responsibilities.
In order to build the complex understanding of the project procurement management understanding it is necessary to describe its processes. The first one refers to the purchases and acquisitions planning, where it is determined what, when and how the one should be produced. This process is based on the determination of the key elements of the project, needed resources and expenditures, it also includes determination is it sufficient for the company to attract outside resources or elements or to perform this project by their own. Careful and effective planning process can save millions of dollars for the company. The technique of make-or-buy analysis is appropriate for this stage. In order to make a decision to “make or buy” the costs of own production of resource are compared with the cost of their purchase. However, there can be other factors that influence such a decision making, because everything is compared with the specific situation of definite organization. The decision in favor of purchases is made in the cases when: the need for a complementary parts is negligible; there are significant opportunities for source selection and product substitutes; there is no capacity for production of components or the process performance; there is no experience in the production of such parts.
The decision in favor of domestic production is accepted if: the need is constant and significant; suppliers cannot provide effective and efficient delivery of supplied products/projects; technology (commercial) production technology secrets exist; the project can be made on the basis of the existing facilities that can rather decrease the expenditures and costs. The next process of project procurement management refers to the process of document preparation that can be needed for the potential partners and the assessment criteria development for the contract awarding. As a result of the previous stage now it is necessary to identify potential suppliers. They can be found through such methods, as: announcement of the competition (tender); studying of promotional materials; visiting of exhibitions and fairs; correspondence and personal contacts on the phone, meeting with potential suppliers. Then it is necessary to make the analysis of potential seller, using the following criteria: security of supply; distance from the supplier to the consumer (if it is necessary for the company); the timing of orders; the frequency of delivery or successful performance; terms of payment (prepaid or its absence, the ability to get the discount); the minimum size of the consignment or project size; completeness of the range; the presence of pre-service and post-sale; marketing support; reputation of the seller, etc. The last processes refer to the contract administration and its closing. During the first one it is set the control under the project performance and the second one refers to the assessment of the quality of the work, its correctness and determined the level of its satisfaction.
Project procurement management is one of the most important parts of the project management. Its main purpose is risks minimization while costs and expenditures minimization for profit maximization of the company. It helps to concentrate on the core businesses of the company and to place minor or secondary processes for the other company’s concern. Sufficient software and can be used in order to make project procurement management, such as specific Internet tools and e-procurement software.