PROCUREMENT MANAGEMENT PLAN

<PROJECT NAME>

COMPANY NAME
STREET ADDRESS
CITY, STATE ZIP CODE

DATE

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TABLE OF CONTENTS
INTRODUCTION.................................................................................................................................. 3
PROCUREMENT MANAGEMENT APPROACH.............................................................................................3
PROCUREMENT DEFINITION..................................................................................................................4
TYPE OF CONTRACT TO BE USED........................................................................................................... 5
PROCUREMENT RISKS..........................................................................................................................5
PROCUREMENT RISK MANAGEMENT......................................................................................................6
COST DETERMINATION........................................................................................................................ 6
STANDARDIZED PROCUREMENT DOCUMENTATION....................................................................................7
PROCUREMENT CONSTRAINTS...............................................................................................................8
CONTRACT APPROVAL PROCESS............................................................................................................ 9
DECISION CRITERIA........................................................................................................................... 10
VENDOR MANAGEMENT.................................................................................................................... 10
PERFORMANCE METRICS FOR PROCUREMENT ACTIVITIES.........................................................................11
SPONSOR ACCEPTANCE......................................................................................................................12

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INTRODUCTION
The purpose of the Procurement Management Plan is to define the procurement requirements
for the project and how it will be managed from developing procurement documentation
through contract closure. The Procurement Management Plan defines the following:
 Items to be procured with justification statements and timelines
 Type of contract to be used
 Risks associated with procurement management
 How procurement risks will be mitigated through contract performance metrics,
insurance, or other means
 Determining costs and if/how they’re used as evaluation criteria
 Any standardized procurement templates or documents to be used
 How multiple suppliers will be managed if applicable
 Contract approval process
 Decision criteria
 Establishing contract deliverables and deadlines
 How procurement and contracts are coordinated with project scope, budget, and
schedule
 Any constraints pertaining to procurement
 Direction to sellers on baseline requirements such as contract schedules and work
breakdown structures (WBSs)
 Vendor Management
 Identification of any prequalified sellers if applicable
 Performance metrics for procurement activities

This Procurement Management Plan sets the procurement framework for this project. It will
serve as a guide for managing procurement throughout the life of the project and will be
updated as acquisition needs change. This plan identifies and defines the items to be procured,
the types of contracts to be used in support of this project, the contract approval process, and
decision criteria. The importance of coordinating procurement activities, establishing firm
contract deliverables, and metrics in measuring procurement activities is included. Other items
included in the procurement management plan include: procurement risks and procurement
risk management considerations; how costs will be determined; how standard procurement
documentation will be used; and procurement constraints.

PROCUREMENT MANAGEMENT APPROACH

The Procurement Management Plan should be defined enough to clearly identify the necessary
steps and responsibilities for procurement from the beginning to the end of a project. The
project manager must ensure that the plan facilitates the successful completion of the project
and does not become an overwhelming task in itself to manage. The project manager will work

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with the project team, contracts/purchasing department, and other key players to manage the
procurement activities.

The Project Manager will provide oversight and management for all procurement activities
under this project. The Project Manager will work with the project team to identify all items to
be procured for the successful completion of the project. The Project Management Office
(PMO) will then review the procurement list prior to submitting it to the contracts and
purchasing department. The contracts and purchasing department will review the
procurement items, determine whether it is advantageous to make or buy the items, and begin
the vendor selection, purchasing and the contracting process.

PROCUREMENT DEFINITION
The purpose of procurement definition is to describe, in specific terms, what items will be
procured and under what conditions. Sometimes items which must be procured for a project
can be made internally by an organization. Additionally, procurement deadlines are usually
affected by the project schedule and are needed by certain times to ensure timely project
completion. This section is where these items must be listed, justified, and the conditions must
be set. Any important technical information should also be included. Individuals may also be
listed with authority to approve purchases in addition to or in the absence of the project
manager.

The following procurement items and/or services have been determined to be essential for
project completion and success. The following list of items/services, justification, and timeline
are pending PMO review for submission to the contracts and purchasing department:

Item/Service Justification Needed By

Item A; 3” x ¾” tool Needed for manufacturing widget type 1; we do 31 July 20xx
not make this item
Item B; 4” x ½” tool Needed for building tool type 2; we make this 15 August 20xx
item but do not know the cost comparison vs.
purchasing it
Item C Needed for transferring data to new operating 1 September 20xx
system; we do not make this item

In addition to the above list of procurement items, the following individuals are authorized to
approve purchases for the project team:

Name Role

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 John Smith Project Manager
Jane Doe Lead Engineer
Bob Jones Design Technician

TYPE OF CONTRACT TO BE USED

The purpose of this section is to describe the type of contract to be used so the contracts and
purchasing department can proceed accordingly. There are many different types of contracts
like firm-fixed price, time and materials (T&M), cost-reimbursable, and others. Different
procurement items may also require different contract types. A well defined product may be a
firm-fixed price while a product which will require a research and development effort may be a
T&M contract.

All items and services to be procured for this project will be solicited under firm-fixed price
contracts. The project team will work with the contracts and purchasing department to define
the item types, quantities, services and required delivery dates. The contracts and purchasing
department will then solicit bids from various vendors in order to procure the items within the
required time frame and at a reasonable cost under the firm fixed price contract once the
vendor is selected. This contract will be awarded with one base year and three option years.

PROCUREMENT RISKS
The purpose of this section is to identify any potential risks associated with procurement for the
project. Depending on the contract type, items or services being purchased, vendor history, or
uncertainties in the project’s scope, schedule, or budget, potential risks may require more
detailed planning and mitigation strategies. For instance, if an organization has a close
relationship to a particular vendor but there is a chance that vendor will no longer to be able to
provide goods or services needed, this represents a significant risk to the project’s procurement
activities that must be managed.

All procurement activities carry some potential for risk which must be managed to ensure
project success. While all risks will be managed in accordance with the project’s risk
management plan, there are specific risks which pertain specifically to procurement which must
be considered:

- Unrealistic schedule and cost expectations for vendors

- Manufacturing capacity capabilities of vendors
- Conflicts with current contracts and vendor relationships
- Configuration management for upgrades and improvements of purchased technology

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 - Potential delays in shipping and impacts on cost and schedule
- Questionable past performance for vendors
- Potential that final product does not meet required specifications

These risks are not all-inclusive and the standard risk management process of identifying,
documenting, analyzing, mitigating, and managing risks will be used.

PROCUREMENT RISK MANAGEMENT

The purpose of this section is to describe how risks related specifically to procurement activities
will be managed. All projects should have an independent and thorough risk management plan.
However, much like there are risks which pertain only to procurement, there are risk
management considerations which may also be unique and apply only to procurement. This
may include involvement of specific personnel in managing procurement risks or obtaining
approval on mitigation steps from a particular management level within the organization.

As previously stated, project risks will be managed in accordance with the project’s risk
management plan. However, for risks related specifically to procurement, there must be
additional consideration and involvement. Project procurement efforts involve external
organizations and potentially affect current and future business relationships as well as internal
supply chain and vendor management operations. Because of the sensitivity of these
relationships and operations the project team will include the project sponsor and a designated
representative from the contracting department in all project meetings and status reviews.

Additionally, any decisions regarding procurement actions must be approved by the project
sponsor or, in his absence, the Vice President of Contracts before implementation. Any issues
concerning procurement actions or any newly identified risks will immediately be
communicated to the project’s contracting department point of contact as well as the project
sponsor.

COST DETERMINATION
The purpose of this section is to describe how costs will be determined and if/how they will be
used as part of the selection criteria. For procurements seeking goods and/or services from an
outside vendor, costs are usually provided in response to a Request for Quote (RFQ), Request
for Proposal (RFP), or a Request for Bid (RFB). Vendors submit quotes, proposals, or bids which
describe the costs of the good or service in detail to aid the customer in their decision making.
Costs are almost always used as part of the procurement decision criteria but may be
prioritized differently depending on the organization.

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For this project we will issue a Request for Proposal (RFP) in order to solicit proposals from
various vendors which describe how they will meet our requirements and the cost of doing so.
All proposals will include vendor support for items A, B, and C (from procurement definition
paragraph) as well as the base and out-year costs. The vendors will outline how the work will
be accomplished, who will perform the work, vendors’ experience in providing these goods,
customer testimonials, backgrounds and resumes of employees performing the work, and a
line-item breakdown of all costs involved. Additionally, the vendors will be required to submit
work breakdown structures (WBSs) and work schedules to show their understanding of the
work to be performed and their ability to meet the project schedule.

All information must be included in each proposal as the proposals will be used as the
foundation of our selection criteria. Proposals which omit solicited information or contain
incomplete information will be discarded from consideration.

STANDARDIZED PROCUREMENT DOCUMENTATION

The purpose of this section is to describe what standard procurement documentation will be
used as part of the procurement. For large complex projects, standardization makes work
across all project process areas easier to manage. When organizations utilize standard forms,
templates, and formats, there is commonality across different projects as well as different
groups within the organization.

The procurement management process consists of many steps as well as ongoing management
of all procurement activities and contracts. In this dynamic and sensitive environment, our goal
must be to simplify procurement management by all necessary means in order to facilitate
successful completion of our contracts and project. To aid in simplifying these tasks, we will use
standard documentation for all steps of the procurement management process. These
standard documents have been developed and revised over a period of many years in an effort
to continually improve procurement efforts. They provide adequate levels of detail which
allows for easier comparison of proposals, more accurate pricing, more detailed responses, and
more effective management of contracts and vendors.

The PMO maintains a repository on the company’s shared drive which contains standard
project management and procurement documentation that will be used for this project. The
following standard documents will be used for project procurement activities:

 Standard Request for Proposal Template to include

- Background
- Proposal process and timelines
- Proposal guidelines
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 - Proposal formats and media
- Source selection criteria
- Pricing forms
- Statement of work
- Terms and Conditions
 Internal source selection evaluation forms
 Non-disclosure agreement
 Letter of intent
 Firm fixed price contract
 Procurement audit form
 Procurement performance evaluation form
 Lessons learned form

PROCUREMENT CONSTRAINTS
The purpose of this section is to describe any constraints which must be considered as part of
the project’s procurement management process. These constraints may be related to
schedule, cost, scope, resources, technology, or buyer/seller relationships. As constraints are
identified, they must be considered every step of the way as procurement activities are planned
and conducted. Every effort must be made to identify all constraints prior to any project or
procurement planning as constraints identified later in the project lifecycle can significantly
impact the project’s likelihood of success.

There are several constraints that must be considered as part of the project’s procurement
management plan. These constraints will be included in the RFP and communicated to all
vendors in order to determine their ability to operate within these constraints. These
constraints apply to several areas which include schedule, cost, scope, resources, and
technology:

Schedule:
 Project schedule is not flexible and the procurement activities, contract administration, and
contract fulfillment must be completed within the established project schedule.

Cost:
 Project budget has contingency and management reserves built in; however, these reserves
may not be applied to procurement activities. Reserves are only to be used in the event of
an approved change in project scope or at management’s discretion.

Scope:

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 All procurement activities and contract awards must support the approved project scope
statement. Any procurement activities or contract awards which specify work which is not
in direct support of the project’s scope statement will be considered out of scope and
disapproved.

Resources:
 All procurement activities must be performed and managed with current personnel. No
additional personnel will be hired or re-allocated to support the procurement activities on
this project.

Technology:
 Parts specifications have already been determined and will be included in the statement of
work as part of the RFP. While proposals may include suggested alternative material or
manufacturing processes, parts specifications must match those provided in the statement
of work exactly.

CONTRACT APPROVAL PROCESS

The purpose of this section is to define the process through which contracts must be approved.
This process may vary greatly from company to company but it is important to define the
process within your organization and who is involved in the decision-making. Typically large
purchases follow an established bidding process and follow a formal selection and approval
process. Smaller purchases can be less formal and can be approved by the Project or Program
Manager. This section should clearly identify the rules for all procurements within your
organization.

The first step in the contract approval process is to determine what items or services will
require procurement from outside vendors. This will be determined by conducting a cost
analysis on products or services which can be provided internally and compared with purchase
prices from vendors. Once cost analyses are complete and the list of items and services to be
procured externally is finalized, the purchasing and contracts department will send out
solicitations to outside vendors. Once solicitations are complete and proposals have been
received by all vendors the approval process begins. The first step of this process is to conduct
a review of all vendor proposals to determine which meet the criteria established by the project
team and the purchasing and contracts department. Purchases less than $x,xxx only require
the approval of the Project Manager; whereas, purchases greater than $x,xxx must be approved
by the Contract Review Board. For these larger purchases the contract review board will meet
to determine which contract will be accepted. The Contract Review Board consists of

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representatives from the project team, purchasing and contracts department, finance, and the
PMO.

DECISION CRITERIA
The purpose of this section is to define the criteria used by the contract review board to decide
on what contract(s) to award. Again, these criteria may vary between organizations but must
be defined as part of the Procurement Management Plan.

The criteria for the selection and award of procurement contracts under this project will be
based on the following decision criteria:
- Ability of the vendor to provide all items by the required delivery date
- Quality
- Cost
- Expected delivery date
- Comparison of outsourced cost versus in-sourcing
- Past performance

These criteria will be measured by the contracts review board and/or the Project Manager. The
ultimate decision will be made based on these criteria as well as available resources.

VENDOR MANAGEMENT
The purpose of this section is to describe the roles and actions the project team and purchasing
and contracts department will take to ensure that the selected vendors provide all of the
products/services agreed upon and that the appropriate levels of quality are maintained.

The Project Manager is ultimately responsible for managing vendors. In order to ensure the
timely delivery and high quality of products from vendors the Project Manager, or his/her
designee will meet weekly with the contract and purchasing department and each vendor to
discuss the progress for each procured item. The meetings can be in person or by
teleconference. The purpose of these meetings will be to review all documented specifications
for each product as well as to review the quality test findings. This forum will provide an
opportunity to review each item’s development or the service provided in order to ensure it
complies with the requirements established in the project specifications. It also serves as an
opportunity to ask questions or modify contracts or requirements ahead of time in order to
prevent delays in delivery and schedule. The Project Manager will be responsible for scheduling
this meeting on a weekly basis until all items are delivered and are determined to be
acceptable.

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 PERFORMANCE METRICS FOR PROCUREMENT ACTIVITIES
This section describes the metrics to be used for procurement activities associated with the
project. These metrics may be used to ensure the project stays on schedule regarding
procurement activities. They may also be used to compile data on the performance of various
vendors in order to assist with future procurement activities’ vendor selection criteria.

While the purchasing and contracts department has their own internal metrics for
procurement, the following metrics are established for vendor performance for this project’s
procurement activities. Each metric is rated on a 1-3 scale as indicated below:

Vendor Product On Documentation Development Development Cos Transactional

Quality Time Quality Costs Time t Efficiency
Delivery per
Unit
Vendor
#1
Vendor
#2

1 – Unsatisfactory
2 – Acceptable
3 - Exceptional

In addition to rating each vendor, actual values will be noted in order to build a past-
performance data base for selecting vendors for future procurement activities.

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SPONSOR ACCEPTANCE

Approved by the Project Sponsor:

___________________________________________ Date:____________________
<Project Sponsor>
<Project Sponsor Title>

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