PM693 Human Resource and Procurement Management
Dr. Nickea Harris
8 September 2022
Give a basic definition of project procurement management
Project procurement management is simply the process of using contracts to acquire services, expertise, or products that are needed for your project, and are not available internally (Edureka, 2020). Throughout a project, given how dynamic projects can become, you as a project manager may find yourself in need of additional things that were either not planned for, or you already noted were not available inside of your organization. Project procurement management goes hand in hand with the need for project teams and managers to be agile. Agility, or the ability to adapt as things change on a project, means having a plan to find missing items or services during project execution (Rane et al., 2020). Just as we learned with risk management, and mitigation, agility is the concept used in dynamic project procurement (Rane et al., 2020). A project procurement management plan can help guide the team to properly execute outsourcing as needed and show what contracts the team should use.
- Procurement management is the process of acquiring something needed for your project outside of your business
- Agility is key to procurement management
- A project procurement management plan helps adjust for things not available on the project team
Note the various types of contracts within project management and the pros and cons of each
There are three main types of contracts that fall under the umbrella of procurement management which are fixed price contracts, cost reimbursable contracts, and time and material contracts/unit price contracts (Simplilearn, 2022). In the below table you can see the pros and cons of each type of contract.
|(Simplilearn, 2022)||Contract Type|
|Fixed Price||Cost Reimbursable||Time and Material (Unit Price)|
|Pro||Seller assumes more risk than the buyer||Offering bonuses for quicker turnarounds can yield better work||Pay for time of work and costs|
|Con||Without detailed specification seller may provide lower quality than desired||If scope is unclear this is not a viable option||May not yield best quality of work|
|Pro||Seller retains cost overages and extra costs||If time is short this can be used to try and get as much work done as possible in a short time||No unknowns at the end of project for price|
|Con||Sellers may cut scope to be on time and at the fixed price||End price can be much higher than expected since it is based on variables equated after the work is done||Without progress checks end result may not be what was wanted|
|Pro||Incentives can increase quality of goods/services provided||Buyer can make some stipulation ahead of getting billed||Incentives can increase output with lower costs|
|Con||Economic adjustments can change costs based on current market prices||High likelihood of running over budget||Slow progress can occur|
- The three types of contracts in project procurement are fixed price, cost reimbursable, and time and material (unit price)
- Each has pros and cons and works for different situations
- Understanding what each contract entails is critical to success
Edureka. (2020, February 17). Project Procurement Management | Project Management | PMP certification | Edureka. YouTube. Retrieved September 8, 2022, from
Rane, S. B., Yahya Abdul, M. N., & Bhandarkar, B. M. (2020). Developing strategies to improve agility in the project procurement management (PPM) process: Perspective of business intelligence (BI). Business Process Management Journal, 26(1), 257-286. https://doi.org/10.1108/BPMJ-07-2017-0196 (Links to an external site.)
Simplilearn. (2022, July 15). PMP study: Types of contracts. Simplilearn.com. Retrieved September 8, 2022, from https://www.simplilearn.com/project-management-con…
Student 2 Joy
We are discussing the project procurement process and the types of contracts it contains. When working a project during project management there is always the possibility you will be working with contracts and contractors. It is important to know the different types that this contains.
The basic definition of project procurement management by the Indeed Editorial Team (2021) is the selection, coordination and maintenance of these goods and services and is an important part of successful project completion (para.1). Larson and Gray (2021) state that procurement management has six main steps (p. 468).
Planning Purchases and Acquisitions
Requesting seller responses
Administering the contract
Closing the contract
Various Types of Contracts
Inside project procurement management there are different types of contracts. Larson and Gray (2021) state there are essentially two types of contracts. The first is a fixed-price contract, in which the price is agreed upon in advance and remains the same as long as other areas dont change and a cost-plus contract, in which the contractor is reimbursed for all or some of the expenses incurred during the performance of the contract (p. 468). However they also state that there are variations inside these two different types of contracts (p. 468). Insides the fixed price contracts they have the fixed price incentive which has incentives such as bonuses if the project is completed ahead of time or the firm fixed price in which the price doesnt change. Inside the cost-plus contract they have a cost-plus percentage of cost contract in which the cost or incentive is based on the actual cost using a cost sharing formula and they have the cost-plus incentive fee contract which offers an incentive using the actual cost of the project (p. 470-471).
Indeed Editorial Team (2021, May 17). Project Procurement Management: Definition and Processes.Www.indeed.com (Links to an external site.). https://www.indeed.com/career-advice/career-develo…
Larson, E.W., & Gray, C.F. (2021). Project Management: The Managerial Process. McGraw-Hill Education.