Definition of Procurement Management

There are many reasons why it is a sound business practice to buy some part of a project's

scope from another firm. MCI's Dick Liebhaber cites one of the more important reasons to

buy scope: to quickly expand the intellectual base at his company. MCI finds that it is easier

to obtain technical brainpower from other companies, than to attempt to recruit and add

permanent employees. And there is also the opposite advantage: to be able to quickly

downsize the company should that unpleasant task become a necessity. Companies can

cancel contracts much easier than to lay off a workforce. But there are also other valid

reasons for companies to follow such a policy. In addition to adding to its intellectual base,

firms often find that relationships with suppliers will bring them resources, facilities,

investments and equipment, which would not otherwise be available to a project utilizing its

own limited company assets. The addition of suppliers to a project will often reduce the risks

of a new venture by sharing the costs of the venture, and enhancing their chances of

success. This book is about project management. However, its primary focus is on that

portion of the project which will be performed by another company. It deals with the project

work which is contractually procured and performed by people working for another company.

Such transactions are sometimes called contracts, sometimes subcontracts, and sometimes

teaming agreements. The key distinguishing ingredient: they are all procured under some

type of a legal relationship. (quentin 1)

Purchasing and Procurement

Procurement Definition

To define procurement broadly, “Procurement” is the overarching function that describes the

activities and processes to acquire goods and services. Importantly, and distinct from

“purchasing”, procurement involves the activities involved in establishing fundamental

requirements, sourcing activities such as market research and vendor evaluation and

negotiation of contracts. It can also include the purchasing activities required to order and

receive goods

Purchasing

The term “Purchasing” refers to the process of ordering and receiving goods and services. It

is a subset of the wider procurement process. Generally, purchasing refers to the process

involved in ordering goods such as request, approval, creation of a purchase order record (a

Purchase Order or P.O.) and the receipting of goods.

(http://purchasinginsight.com/resources/what-is/definition-of-procurement-procurement-vs-

purchasing/)

Procurement Authority

The project team will be supportedby a procurement professional, a person loaned into the project team by anorganization which exists under the title of purchasing, procurement,material, materiel, supply management, etc. This procurement professional must have procurement authority. This is described by the chief executive of a major designconstruction management firm in USA;

"I would never give procurement authority to a project manager.There is just too much at stake, too many non-technical mattersto know, which most project managers are typically not preparedto handle. Procurement authority must be restricted to people whoare familiar with contracting terms, procurement regulations,funding and contractual compliance issues. We delegate procurementauthority to only procurement people, but who are assignedto support the project manager."

New Product development

Rapid changes in technology, the emergence of global industrial and consumer markets,

increasing market fragmentation and product differentiation, and the increasing options for

developing and producing products have increased the pressure on all firms to more

effectively and efficiently develop new products. In many progressive firms, the design of

new products is conducted by a team representing a number of functional areas. Marketing,

product planning, design engineering, reliability engineering, supply management,

manufacturing engineering, quality, finance, field support, and, frequently, carefully selected

suppliers and customers are involved, as appropriate.

Anecdotal evidence indicates that the development of new products by such cross

functional teams and the use of concurrent engineering have potential of significantly

improving three key objectives: time to market, improved quality and reduced total cost. The

turnaround of many troubled manufacturers during the recent decade was the result of

replacing departmental walls with teamwork among those who should be part of the design

process. Supply management professionals and carefully selected suppliers are moving to

earlier involvement in the new product development process because of the important

contributions they can make in the areas of quality, cost, and timely market availability. This

early involvement commonly is referred as early supply management involvement and early

supplier involvement (ESI). By involving supply management and suppliers in simultaneous

(cross functional) engineering process teams at an early stage, R&D gets the chance to

increase efficiency. In fact, early supply management involvement help to shorten

engineering time and increase engineering quality.

Cross Functional Team

EPC Project Manager’s Responsibilities Customer relations – point responsibility Championing safety – zero accidents Meeting project quality objectives Leading environmental compliance and advocating sustainable development Execution Planning Project scope, cost, and schedule control More EPC Project Manager Responsibilities Prime contract administration Risk management Project coordination and interface management Management reporting and financial control Delivering planned profitability (“as sold” or better) No surprises EPC Project Engineering Manager’s Responsibilities (Typical) Engineering execution planning Managing the engineering design work of the project. Producing all engineering deliverables incl. design criteria, design drawings, technical and general specifications, material requisitions, equipment lists, necessary to define and construct the facility. Providing the engineering input to the project execution plan, Preparing the detailed engineering budget and schedule and the list of deliverables. Reporting to the Project Manager regarding overall performance of engineering activities, costs, and schedule. Project Procurement Manager’s Responsibilities (Typical) Procurement execution planning Managing acquisition of equipment and materials(purchase orders and supply contracts) in response tomaterial requisitions prepared by engineering or fieldrequisitions generated at construction sites Managing purchasing, expediting, supplier qualitysurveillance, traffic and logistics, and materialmanagement services for supplier-furnished equipmentand materials Reporting to the Project Manager regarding overallperformance of engineering activities, costs, and schedule.