ISO 21502:2020 Clause 7.17 Procurement

Project Management 8 Minutes

7.17.1 Overview

The purpose of the procurement is to source products and services bought as part of resourcing the work that are of appropriate quality, represent value for money and can be delivered when needed within an acceptable level of risk.
Procurement should be planned to use organizational procurement processes, if any, in line with the procurement strategy of the project. Procurement management should be integrated with planning.
NOTE Procurement requires knowledge of relevant laws and practices and is often undertaken by specialists outside the project’s organization, such as a sourcing specialist within the sponsoring organization.

Procurement in a project organization involves acquiring goods, services, or resources required to support project objectives. Here’s an overview of the procurement process:

  1. Identify Procurement Needs: The first step is to identify the goods, services, or resources needed to support project activities. This involves understanding project requirements, conducting market research, and assessing internal capabilities.
  2. Develop Procurement Plan: Develop a procurement plan that outlines the procurement strategy, procurement methods, selection criteria, and timeline for procurement activities. Consider factors such as cost, quality, schedule, and risk management.
  3. Supplier Identification and Prequalification: Identify potential suppliers or vendors who can meet project requirements. Prequalify suppliers by assessing their capabilities, experience, financial stability, and compliance with regulatory requirements.
  4. Request for Information (RFI): Issue a Request for Information (RFI) to solicit information from potential suppliers about their products, services, pricing, and capabilities. This helps in evaluating supplier suitability and gathering market intelligence.
  5. Request for Proposal (RFP) or Request for Quotation (RFQ): Issue a Request for Proposal (RFP) or Request for Quotation (RFQ) to shortlisted suppliers, outlining project requirements, evaluation criteria, and terms and conditions. Suppliers submit proposals or quotations in response.
  6. Bid Evaluation and Supplier Selection: Evaluate supplier proposals or quotations based on predefined criteria such as price, quality, technical capabilities, and delivery schedule. Select the most suitable supplier(s) through a transparent and objective evaluation process.
  7. Contract Negotiation: Negotiate contract terms and conditions with selected suppliers, including pricing, payment terms, delivery schedules, warranties, and service level agreements (SLAs). Ensure that contracts comply with legal and regulatory requirements.
  8. Contract Award: Award contracts to selected suppliers based on the negotiated terms and conditions. Issue purchase orders, service agreements, or contracts to formalize the procurement agreements.
  9. Contract Management: Monitor supplier performance and manage contract execution throughout the project lifecycle. This involves tracking deliverables, managing changes, resolving disputes, and ensuring compliance with contract terms.
  10. Supplier Relationship Management: Foster positive relationships with suppliers to promote collaboration, innovation, and continuous improvement. Communicate openly, address issues promptly, and recognize supplier contributions to project success.
  11. Procurement Closure: Closeout procurement activities by verifying deliverables, finalizing payments, and documenting procurement records. Conduct lessons learned to identify areas for improvement in future procurement processes.

By following these steps, project organizations can effectively procure the goods, services, and resources needed to support project objectives while maximizing value, minimizing risk, and ensuring compliance with procurement policies and regulations.

The purpose of the procurement is to source products and services bought as part of resourcing the work that is of appropriate quality, represents value for money and can be delivered when needed within an acceptable level of risk.

The purpose of procurement, as you’ve outlined, is to ensure that the products and services acquired meet the needs of the project in terms of quality, value for money, timeliness, and risk management. Here’s how each aspect contributes to the overall objective of procurement:

  1. Appropriate Quality: Procurement aims to acquire products and services that meet the required standards and specifications. This involves clearly defining quality requirements and evaluating suppliers based on their ability to deliver products and services that meet or exceed these standards.
  2. Value for Money: Procurement seeks to obtain the best possible value for the resources invested. This involves not only considering the upfront costs of products and services but also evaluating factors such as total cost of ownership, life cycle costs, and long-term benefits. Value for money is achieved when the benefits derived from the products or services outweigh the costs incurred.
  3. Timeliness: Procurement aims to ensure that products and services are delivered when needed to support project activities. This involves establishing realistic delivery schedules, coordinating with suppliers to meet deadlines, and mitigating delays through effective communication and planning. Timeliness is crucial for maintaining project schedules and avoiding disruptions.
  4. Acceptable Level of Risk: Procurement seeks to manage and mitigate risks associated with sourcing products and services. This involves identifying potential risks, assessing their likelihood and impact, and implementing measures to minimize or transfer risks. Risks may include supplier failures, quality issues, delivery delays, or cost overruns. Procurement activities should be conducted in a way that balances risk and reward, considering factors such as supplier reliability, contractual protections, and contingency planning.

By prioritizing these aspects in the procurement process, project organizations can ensure that the products and services acquired contribute to project success by meeting quality standards, providing value for money, being delivered on time, and managing risks effectively. This ultimately supports the overall objectives of the project and maximizes the return on investment.

Procurement should be planned to use organizational procurement processes, if any, in line with the procurement strategy of the project.

Aligning procurement activities with organizational procurement processes and the procurement strategy of the project is crucial for ensuring consistency, efficiency, and compliance. Here’s how this alignment can be achieved:

  1. Understand Organizational Procurement Processes: Start by understanding the existing procurement processes and procedures within the organization. This may include policies, guidelines, templates, and standard operating procedures (SOPs) related to procurement, contract management, and supplier selection.
  2. Review Procurement Strategy: Review the procurement strategy of the project, which should align with the overall project objectives, budget constraints, and risk management considerations. The procurement strategy outlines the approach to be taken for sourcing goods, services, and resources to meet project needs.
  3. Integration of Organizational Processes: Identify opportunities to integrate organizational procurement processes into the project’s procurement activities. This may involve adapting existing processes to meet project-specific requirements, leveraging organizational frameworks for supplier evaluation and contract management, and aligning procurement practices with organizational standards.
  4. Customize Procurement Processes: Tailor procurement processes and procedures to suit the specific needs and constraints of the project while ensuring alignment with organizational policies and regulations. This may involve customizing procurement documentation, evaluation criteria, and approval workflows to reflect project requirements.
  5. Utilize Organizational Resources: Take advantage of organizational resources, expertise, and support functions to streamline procurement activities. This may include accessing centralized procurement systems, leveraging existing supplier relationships, and seeking guidance from procurement professionals within the organization.
  6. Compliance and Governance: Ensure that procurement activities adhere to organizational procurement policies, regulatory requirements, and ethical standards. Establish governance mechanisms to oversee and monitor procurement processes, including approval authorities, compliance checks, and reporting requirements.
  7. Training and Capacity Building: Provide training and capacity-building initiatives to project team members involved in procurement activities to ensure they understand and adhere to organizational procurement processes. This may include training on procurement policies, procedures, and best practices.
  8. Continuous Improvement: Continuously evaluate and refine procurement processes based on feedback, lessons learned, and changing project requirements. Identify opportunities for optimization, efficiency gains, and process improvements to enhance the effectiveness of procurement activities over time.

By leveraging organizational procurement processes and aligning them with the procurement strategy of the project, project organizations can optimize procurement practices, ensure compliance with organizational standards, and maximize the value derived from procurement activities.

Procurement management should be integrated with planning.

Integrating procurement management with planning is essential for ensuring that the acquisition of goods, services, and resources aligns with project objectives, timelines, and budgets. Here’s how procurement management can be integrated with planning:

  1. Early Involvement in Planning Process: Procurement management should be involved in the project planning process from the outset. This ensures that procurement considerations, such as sourcing strategies, lead times, and budgetary constraints, are incorporated into the project plan from the beginning.
  2. Requirements Definition: During the planning phase, clearly define the requirements for goods, services, and resources needed to support project activities. This includes specifying technical specifications, quality standards, quantities, and delivery schedules.
  3. Market Analysis and Supplier Identification: Conduct market analysis and supplier research during the planning phase to identify potential suppliers and assess market conditions. This helps in developing procurement strategies, evaluating supplier capabilities, and anticipating supply chain risks.
  4. Procurement Strategy Development: Develop a procurement strategy as part of the project planning process. This strategy outlines the approach to be taken for procuring goods, services, and resources, considering factors such as procurement methods, supplier selection criteria, and risk management strategies.
  5. Budget Planning and Cost Estimation: Integrate procurement cost estimates into the project budget during the planning phase. This involves estimating the costs associated with procuring goods, services, and resources, including acquisition costs, delivery fees, taxes, and contingencies.
  6. Risk Management: Assess procurement-related risks and develop risk management strategies as part of the project planning process. This includes identifying potential risks such as supplier failures, supply chain disruptions, and cost overruns, and implementing measures to mitigate or respond to these risks.
  7. Procurement Schedule Development: Develop a procurement schedule that aligns with the overall project timeline and critical milestones. This includes establishing procurement timelines, lead times for supplier delivery, and dependencies with other project activities.
  8. Integration with Project Plan: Integrate procurement activities into the project plan to ensure alignment with project milestones and deliverables. This involves coordinating procurement timelines with project schedules, identifying procurement dependencies, and communicating procurement milestones to relevant stakeholders.
  9. Continuous Monitoring and Adjustment: Continuously monitor and adjust procurement plans and strategies throughout the project lifecycle as project requirements, market conditions, and risks evolve. This ensures that procurement activities remain aligned with project objectives and contribute to project success.

By integrating procurement management with planning, project organizations can optimize procurement processes, minimize risks, and ensure that the acquisition of goods, services, and resources supports the overall project goals and objectives.

Procurement requires knowledge of relevant laws and practices and is often undertaken by specialists outside the project’s organization, such as a sourcing specialist within the sponsoring organization.

Procurement requires a deep understanding of relevant laws, regulations, and best practices to ensure compliance, mitigate risks, and achieve optimal outcomes. Often, procurement activities are undertaken by specialists or procurement professionals who possess the necessary expertise and experience in procurement processes and regulations. Here’s how specialists outside the project’s organization, such as sourcing specialists within the sponsoring organization, contribute to procurement activities:

  1. Legal and Regulatory Compliance: Sourcing specialists have knowledge of relevant procurement laws, regulations, and industry standards. They ensure that procurement activities adhere to legal requirements, including procurement policies, contract laws, labour laws, and trade regulations.
  2. Market Knowledge and Analysis: Sourcing specialists possess expertise in market analysis and supplier evaluation. They conduct market research to identify potential suppliers, assess market conditions, and evaluate supplier capabilities, pricing, and performance.
  3. Supplier Relationship Management: Sourcing specialists manage relationships with suppliers throughout the procurement process. They negotiate contracts, establish service level agreements (SLAs), resolve disputes, and monitor supplier performance to ensure that suppliers meet project requirements and deliver value for money.
  4. Risk Management: Sourcing specialists assess and mitigate procurement-related risks. They identify potential risks such as supplier failures, supply chain disruptions, and cost overruns and implement risk management strategies to minimize the impact of these risks on project objectives.
  5. Procurement Strategy Development: Sourcing specialists develop procurement strategies aligned with project goals and objectives. They determine the most appropriate procurement methods, sourcing strategies, and supplier selection criteria to optimize procurement outcomes and minimize risks.
  6. Contract Management: Sourcing specialists manage the contract lifecycle, from contract negotiation to contract execution and closeout. They ensure that contracts comply with legal requirements, monitor contract performance, and administer contract changes as needed.
  7. Cost Management: Sourcing specialists are responsible for managing procurement costs and optimizing procurement spend. They negotiate pricing, terms, and discounts with suppliers to achieve cost savings while maintaining quality and delivery requirements.
  8. Professional Expertise: Sourcing specialists bring specialized knowledge, skills, and experience in procurement processes, practices, and techniques. They leverage their expertise to drive efficiencies, improve procurement processes, and achieve better outcomes for the project.

By leveraging the expertise of sourcing specialists and other procurement professionals, project organizations can ensure that procurement activities are conducted efficiently, effectively, and in compliance with relevant laws and practices. Sourcing specialists play a critical role in optimizing procurement processes, managing supplier relationships, and delivering value for the project.

Published by Pretesh Biswas

Pretesh Biswas has wealth of qualifications and experience in providing results-oriented solutions for your system development, training or auditing needs. He has helped dozens of organizations in implementing effective management systems to a number of standards. He provide a unique blend of specialized knowledge, experience, tools and interactive skills to help you develop systems that not only get certified, but also contribute to the bottom line. He has taught literally hundreds of students over the past 5 years. He has experience in training at hundreds of organizations in several industry sectors. His training is unique in that which can be customized as to your management system and activities and deliver them at your facility. This greatly accelerates the learning curve and application of the knowledge acquired. He is now ex-Certification body lead auditor now working as consultancy auditor. He has performed hundreds of audits in several industry sectors. As consultancy auditor, he not just report findings, but provide value-added service in recommending appropriate solutions. Experience Consultancy: He has helped over 100 clients in a wide variety of industries achieve ISO 9001,14001,27001,20000, OHSAS 18001 and TS 16949 certification. Industries include automotive, metal stamping and screw machine, fabrication, machining, assembly, Forging electrostatic and chrome plating, heat-treating, coatings, glass, plastic and rubber products, electrical and electronic equipment, assemblies & components, batteries, computer hardware and software, printing, placement and Security help, warehousing and distribution, repair facilities, consumer credit counseling agencies, banks, call centers, etc. Training: He has delivered public and on-site quality management training to over 1000 students. Courses include ISO/TS -RAB approved Lead Auditor, Internal Auditing, Implementation, Documentation, as well as customized ISO/TS courses, PPAP, FMEA, APQP and Control Plans. Auditing: He has conducted over 100 third party registration and surveillance audits and dozens of gap, internal and pre-assessment audits to ISO/QS/TS Standards, in the manufacturing and service sectors. Other services: He has provided business planning, restructuring, asset management, systems and process streamlining services to a variety of manufacturing and service clients such as printing, plastics, automotive, transportation and custom brokerage, warehousing and distribution, electrical and electronics, trading, equipment leasing, etc. Education & professional certification: Pretesh Biswas has held IRCA certified Lead Auditor for ISO 9001,14001 and 27001. He holds a Bachelor of Engineering degree in Mechanical Engineering and is a MBA in Systems and Marketing. Prior to becoming a business consultant 6 years ago, he has worked in several portfolios such as Marketing, operations, production, Quality and customer care. He is also certified in Six Sigma Black belt .

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