Procurement Planning ProcessFelecia L. AlexanderCPMG

Procurement Planning Process
Felecia L. Alexander
CPMGT/302
June 22, 2020
Dr. Daryoush Tehranchi
PROCUREMENT PLANNING PROCESS
1
PROCUREMENT PLANNING PROCESS
2
Procurement Planning Process
The goals of this procurement planning process information
paper are to describe the project procurement planning process.
Some of the goals are to identify the most valuable output of the
plan procurement process and explain why I believe it is most
valuable. It will explain the various contract types and describe
who, buyer, or seller has the most risk for each contract type.
Also, it will explain methods that can be used to mitigate the
risks for each contract type. Another goal for this procurement
planning process information paper is to develop a project
monitoring process to track procurement orders for a project.
This procurement planning process information paper will
describe a source selection criterion that would be applicable to
any project. Analyzing the ethical concerns that should be

considered when identifying source selection criteria will
further be included in this procurement planning process
information paper. The final goal is to explain the role of risk
management in the procurement planning process.
The procurement planning process is essential to a project and
key phase in project planning. “The project manager is tasked
with developing a plan for obtaining everything required to
carry out project work activities and in doing this, needs to
make several decisions on how to best use available
organizational resources” (Wilson, 2015, "4.2 Project
Procurement Requirements"). Procurement planning should be
developed at the same time of creating a project’s preliminary
budget, which is established during the planning phase of the
procurement process. “Another important element in evaluating
procurement requirements are the details of each requirement”
(Wilson, 2015, "4.2 Project Procurement Requirements").
Project managers usually make mistakes when evaluating details
of each requirement. This is vital not only in the initial phase
of any project, but throughout all phases. Sometimes the
resources required for an organization’s project are employees
of the organization. An organization’s employees are great
resources because they may possess the necessary experience,
knowledge, and skill in order to support the project
development. Also, company employees who have the
necessary skillset for assisting in project development will
alleviate the additional cost to pay external resources to perform
the same work on the project.
The most valuable output of the plan procurement process is
creating and establishing a project management plan (PMP). In
this phase of project development, it is vital to assess the
requirements of a business’ future endeavor. It is the
responsibility of the project manager to identify project
particulars, which will reflect provisions, essential plan
fundamentals, skillset requirements of a specific resource, and
whether it is better to employ company internal resources versus
spend additional funding obtaining external resources.

It is my opinion; the most valuable output of the plan
procurement process is to establish and implement a PMP. A
PMP has many components. “It is a document that defines how
a project is executed, monitored, and controlled; it is much
more than a schedule chart” (Simplilearn, 2020, para. 1).
Information in the PMP is critical for a successful project to
fully accomplish the objectives and goals of the organization
investors’ deliverables and meet their expectations on the
agreed upon schedule. A project charter, work breakdown
structure (WBS), and a project statement of work (SOW) are
necessary areas of the PMP. Additional areas of the PMP are a
customer specification document, activity information checklist,
network diagram, and bill of materials (BOM). The project
charter should be established in the initial phase of a project. It
defines the objective and will outline specific information
regarding project requirements of its deliverables. A customer
specification document is the key foundation of information for
project development. It lists all components of the project’s
deliverables in a sequenced WBS. It is crucial to review this
document with its stakeholders for clarity and verification of
their expectation of deliverables. The project SOW document
should be created in the initial phase of a project as well. It
defines specific project deliverables. The SOW is “used as a
primary source of procurement information if a customer
specification was not available. The project manager should
take caution and ensure that the SOW has been developed and
interpreted correctly to reduce the chance of error in
procurements” (Wilson, 2015, "4.2 Project Procurement
Requirements"). The WBS is a hierarchical reflection of all the
work requirements in a project in terms of deliverables. Work
requirements of a project must be performed in order to produce
these deliverables. When developing a WBS, it is vital for the
project manager to start at the highest level with all product
necessities. An activity information checklist are specifics of
the overall work, essential resources, calendar necessities, and
budget estimates to include the identified potential project

risks. The network diagram follows a WBS and activity
information checklist. “This is important because in many
cases activities can be done simultaneously or in parallel, and
some activities have to be completed before the next activity
can start” (Wilson, 2015, "4.2 Project Procurement
Requirements"). Finally, the BOM document is created as a
defined project deliverable list to use during execution of a
project. This document is important because it discloses to the
project manager all required procurement materials that are
warranted and justified.
There are various contract types utilized in project
management prior to the start of a project development.
Contracts differ in scope and intricacy. All entities i nvested are
known to have their legal advisors review the contract because
of the legalities of contract jargon as it is a legal, binding
document. Contracts are implemented to ensure all parties
involved understand the project requirements and expected
deliverables of the investors, resources and materials required,
specific and special requests, and equipment needed to begin
and complete a project. According to Wilson (2015), “there are
three primary categories of how contracts can be structured;
fixed price, cost reimbursable, and time and material” ("4.4
Contract Strategies"). Two of these contract categories have
three add-on subcontract categories; time and material contracts
are stand-alone. The primary contract categories are fixed price
contracts, cost-reimbursable contracts, and time and material
contracts. Fixed price contracts are fixed total price contracts.
“The seller needs to calculate all of the time, resources, and
materials required to fulfill the requirements of a deliverable
outlined in the contract as well as any profit margins and risk
contingency monies that would normally be factored in to
establish a single fixed price. The seller is obligated to perform
all the duties outlined in the contract for the fixed price
regardless of any inaccuracies in the seller’s estimates. The
buyer is at an advantage because he obtains the product or
service at a fixed price under the terms of the contract and can

factor both the cost and schedule of this procurement into a
project plan” (Wilson, 2015, "4.4 Contract Strategies"). Cost
reimbursable contracts are exactly how they are titled. “the
seller wants to be reimbursed for any actual costs incurred in
fulfilling contract objective obligations. It additionally
includes incentive and award fees as add-ons for measurable
performance. Sellers typically use this type of contract because
products or services incur large sums of financial outlay; the
seller wants to manage cash flow and immediately
reimbursement. The seller will not commit to a fixed price
because the risk is too high for the seller to cover any errors in
cost estimating without enough information on critical
purchases or special orders. Time and material contracts
consent to seller reimbursement of cost incurred on materials.
It requires the buyer to pay a pre-negotiated rate for time
incurred in completing the contract objective. Subcontractors
keep track of all time worked and bill the buyer as materials are
being purchased. Contractors prefer this type of contract, as it
shifts most of the risk to the buyer, allowing the seller full
reimbursement on materials and a seemingly open-ended
schedule for completion” (Wilson, 2015, "4.4 Contract
Strategies").
Methods that can be used to mitigate the risks for each
contract type are to establish the related risks to each item and
create a response plan fitting for each risk item. A strategy
response should be jointly developed by the project manager
and the procurement department. A strategy response
summarizes all mandatory acquisitions and agreements.
The purpose of a project monitoring process to track
procurement orders is to avoid procurement acquisition
wastefulness in addition to overseeing and monitoring
purchases. This process is done by identifying procurement
requirements for all project planning, which entails project
purchasing agents are aware and understand the exact
specifications of the necessary supplies, equipment, and tools
listed on a procurement requisition form. Additionally, project

managers should create and implement cautionary prompts
regarding possible problems of procurement data that can delay
project development due to incorrect procurement purchases.
Source selection criteria will consist of supplier abilities,
size, delivery, pricing, lifespan warranty, and technical
knowledge of a project contract. A source selection criterion
that would be applicable to any project would be the
management approach. The management approach criteria
describe if the seller is reliable to establish and produce
management methods, which will guarantee successful project
deliverables.
In my professional experience, analyzing the ethical
concerns that should be considered when identifying source
selection criteria are imperative because violations are known to
happen and exist with project acquisition contracts. Some areas
to identify are fraud, conflict of interest, and exploitation. One
particular violation is personal gain, which is considered a
conflict of interest. This means awarding a contract to a
company or having personal involvement with the awardee for
personal financial gain.
The role of risk management in the procurement planning
process is to minimize supplier selection risks. Risk
management in the procurement planning process assists
businesses by assuring the purchasing and supply operations are
steady and consistent. According to "Importance of Risk
Management in Procurement"(2019), “it also contributes to the
resilience of a supply chain as a whole and to business
continuity” (Why Is Understanding Risk Important).
In summary, the procurement planning process is just as
vital and significant in project developments. There are
procurement risks, which require the project manager and an
organization’s supply, budget, or procurement department’s
attention to have the necessary skillsets when submitting the
project requisition forms purchases. One of the most important
aspects of a contract to an organization is the ethical behavior
of their entrusted employees because lack of ethics wil l ruin an

employee, but will also cause project delays.
References
Importance of Risk Management in Procurement (2019).
Retrieved from https://precoro.com/blog/importance-of-risk-
management-in-
procurement/#:~:text=Risk%20affects%20many%20aspects%20
of,guiding%20consideration%20when%20selecting%20suppliers
.&text=Risk%20management%20helps%20companies%20ensure
,whole%20and%20to%20business%20continuity.
Simplilearn. (2020, February). What Is a Project Management
Plan? Simplilearn, (1). Retrieved from
https://www.simplilearn.com/what-is-a-project-management-
plan-article
Wilson, R. (2015). Mastering Risk and Procurement in Project
Management: A Guide to Planning, Controlling, and Resolving
Unexpected Problems. Retrieved from
https://phoenix.vitalsource.com/?utm_channel=affiliate&utm_so
urce=CJ&utm_medium=Ebates+Performance+Marketing%2C+In
c.+dba+Rakuten+Rewards&utm_campaign=Free+Tools+at+Vital
Source&utm_term=&utm_content=800703657283440682%3A2
MOZZy9HH3rI&cjevent=1178899bae9b11ea819d02a10a24060e
#/books/9781323471821/?utm_channel=affiliate&utm_source=C
J&utm_medium=Ebates+Performance+Marketing%2C+Inc.+dba
+Rakuten+Rewards&utm_campaign=Free+Tools+at+VitalSourc
e&utm_term=&utm_content=800703657283440682%3A2MOZZ
y9HH3rI&cjevent=1178899bae9b11ea819d02a10a24060ecfi/6/2

4!/4/[email protected]:58.3.
Procurement Planning Paper
Adam Bentley
CPMGT/302
September 01, 2020
Pamela Hill
Planning of project procurements is done inside the obtainment
procedure and results in building up an arrangement. A
procurement plan is a beneficial tool for sorting out and
overseeing exercises and tasks identified with the obtainment of
the executive's procedure. A layout of the arrangement is to be
structured by the obtaining office in participation with the
venture director. A task acquisition plan should be explored and
upheld by the task supervisor before any provider connections
begin. During the procurement planning process, the acquisition
technique is relegated and the desires for the satisfaction of
obtainment necessities are decided. It enables organizers to
decide whether desires are sensible; especially the desires for
the mentioning properties, which as a rule expect their
prerequisites met without warning over a shorter period than the
utilization of the relating obtainment technique permits.
The valuable output - Procurement Management plan.
This shows how most of the other processes are to be carried
out. In point of interest, it shows what is to be acquired for the
company, the type of contract that is used, how or how it is to
be selected, how its implementation is measured, and how the
risk of acquisition is to be monitored. Because the procurement
strategy is vital.
All anticipated specifications are reported and more than once

guaranteed. A purchase schedule is developed from there that
sets the course for every stage of the purchase process to allow
awards to be granted and to meet the requirements. It includes
strengthening comparable needs under one single agreement or
dividing a necessity into various packages of economic-scale
agreements. The purchasing component that previously focuses
on additional personnel specifications for finalization of all
selection factors from the number of preconditions to the
purchase agreement, including external assistance. To determine
how actual training comparisons and tasks are carried out, the
analysis of the procurement process is considered, therefore,
informing the business divisions and modifying the structure
equivalently. It improves the quality and performance of the
procurement process.
Three general types of contract compensation:
1. Fixed Price: The supplier is obliged to deliver the contract
at a fixed price. The supplier bears the risk.
2. Incentive contracts: In this, the supplier is rewarded for
controlling cost and improving schedule performance. The risk
is shared by both buyer and supplier.
3. Cost-Type: In this, the buyer is obliged to pay for all
reasonable costs agreed to the supplier. The buyer bears the
risk.
Risk is a major factor during the contract type selection. Every
contract type has a different type of sharing of risk amongst the
parties involved. The risks and their impact also differ from one
project to another. So, while selecting a contract type the degree
of risk and the risk-sharing between the parties entering the
contract must be kept in mind.
The contracting helps to mitigate the risks in a project in two
ways. Firstly, it mitigates the risk through the sharing of the
risk with the contractor. When a contract is given, the risk is
either shared or transferred to the contractor. This helps in
mitigating and avoiding the risk. Secondly, the contractors are
often experts in their work, and getting a job done by an expert
reduces the chances of risk and helps in mitigating the risk.

The success of a development project can be measured in
several ways using the following indicators, Increased customer
base is a major indicator of the success of a growth project. The
purpose of the project is reviewed if the purpose is almost
solved then t is considered that a growth project was successful.
This can also be seen in the balance sheets if the profit and loss
statement say that profits have increased then it can be
conserved that the project was successful. Another indicator is
that the project should get completed within the defined budget.
Sustainability of the growth over a period is also a measure of
the success of a growth project. The quality of the products
produced, and the customer reviews can also be considered to
ensure the success or failure of the growth project.
When identifying a source selection standard, there may be
some ethical concerns, especially when a preferred
supplier/vendor list is not going to be used by the procurements
department. Some of those ethical issues are favoring a vendor
for personal reasons and therefore giving them the advantage of
knowing more about the scope of work than the other vendors,
providing an unfair advantage to that vendor. Other ethical
issues can be fairness across the board as far as making sure
every vendor/supplier has all the same information with regards
to the scope and requirement of the project. Providing
misleading information to one vendor because of personal issues
with that vendor is an ethical issue as well.
Risk management is part of the procurement management
process. Risk management is continuing the early stage, the
firm must decide the requirements of the project and for this,
they must keep in mind the suppliers available who can meet
these needs. But available suppliers cannot fulfill all the
requirements, so risk management starts from here. Firms must
search for new suppliers who can fulfill their needs, but the risk
is involved in it. In risk management, they must determine
which supplier has the least risk level. It must be based on the
facts or experience, not on the rule of thumb, for example,
intuition or guesses. Each step of the planning process contains

risk, the firm must consider all factors before appointing a
supplier. Therefore, risk management plays important role in
procurement planning.
References:
MYMG TEAM. (MARCH 23, 2011). Project Procurement
Management: 5 Steps of the
Process. https://mymanagementguide.com/project-procurement-
management/
Watt,A. (Na). ProcurementManagement. https://opentextbc.ca/p
rojectmanagement/chapter/chapter-13-procurement-
management-project-management/
Fahad, U. (July 25, 2020). Types of Procurement Contracts
used in Project
Management. https://pmstudycircle.com/2013/12/types-of-
procurement-contracts-used-in-project-management/
Choma, A. A. (2008). How to reduce risks in contractors'
management. Paper presented at PMI® Global Congress 2008—
North America, Denver, CO. Newtown Square, PA: Project
Management Institute.

Procurement Planning ProcessFelecia L. AlexanderCPMG

Procurement Planning ProcessFelecia L. AlexanderCPMG

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Procurement Planning ProcessFelecia L. AlexanderCPMG