This document provides an overview of project procurement and contract management. It defines procurement as the process of acquiring goods and services through purchasing, renting or leasing. Procurement includes preparing specifications, evaluating bids, awarding contracts and contract administration. The key functions of procurement management are issuing purchase requisitions, purchase orders, approving invoices, vendor management and contract management. Contract management involves negotiating terms, ensuring compliance with terms, and documenting any changes to contracts. The objectives of contract management are to ensure contracts are delivered on time and specifications at the agreed upon price.

1. COURSE CODE: MCM1223
SEMESTER TWO
M.E. CONSTRUCTION ENGINEERING &
MANAGEMENT

2. LECTURE 1
CHAPTER ONE
Defining Project Procurement and Contract Management
INTRODUCTION
Lecturer: Ahmed Baasaay

3. What is Procurement?
• Procurement is the process of acquiring goods and services by purchasing, renting, or leasing.
The procurement process includes preparing specifications and solicitations. The procurement
process also includes evaluating bids and proposals, awarding contracts, and contract
administration. A solicitation is a document that describes what you need and gives vendors
instructions for responding.
The terms “sourcing,” “purchasing,” and “procurement” are at
times used interchangeably (depending on the industry) to define
the process of procuring supplies. However, sourcing is more
strategic, while purchasing and procurement refer to the actual
operational function.

4. • Another word, Procurement is acquisition of goods and services.
• Procurement items are usually classified as goods, works or cervices (GWS)
- Goods represent raw material or product items
- Work means contracted labor
- Services means consultation/consultant services
• The Project Procurement Management processes involve agreements that
describe the relationship between two parties—a buyer and a seller.
- Buyer – seller
- Service requestor – supplier
- Purchaser – vendor
- Customer – contractor

6. • A procurement management process has to be guided by a strong procurement
strategy that aligns with the organization’s business goals.
• This strategy provides your procurement team with a method of obtaining goods
or services from external suppliers in a cost-effective manner. Having solid
vendor relationships is crucial to ensuring that the procurement process runs
smoothly and on budget.
• Procurement teams are in charge of overseeing this entire process. They are
responsible for:
How Does Procurement Management Work?
- Finding suppliers - Tracking orders - Diversifying suppliers
- Defining contract terms and costs
- Creating a list of approved vendors for future needs
- Ensuring that all parties fulfill their obligations

7. Functions of Procurement Management
Generally, procurement management is composed of five functions which include:
1. A Purchase Requisition
This document (created within the company) is a request to purchase a good or service. It can be either direct or
indirect spending, depending on the needs of that particular project. This document is then sent to the procurement
department.
2. Purchase order (PO)
The procurement department sends the vendor the purchase document that details each order’s goods or services and
quantities to be bought and delivered. Each PO will include a tracking number, a description of the items ordered, and
the relevant quantities.
3. Invoice Approval
Once the PO is approved, the following process includes reviewing and approving vendor invoices before paying
them. Each invoice has to be sorted and then sent to the appropriate stakeholder for approval. Many businesses use
ERP “Enterprise Resource Planning” systems to log these approvals.

8. 4. Vendor Management
Another function of procurement management is to identify suppliers, monitor and track vendor
performance, obtain quotes, negotiate contracts, timelines, and make payments. This process is fundamental
in organizations with a complicated procurement process and cannot afford delays due to tight deadlines.
5. Contract Management
The last function of procurement management is to administer and monitor contracts. This process oversees
the administration of vendor agreements, from the drafting of the contract to its execution. The aim is to
ensure that all vendors meet the agreed requirements and that any contractual or regulatory risk is mitigated.

10. What is contract?
Agreement - Every promise and every set of promises, forming the
consideration for each other, is an agreement.
AGREEMENT = OFFER + ACCEPTANCE
An Agreement involves an offer or proposal by one person and
acceptance of such offer or proposal by another person. If the
agreement is capable of being enforced by law then it is a contract.
Contract - An agreement enforceable by law is a contract.

11. Offer = Expressing willingness
Acceptance= Assent to offer
Promise = accepted offer
Agreement = Promise/s + consideration for each other
Contract = Agreement + enforceability by law

12. Contract Management is the management of contracts made with
customers, vendors, partners, or employees.
Contract management includes negotiating the terms and conditions in
contracts and ensuring compliance with the terms and conditions, as
well as documenting and agreeing on any changes or amendments that
may arise during its implementation or execution.

13. Contract management objectives
The key objectives of contract management are to ensure that the
contract is:
1. delivered on time, at the right place and in the right quantity;
2. completed to the required specifications, standards and/or quality;
3. completed within the agreed price

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