Standardizing the Procurement Process

The ACME Development Corporation has charged me with the task of standardizing their procurement processes and practices. In order for me to accomplish this, it is imperative that all project managers understand why a standardize procurement process is an important part of the project management lifecycle and what negative impact would occur if we continue to do ‘business as usual’. Let’s start by taking a look at how procurement fits into the project management lifecycle.

As one of many subsidiary plans of the Project Management Plan, the Procurement Management Plan is the organization of processes of all purchases and acquisitions of external resources (products and/or services) which are needed to perform work and complete the project. (PMI, 2004) These processes can be separated into six different process areas: 1. Plan Purchases and Acquisitions 2. Plan Contracting 3. Request Seller Responses 4. Select Sellers 5. Contract Administration 6. Contract Closure (PMI, 2004)

Each of these processes interacts with the other Knowledge areas at various times during the lifecycle of the project. Contracts are typically drawn up to secure products and/or services that conform to and fulfill the project’s needs and are usually scrutinized by specialists in contracting, purchasing and the law. This is important as a contract is a legally binding document, so we want to be sure that the wording in that contract accurately defines how, when and what it is we are trying to acquire.

If a contract does not accurately spell out the terms of an agreement, disagreements and frustration can lead to project delays and unsatisfactory outcomes, or worse yet, law suits can plague a project. We see this all the time in the news. For example: In the small town of Adelphia, Ohio, a dispute between a sewer contractor and the city erupted when the contractor developing a sewer system for the community wanted to back out of the 1994 contract (which was for 40 years) and the community was already paying fees for the sewer system.

Long story short, the courts ended up settling the dispute and dissolved the contract due to improper legal wording in the contract, however a new agreement has since then been reached, but only at the expense of the local tax payers. (Genson, 2006) The down side to doing ‘business as usual’ can (and most likely will) lead ACME to face difficult project situations (at best), eventual project termination, or even business failure with potential jail time for mismanaged or improper business practices.

With the passing of the Sarbanes-Oxley Act of 2002, businesses across the United States (and those who do business with U. S. companies) are being held accountable for their actions. (107th Congress, 2002) This is to primarily protect investors by the improvement and accuracy of corporate disclosures as well as to make sure good ethics are being practiced. By standardizing ACME’s procurement management processes, we should be able to effectively control our project spending, identify and hopefully neutralize potential project risks, control our projects’ schedules, and ultimately finish a project with at least an expected out come or better yet, a finished project with greater quality than anticipated and less capitol expenses.