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12 - PROJECT PROCUREMENT MANAGEMENT

The Project Procurement Management processes involve agreements, including contracts, which are legal
documents between a buyer and a seller. A contract represents a mutually binding agreement that obligates the
seller to provide something of value (e.g., specified products, services, or results) and obligates the buyer to provide
monetary or other valuable compensation. An agreement can be simple or complex, and may reflect the simplicity
or complexity of the deliverables or required effort.

A procurement contract includes terms and conditions, and may incorporate other items that the buyer
specifies as to what the seller is to perform or provide. It is the project management team’s responsibility to make
certain that all procurements meet the specific needs of the project while adhering to organizational procurement
policies. Depending upon the application area, a contract can also be called an agreement, an understanding,
a subcontract, or a purchase order. Most organizations document policies and procedures specifically defining
the procurement rules and specifying who has authority to sign and administer such agreements on behalf of
the organization.

Although all project documents may be subject to some form of review and approval, the legally binding nature
of a contract or agreement usually means it will be subjected to a more extensive approval process. In all cases, the
primary focus of the review and approval process is to ensure that the contract language describes the products,
services, or results that will satisfy the identified project need.
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The project management team may seek support in early phases from specialists in contracting, purchasing,
law, and technical disciplines. Such involvement can be mandated by an organization’s policies.

The various activities involved in the Project Procurement Management processes form the life cycle of an
agreement. By actively managing the agreement life cycle and carefully wording the terms and conditions of a
procurement, some identifiable project risks may be shared or transferred to a seller. Entering into an agreement
for products or services is one method of allocating the responsibility for managing or sharing potential risks.

A complex project may involve managing multiple contracts or subcontracts simultaneously or in sequence.
In such cases, each contract life cycle may end during any phase of the project life cycle. Project Procurement
Management is discussed within the perspective of the buyer-seller relationship. The buyer-seller relationship
may exist at many levels on any one project, and between organizations internal to and external to the acquiring
organization.

Depending on the application area, the seller may be identified as a contractor, subcontractor, vendor, service
provider, or supplier. Depending on the buyer’s position in the project acquisition cycle, the buyer may be called a
client, customer, prime contractor, contractor, acquiring organization, service requestor, or purchaser. The seller can
be viewed during the contract life cycle first as a bidder, then as the selected source, and then as the contracted
supplier or vendor.

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©2013 Project Management Institute. A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Fifth Edition 357

Licensed To: Jorge Diego Fuentes Sanchez PMI MemberID: 2399412
This copy is a PMI Member benefit, not for distribution, sale, or reproduction.