Experts Advise How to Manage Project Procurement Process

How to bring project procurement process to the next level? Experts will explain techniques you should use, actions you should take and mindset you should have.

1. William Pegg, Director, Synthesis Group

When running a project, the procurement process has to be flexible. Ask yourself, what is the business case and what does the project hope to achieve? Understanding the commercial reason for the project and the mid-term objectives frames how the project will be delivered. In other words, a proactive approach and appreciation of ramifications to business puts an emphasis on outcomes and flexibility, more than just process. Flexibility is also achieved when the end user or primary stakeholder has their wants and needs prioritised. This can be challenging since we each have targets and they don’t always align. The thing is, this approach delivers results - greater stakeholder buy-in, higher project adoption and increased returns. 

So a focus on the business case and critical stakeholders shifts attention to how best to achieve these requirements first, rather than just applying the same process that’s always been used. There’s a saying, love your customer more than your product, in this instance it’s love your stakeholder more than your process.

Suppliers can be better utilised if we are prepared to change how with think. Let’s be clear, without clients we have no business, just as without suppliers we have no goods and services to sell. We need to recognise that suppliers are as important as clients. But why should we bother, after all we’re paying the bill? This is true however, if we cease the often hostile approach of interacting with suppliers and position our business as a preferred point of sale, consider what could happen. You could gain preferential access to scarce resources, suppliers would bring their latest innovations to you first and you could secure preferential pricing. A commoditised supplier, one where only price is discussed, is hardly going to bring you their best thinking. Instead, try to position your business as a customer of choice. Would you sell your wares for next to no margin? I doubt it.

If we want to see greater utilisation of our important suppliers, allow them to be profitable, develop constructive contracts that reward, integrate them into your business, make full use of their ancillary services and have commercially robust but relationally focused teams manage the arrangements – that’s exactly what companies like Toyota and Unilever do. The test - if you believe you have great supply relationships, list the confidential innovations your suppliers are working on right now. If you can only name a handful or none at all, it’s not that your suppliers aren’t innovating, it’s just that the benefits are going to your competition.

2. Jeremy Smith, Director, 4C Associates

The success of procurement depends on the programme and project operating model but ultimately success lies in the smart and early cross functionality of both engineering/operations and procurement.

Procurement should be at the heart of projects such as infrastructure or oil & gas, in a supporting and enabling role to the surveyors, engineers and operational stakeholders and not just be doing the final negotiations or the administration in a process that was a fait accompli. Embed the procurement process into the overall project processes to enable procurement to work as a trusted advisor from the early feasibility stages of the project. This is not category management, and should not be procurement led for that reason.

To ensure that procurement can advise and propose solutions, the CPO and the Programme Lead should be looking for the optimal outcomes from the quality & innovation, effectiveness and efficiency, and to innovate value propositions.

3. Celia Jordaan, Principal Consultant, Ichiban Commercial Solutions

Understand that projects have tight deadlines and procurement is always underestimated. Toughen up and find solutions.

Work with the project team to determine what is critical, long lead and non-critical. 

Agree milestones and hold people accountable.

Stand your ground on detailed scopes, the project team will groan but a clear scope avoids unnecessary variations and claims.

Make use of existing providers where possible. They know your operation and will be more loyal because they know there is work after the project. This way you can focus on long lead and critical path procurement.

Get fit-for-purpose contract templates that don’t require endless negotiations. Start closer to the middle ground because that is where you will end up in any event.

Communicate as you go including project approvers. There is nothing more frustrating than having to salvage contract negotiations at number ninety-nine because an approver came up with a sudden “brainwave”.

4. Michael Gravier, Associate Professor of Marketing and Supply Chain Management, Bryant University

Lots of good technical advice exists for managing the project procurement process effectively, yet one basic area repeatedly gets ignored: supply chain architecture. Procurement is the master tool for creating a supply chain architecture; where amateurs talk strategy, professionals realize that day-to-day operational capability depends on having the right configuration of suppliers/customers. Where strategy and architecture align you have success.

A truly supply chain oriented procurement process needs to incorporate how each supplier fits into the network of suppliers and customers. Create a supply chain map that shows suppliers’:

- value proposition
- operational impact, such as VMI, facility location, or distribution classification
- risk management aspects (e.g., exposure, pooling, diversification, buffering capability)
- responsiveness as determined by order fulfilment and product customization capabilities

A supply chain map should relate different supplier capabilities to each other, allowing the planning of synergies, avoiding unnecessary duplication, and bolstering strategic risk management.