Management Tutor
A Project Management Blog

Procurement management

This page describes procurement management processes viz. plan procurements, conduct procurements, administer procurements and closing procurements. Fixed price and time and material contract types are also covered.

In a project management the procurement management knowledge area plays essential role in certain conditions. This is due to following reasons:

•  The work is big which your company can not be able to handle due to shortage of man power.

•  Your company do not have expertise or skills to execute the work.

•  Your company do not have equipments to execute the work.

Inspite of above insufficient resources, your company do not want to leave the opportunity and wants to execute the project successfully and like to earn the profit. In this conditions, your company will find another company to do the work for you. Till the goals of the contract are met, you will get the job done and will lead the project to be a success.

There are four procurement management processes as mentioned below.

•  Plan procurements (in Planning process group)
•  Conduct procurements (in Executing process group)
•  Administer procurements (in Monitoring & Control process group)
•  Close procurements (in Closing process group)

Tools in the procurement management are as follows:

•  Make or Buy Analysis
•  Expert Judgement
•  Contract types as described below

Procurement Management

The figure depicts inputs and outputs of procurement management.

Fixed Price Contract Type-FP

In this type of contract, no matter how much time or effort goes into them, you always pay the same.

Cost Reimbursable Contract Type-CR

In this type of contract, where the seller charges you for the cost of doing the work plus some fee or rate. It is also referred as cost plus contract.

Time and Material Contract Type-T&M

In this type of contract, the buyer pays a rate for the time spent working on the project and also pays for all of the materials used to do the work.

The table below mentions various contact types with their procurement documents, contract SoW and risk associated with buyer or seller.

Procurement Document Contract type Contract
Statement of Work(SoW)
Risk associated
with whom?
Request for proposal(RFP) Cost Reimbursable Contract Performance or functional Buyer
Invitation for Bid
Request for Bid(RFB)
Fixed Price Contract Design Seller
Request for Quotation(RFQ) Time and Material contract Any Buyer

Request for proposal(RFP): This will request a price, but also a detailed proposal on how the work will be accomplished, who will do it, resumes, company experience etc.

Request for Bid(RFB): Requests one price to do all the work.

Request for Quotation(RFQ): Requests a price quote per item, hour or foot.