The Money Files

A blog that looks at all aspects of project and program finances from budgets and accounting to getting a pay rise and managing contracts.

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7 Elements for Project Cost Management Plans

3 Productivity Tips for the End of the Week [Video]

What's New in Project Procurement Management (pt 1)

Simple Measures for Your PMO To Track

Project Cost Management: Trends & Tailoring

What's New in Project Procurement Management (pt 1)

Categories: procurement

I got so many positive comments about the summary guide to what’s new in Project Cost Management that I shared recently, that I thought I would do it again for another Knowledge Area.

This time, it’s the turn of procurement – another budget and financial management aspect of project management that has had an update in the PMBOK Guide®-- Sixth Edition.

As the date for the launch of the new exam is this month, a quick review of Project Procurement Management will be relevant for anyone who started studying for their PMP® or CAPM® but who hasn’t yet managed to take the exam.

Plus, it’s just generally interesting, if you are interested in things like this – like I am! I enjoy seeing how the discipline of project management is evolving over time and the procurement area has seen some significant updates.

As before, I have to thank the authors of a free pdf including Asad Naveed, Varun Anand and others, for their comprehensive guide to what is new in the latest version. I have my own electronic version and I’ve been scouring that too, but their 130-page guidance document is helpful for showcasing the headlines of where things have changed.

So, without further ado, let’s dive into how procurement management is different now.

Plan Procurement Management Process

The first process in this knowledge area is Plan Procurement Management. We are, of course, in the planning process group.

It feels like quite a lot is different, but I don’t think the changes are substantive. Let me explain what I mean.


The inputs have changed around a lot. Requirements documentation, activity resource requirements, the schedule, cost estimates, the risk register and the stakeholder register are out.

In come the project charter, the generic “business documents” and project documents.

There is some sense to this. It speaks to what feels like more of a desire for project managers to make their own judgements, which is reflected throughout the PMBOK Guide®-- Sixth Edition. For example, project documents can include:

  • Requirements documentation
  • Risk register
  • Stakeholder register
  • Resource requirements

And so on.

The charter includes statements about finances, as you may have consideration given in that document to the total budget, or even information about possible suppliers. 

Tools and Techniques

The make or buy decision analysis has gone! So has market research, which I always thought was quite a helpful inclusion.

However, the nice and vague “data analysis” has been included, along with data gathering, and market research could justifiably fit in here.

The other new T&T is source selection analysis. This sounds a lot more complicated than it actually is. All it means is you plan for how you are going to select your vendors. The analysis part is looking at the options available to you and making the choice about which selection approach to use. For example:

  • You can choose the cheapest
  • You could base your decision on quality
  • You could look at a range of technical criterial
  • You could go with a preferred/mandated supplier so it doesn’t much matter what they cost or how good they are

Or a mixture, or something else.


The new version has 10 outputs! We have some new ones: procurement strategy, bid documents, independent cost estimates and organisational process asset updates (those OPAs get everywhere, and have to be updated).

Where, in other areas, it feels like there is some streamlining and introduction of generic terms, here the “procurement documents” output has been dropped in favour of the more specific strategy document.

I can see why – this is the planning process, so the output should be something that is basically your plan for procurement. The strategy gives you that. It can cover how you are going to procure, the kind of deals you are prepared to go into, preferences for contract types and so on.

Bid documents might not be necessary for all projects (in fact, much of procurement management might not be relevant for your project – it depends on what, if anything, you are buying). Bid documents is a summary term for the paperwork you need to generate so that suppliers know what it is you want to buy from them. In other words, the Request for Information, Request for Quote or Request for Proposal.

I like that the update includes independent cost estimates, although I have never worked on a project that has used these. Basically someone skilled in this area tells you what the work should cost, so that you can benchmark the vendor proposals when they come in. Very sensible!

Next time I’ll look at what’s new in the Conduct Procurements process. A quick teaser: your new procurement strategy, produced as part of this process, is not directly an input! You’ll have to wait for the next instalment to see how that’s reflected in the process.

Posted on: March 09, 2018 06:09 PM | Permalink | Comments (10)

5 Contract Terms You Should Know [Video]

Categories: contracts, procurement

In this video I share 5 contract terms that you should know. Remember, this isn't legal advice (and it's good to get some of that prior to any contract) but understanding common procurement terminology will help you manage your supplier relationships more effectively.


Posted on: October 16, 2017 12:00 AM | Permalink | Comments (11)

5 Tips for Better Buying [Video]

Categories: procurement, video

Here are 5 tips for better project procurement. To get more details on any of these tips, you can read this article.

Feel free to share!

Posted on: June 02, 2017 07:52 AM | Permalink | Comments (5)

3 Ways To Procure Without Competition

Categories: procurement

3 Ways To Procure Without Competition

Yes, there is such a thing! Not all project procurement processes have to be a struggle for who comes out top and a hugely competitive bidding event. Here are 3 project processes where there isn’t an element of competition.

1. Use a Preferred Supplier

You probably know this already but you might not have considered it as a non-competitive procurement approach.

If you have a preferred supplier, say, for photocopiers, then you are going to get your next photocopier from them. This goes for recruitment agencies sourcing your next project team members, to the company you have worked with for years who always supplies your widgets.

Where a preferred arrangement exists, company policy may actively prevent you from seeking out competition.

The risk here is that you don’t take the time to look at other vendors. Just because your preferred print supplier was competitive a year ago doesn’t make it competitive today. Business models are changing in plenty of sectors. I usually get all my printing from but this month I changed to a local print shop as (strangely) they were more competitively priced for the leaflets I needed. They were even kind enough to ask me to check again, as they said they weren’t normally competitively priced with online printers. But in this case, being able to deal with a real human, having a turnaround in 24 hours and not paying for postage really swung it for me.

Also, don’t assume that your past good experience with a supplier is always going to reflect their future performance. As well as their business model and pricing changing, a key change in support or service personnel could mean that the good relationship you had previously isn’t there any longer.

2. Joint Venture

You might come across this on large projects or at a business venture or product level.

A joint venture is where you are contractually in a partnership-type arrangement with another party to work together to provide a service. There’s an agreement in place that requires you to give the work to a particular company (and they, in turn may give you something).

3. Sole-Source Procurement

I hadn’t heard of this until I read Henrique Mora’s PMP® Exam prep guide where he covers the procurement management processes extensively. It’s a good read if you are preparing for the exam (I read the version that’s current for the 5th Edition).

Sole-source procurement is where the buyer chooses to get a product that is only provided by a single provider. Say, for example, you need a particular kind of roofing tile that is only made by one manufacturer. You’d buy it from them.

You could say this is the same for the vast majority of software too. If you want to buy a particular software tool that you think is right for your business, you can only get it from the vendor. You can’t buy Microsoft Office from Adobe, for example. (This is a poor example because so many large software vendors have a network of resellers where you do have choice about where to get it from. But it holds true for the majority of small/medium sized project management tools like the ones I review.) In healthcare tech many software products are linked to modalities or medical equipment – you have to get the one that ‘matches’.

“The main risks of conducting a sole-source procurement,” Moura writes, “concern the supplier’s economic feasibility and market conditions.”

You can include escrow in your contract if that’s appropriate, or other legal measures as a way of mitigating this if you think it’s worth it.

Benefits of Non-Competitive Procurement

I love the idea of non-competitive procurement.

Not having to sit in endless vendor presentations while the sales people tell you all the features of the product that you know won’t work when you start to get your hands on it.

Not having to prepare detailed business cases and financial models for products that you aren’t recommending, just to prove that you aren’t recommending them for the right reasons.

There are plenty of benefits including being able to get on with the work of your project more quickly because your team isn’t tied up in knots doing procurement activities.

However, there are drawbacks as well, not least because there’s an assumption that you are getting the best/right deal for your business. You might be, but if you have a feeling that actually you aren’t, it is worth talking to your manager or the PMO to see if there is flexibility to ditch the normal arrangements and go out to tender for this particular piece of work.

I’ve written before about treating the company’s money as if it is your own, and if you wouldn’t go ahead with the non-competitive procurement if it was your cash, then you’re right to question your own instincts here too.

Posted on: May 23, 2017 08:00 AM | Permalink | Comments (5)

5 Considerations for Your Project Procurement Strategy

Categories: procurement

A project procurement strategy is drawn up at the very beginning of a project at a high level because it’s useful for the business case.

Then you’ll put together a more detailed level procurement plan during Definition, when you are specifying exactly what is going to happen on the project. The procurement plan is part of your overall project management plan (remember: your plan is more than the schedule alone).

Here are 5 things to take into account when you are putting your procurement approach together.

1. Make or Buy

Make or buy decisions happen all the time on projects because you need to get your hands on stuff to make your project happen.

A make or buy decision is where you decide whether the deliverables will be made in-house or bought in. For example, you might do some IT developments in-house as you have developers with  those skills, and then buy in Software-as-a-Service products for other software items where you don’t have the skills (or the inclination) to build them yourself.

‘Make’ is a good choice where you have internal capacity, resources, time and funding and a as way of building expertise in the team for long term support.

‘Buy’ can be more expensive but is also normally faster and does not require the project manager to recruit or backfill specialist permanent roles.

Do you want more tips for make or buy decisions? This video sets out 5 steps to consider.

2. Single or Multiple Suppliers

You also have to decide if you want a main contractor or are prepared to manage multiple suppliers.

Using a single supplier streamlines communication and devolves the project management requirement to the lead contractor. But it can cost more as it introduces another layer or management and there may be disputes.

Also: watch out for communication problems as your message might be lost or diluted as it is passed down.

Multiple suppliers are common on projects because there are often a variety of deliverables. It might make sense to group these together under a lead contractor – it often does on construction projects, for example – but it is going to really depend on your project and the type of suppliers you have.

3. Method of Reimbursement

You should think about what method of reimbursement you are going to use on your project and this might be mandated by your finance team or company policy. It’s really about the types of contract you are prepared to enter into: cost plus, cost, fixed price, firm price and so on.

Think about how much of your costs should be fixed and how much you are prepared to have as variable. The legal team are likely to get involved here to offer advice as you write your strategy. It’s not something that you can decide alone, although you might be in a position to make a recommendation. However, it’s important that you know what you are authorised to offer to a vendor, so it’s best to be clear at the beginning.

4. Supplier Selection

This involves:

  • Looking at where you are going to find qualified suppliers
  • What your minimum criteria are (useful for the pre-qualification questionnaire)
  • How you will rank suppliers
  • The process for tendering
  • Relevant internal policies

Think it through, take advice and then document your approach in your procurement strategy. You may already have this process for supplier selection formalised as part of your company policies, so there might not be much to do here except reference the existing procurement process. Check before you invent a supplier selection approach from scratch!

5. Contract conditions

Finally, contract conditions are worth covering in your strategy. You’ll need to ensure that your contract meets company standards and has a signatory at the appropriate level of authority. Your Finance team can advise on this.

Review any specifications that must be included like a break clause, intellectual property clause or force majeure.

What else would you consider in your procurement strategy? Let us know in the comments below.

Posted on: October 04, 2016 03:20 PM | Permalink | Comments (4)

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