Should selling contract be controlled in procurement management function?
Yan WuTrainer/Consultant| Changeway Management Consulting Co., Ltd.Beijing, China, Mainland
Recently, I met up with a question, "what process should be taken to abort a contract when asked by the client?" And the answer was "end procurement".
After a hard time discussing with friends around, some of whom insist that the selling contract should not be managed in procurement management function. They insist that those work does not belongs to the project work.
In my opinion, procurement management is not simply a function managing sellers, it also manages buyers and selling contracts.
Is there any idea according to PMBOK? Saving Changes...
Yan WuTrainer/Consultant| Changeway Management Consulting Co., Ltd.Beijing, China, Mainland
Apr 14, 2016 3:46 AM
Replying to Praveen Malik
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Yan, Consider yourself as a PM. You can look at a contract either from the Buyer's (Client, Customer) side or the Seller's (Vendor, Performing organization) side. A PM would be either working for the Buyer's org or the seller's org. The two org. cannot be mixed. If you are talking about Buyer's PM then Procurement KA is applicable. The PM (buyer) makes the payment against the product/services mentioned in the contract. If you are talking about seller's PM then all the other KA are applicable. The PM (seller) has to deliver the product/services mentioned in the contract and receive the payments. Coming to your Q, I am repeating the stmts from my previous comment. Just replace word 'termination' with 'closure' 1. The contract termination, if happens, can be done either by buyer or the seller 2. The contract termination, if happens, is done as per the provisions of contract itself. 3. The project termination happens in Close Project process. 4. The procurement termination happens in Close Procurements process. 5. Contract controlling/management happens in Control Procurements process. For PMP exam, correct use of terminology is very important.
More over, I've got my certification already. But this time I got totally shocked when facing the question mentioned in the topic. I got it clear again with your help this time.
See, I find the community pretty good, here and the website you recommended. It's a little pitty that the website you recommended cannot always be opened fluently here in China. Saving Changes...
Praveen MalikIndependent Consultant| Independent ConsultantNew Delhi, India
Apr 14, 2016 4:45 AM
Replying to Yan Wu
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Thanks again, Malik.
So, a seller's side PM, he take the whole job the contract signed as the work to be done, and gain no performance in Procurement KA even works happened around the sales contract. Right?
Wrong...Let me give you an example.
Your company (performing org.) took a contract for building ecom website but your company did not have the capability/competency on payment gateways. So you (PM) outsourced the payment gateway part of the website to a third party.
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1 reply by Yan Wu
Apr 17, 2016 8:53 PM
Yan Wu
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Pretty clear of that, thanks for all your help Malik.
Finally, I find out that there's maybe a mistake in translation of that problem. See, it's rather different from the Q "when PM is asked to abort the running project, which process should be taken to close the contract" to "when PM is asked to to abort the running project, which process should be take to close the upstream contract". And the translator make the translation like the second one, while the original Q is probably the first.
Saving Changes...
Stéphane ParentSelf Employed / Semi-retired| Leader MakerPrince Edward Island, Canada
Project management is all about getting work done through organizational units, or functions. Different projects require different levels of involvement from each function. I have had projects manage the process of establishing a professional services agreement, then a contract and, finally, a service level agreement.
Where it gets iffy is when some of these procurement artifacts outlive the project. In my example, only the contract was closed along with the project.
However, I was still on the hook to define the closing processes for the remaining agreements. I then transitioned the agreements and associated processed to the procurement function.
Not clear on your question.
If your talking about the contract that generate the project or a sub contract.
If the contract is the project contract and it's before project start, it's likely done at the corporate level.
On the other hands if the contract is sign, then it is in the close project process that you'll find answers and in the contract with the client.
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1 reply by Yan Wu
Apr 17, 2016 8:58 PM
Yan Wu
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You're right Guerard.
Originally I was pretty sure of the point that the upstream contract has nothing to do with the Close Procurement process. It was the bad translate of a practice problem misled me so.
Saving Changes...
Yan WuTrainer/Consultant| Changeway Management Consulting Co., Ltd.Beijing, China, Mainland
Apr 17, 2016 9:02 AM
Replying to Praveen Malik
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Wrong...Let me give you an example.
Your company (performing org.) took a contract for building ecom website but your company did not have the capability/competency on payment gateways. So you (PM) outsourced the payment gateway part of the website to a third party.
Pretty clear of that, thanks for all your help Malik.
Finally, I find out that there's maybe a mistake in translation of that problem. See, it's rather different from the Q "when PM is asked to abort the running project, which process should be taken to close the contract" to "when PM is asked to to abort the running project, which process should be take to close the upstream contract". And the translator make the translation like the second one, while the original Q is probably the first. Saving Changes...
Yan WuTrainer/Consultant| Changeway Management Consulting Co., Ltd.Beijing, China, Mainland
Apr 17, 2016 9:14 AM
Replying to Stéphane Parent
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Project management is all about getting work done through organizational units, or functions. Different projects require different levels of involvement from each function. I have had projects manage the process of establishing a professional services agreement, then a contract and, finally, a service level agreement.
Where it gets iffy is when some of these procurement artifacts outlive the project. In my example, only the contract was closed along with the project.
However, I was still on the hook to define the closing processes for the remaining agreements. I then transitioned the agreements and associated processed to the procurement function.
Perfect example here, thanks a lot, Parent. Saving Changes...
Yan WuTrainer/Consultant| Changeway Management Consulting Co., Ltd.Beijing, China, Mainland
Apr 17, 2016 3:07 PM
Replying to Vincent Guerard
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Hi Yan,
Not clear on your question.
If your talking about the contract that generate the project or a sub contract.
If the contract is the project contract and it's before project start, it's likely done at the corporate level.
On the other hands if the contract is sign, then it is in the close project process that you'll find answers and in the contract with the client.
You're right Guerard.
Originally I was pretty sure of the point that the upstream contract has nothing to do with the Close Procurement process. It was the bad translate of a practice problem misled me so. Saving Changes...
