Steps in Procurement Management

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Steps in Procurement Management:


Key principles governing procurement management:

Preparation of SOW: The first step is drafting a statement of work or SOW. This statement is created at the start of the project and is used as an input and output device. It outlines detailed descriptions of the products and services to be delivered at the end of a contract. The project scope statement and WBS are referred to while creating the SOW. A project can have several Statements of Work. The purpose of this statement:

  • It puts the expectations of the buyer and the deliverables by the seller on a single platform
  • It serves a crucial role in case of discrepancy between the demand and supply

Type of Contract: A contract is a formal document drafted to record the terms and conditions governing the negotiations between the seller and buyer. Three types of contracts that can be used

  1. Fixed Price Contract: In this arrangement, the seller is paid a fixed amount for the products or services provided by it. The predetermined amount does not change due to any contingency. This kind of contract allows the suppliers to charge a higher amount and keeps the buyer relaxed as nothing will trigger a change in the price.
  1. Time and Material: In this type of contract, the prices between the seller and the buyer are agreed on unit basis. These contracts do not have a fixed structure and are more flexible than fixed price contracts.
  1. Cost Reimbursement: Here the seller is reimbursed for the actual costs incurred. Additionally, the seller is paid a fee as a profit. The costs are categorized as:

 

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