Why Is a Project Procurement Strategy Necessary?

An effective project procurement strategy is based upon a shared understanding of the role and purpose for the procurement process.

Frequently, there are different perceptions of this at senior management, project management, end-user, and supplier levels.

A shared focus needs to be built upon an alignment of perceptions and understanding around what the project requires from a well performing procurement process, which is consistent with the agreed aims and objectives.

A procurement strategy that is successfully integrated, and implemented, within the Project’s cascade of objectives and performance measures, is recognisable by the following five characteristics:

1. Clear “buy-in” from senior and broader project stakeholders to the benefits of embracing an agreed role and purpose for the procurement process, and how people need to interact to ensure that outcomes are achieved in a satisfactory manner.
2. Competent, professional commercial people playing a key role in the process, at the right interaction points, to ensure delivery of clear solutions from supply markets that meet project needs.
3. Key suppliers and contractors who treat the project as genuine ‘preferred customers’.
4. Processes, systems, measures and enabling structures that support delivery capability along the entire procurement process cycle.
5. Capacity and capability that’s available at the right pressure points.

Setting out the Objectives, Goals and Guiding Principles

Strategy documents need to outline two key facets — the objectives of the strategy, and the goals which are necessary to achieve these objectives.

The goals describe what will actually happen, and objectives describe what will be achieved as a result. The guiding principles reflect the core values on which the strategy is based, and which will inform all the actions which are planned as a result.

Procurement will:

• be transparent;
• be driven by desired results;
• create the most economically advantageous balance of quality and cost;
• reduce the burden on administrative and monitoring resources;
• lead to simplified or routine transactions;
• encourage open and fair competition; and
• follow all appropriate regulations and legislation.

These values in turn translate into key performance indicators that can be used to assess the quality of results.

Setting the Objectives 

There’s no short, definitive list of subjects to include in procurement strategy objectives. Priorities change over time – strategies need to be reviewed and revised to reflect changes in circumstance and focus.

Subjects to consider include:

• Operating Structure – is it fit for role and purpose, influencing where it should and as it should in a devolved environment? Do end users know what’s available to them by way of contract access and the procedures that they must follow, and are these procedures benchmarked against best practice, reviewed and updated as required? Is there clear project leadership of the procurement process?

• Expenditure Analysis – is project expenditure on bought-in goods and services analysed in such a way that amounts spent, with whom, on what, and by whom, are understood, under control and spent optimally?

• Maximising Value – how is it intended to maximise value through procurement activity, the use of competitive tendering and established collaborative contracts, and the deployment of procurement professionals?

• Supplier Strategy – does the project have a strategy for dealing with suppliers and markets, such as buying local and compliance with relevant Regulations? Is there available guidance to suppliers on elements of the procurement policies (sustainability, SMEs etc, key contacts and signposts), and core values?

• Social Responsibility – how does the project plan to take account of its social, economic and environmental responsibilities through procurement e.g. sustainability, health, safety and welfare, environmental management, equality, ethical procurement, working with the local business and social communities?

• The Use of Procurement Tools – is there a strategy for operating the most appropriate, efficient and effective Purchase to Pay systems and procedures including use of procurement cards, e-tendering, e-auctions and an e-procurement platform and are the benefits of such use – reporting, planning, measurement and cost control – clearly explained and understood?

• Supplier/Contract Management – are key suppliers identified and, if so, who are they and why are they key? What is the Project approach to supplier and contract management and what are the plans for monitoring supplier performance and managing improvements?

• Performance Reporting – are there mechanisms/indicators in place whereby performance monitoring within the procurement process is routinely reported to senior management? Do such mechanisms include benefits and savings reports, customer and supplier feedback on the effectiveness of procurement performance?

• Risk Management – Efficient risk management is a key best practice for project managers. Are key risks and dependencies relating to procurement process, legislative and regulatory non-compliance identified, understood, monitored and appropriately communicated across the Project?

ACTION: develop and adopt a clearly documented procurement strategy in terms of measurable and managed contributions to the achievement of procurement, and ultimately Project, objectives.

Stephen Ashcroft BEng MSc MCIPS is a procurement learner stuck in the body of a procurement veteran, and with over 20 years’ experience still sees the glass as half full. Check out this article, and more, on ThinkProcure.