Chapter Procurement

Many telecom projects require procurement of equipment of services from outside the company. Most service development projects involve some acquisition - perhaps purchasing ATM or DSL equipment or service components for wireless service. Some marketing studies involve outside help. E.g. we might want to contract some user-needs studies for a new ecommerce service. Many operations projects involve acquisition of either goods or services.

Any outside procurement should be done with the involvement of the Purchasing department. While most project managers are aware that they should work through Purchasing, some are not. Even when PM's are aware of the proper processes, they sometimes do not understand why this is necessary. Some even see the purchasing department as a roadblock to their project, adding unnecessary bureaucracy. Some of the newer companies do not even have a purchasing department, which puts the project managers at risk of legal problems unless they have a good understanding of the implications of purchasing activities. However, in most telecom companies of any size, the purchasing department is responsible for the procurement processes, and this department works closely with project teams. Depending on the organization structure selected for a specific project, the procurement person may actually report to the PM for the duration of the project, or may continue to work within the home department, contributing to the project from there. The project manager and project team also play and integral role in procurement, as they define what is required, produce the specs and handle the control. The purchasing cycle and implications of the different components are discussed in this chapter. We also discuss contracts, and the management of disputes.

Before we start into the details of the purchasing processes and tools, let's consider briefly why it is that companies have purchasing departments. It is obvious that a central department can more easily maintain an ongoing relationship with suppliers, and can take advantage of the company wide purchasing power to negotiate better deals. A central department also provides a focus on the purchasing function, which allows time to research offered products and prices. In addition, the purchasing department can focus on process and procedures for purchasing. Even more important, this department will be fully aware ofthe uses and implications of all purchasing tools, such as contracts, Requests for Proposal, Requests for Quote, etc. And, in the case of a project, this department provides additional manpower for purchasing functions on the project, which is often not charged back to the project. Of course, if there is no charge to the project for this time, sometimes project teams forget that this department is an extended team member. Given that very important project work is done by this department, PM's are reminded to ensure that they are included in team information and recognition.

The strategy and processes that will be used for any project depend heavily on the corporate strategy and processes, as well as on the project strategy and processes. The team needs to ensure that they are aware of both of these dimensions as the planning proceeds.

The purchasing processes

From the PMBOKĀ® Guide, procurement processes are:

Procurement planning - determining what to procure and when Solicitation planning - documenting product requirements and identifying potential sources

Solicitation - obtaining quotations, bids, offers, or proposals as appropriate

Source selection - choosing from among potential sellers Contract administration - managing the relationship with the dealer Contract close-out - completion and settlement of the contract, including resolution of any open terms

Figure 1

Within these processes the procurement of services required many functions. Not all of these functions are used every time, but it is best to understand all of them. Figure 1 shows the functions, and where they fit into the process continuum.

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