Commercial management approach

The commercial management approach describes how a project will plan, manage, and control commercial activities to secure and maintain the agreements required for project success. It sets out the procedures, techniques, standards, and responsibilities needed to manage suppliers and contracts consistently throughout the project lifecycle.

This approach ensures that:

• All supplier and contractual relationships support the project’s objectives.
• Procurement and contract management are carried out in a transparent and controlled way.
• Variances from organizational or programme commercial policies are justified and approved.

It covers areas such as:

• Market engagement
• Procurement processes
• Contract management and closure
• Roles and responsibilities for managing commercial agreements

Life cycle

The commercial management approach is applied throughout the project, aligning with PRINCE2’s processes:

1. Starting up a project (SU) – Little activity takes place here, apart from noting any initial commercial needs and confirming whether supplier or contractual arrangements may be required later in the project.
2. Initiating a project (IP) – The commercial management approach is created and facilitated by the project manager. It defines the scope of commercial relationships, the delivery model, and how procurement and contracts will be managed. The project manager will normally use a template from the programme or organization (if available) to review and finalize the commercial management approach.
3. Directing a project (DP) – The project board will approve and baseline the commercial management approach as part of approving the project initiation documentation.
4. Controlling a stage (CS) – The project manager ensures that commercial agreements and procurement activities are being applied correctly during day-to-day work. This includes monitoring supplier performance, checking compliance with contract terms, raising purchase orders, and escalating any commercial risks or issues.
5. Managing product delivery (MP) – Team managers and suppliers deliver products in line with contractual agreements. They are responsible for adhering to commercial terms, providing required documentation (e.g., invoices, delivery notes, warranties), and confirming acceptance criteria linked to the contracts.
6. Managing a stage boundary (SB) – The project manager can review supplier performance and commercial arrangements at the end of each stage, if necessary. The commercial management approach may be updated if there are changes in suppliers, contractual terms, responsibilities, or the timing of commercial activities.
7. Closing a project (CP) – The project manager uses the original commercial management approach to confirm all contracts are completed, final accounts settled, supplier handovers done, and commercial lessons captured.
8. After the project – The business level (corporate, programme management, or operational teams) can take over responsibility for any ongoing supplier or contractual matters.

Contents

A commercial management approach document will normally include:

• Scope: Description of required commercial relationships (e.g., user agreements, supplier contracts).
• Delivery Model: How work will be delivered (internal vs. external suppliers).
• Resources: People, skills, and systems for market engagement, procurement, and contract management.
• Responsibilities: Who is responsible for each commercial activity.
• Tools & Techniques: Systems for tendering, contract tracking, and supplier communications.
• Standards: Applicable policies, procurement frameworks, and legal requirements.
• References: Links to related documents or corporate guidance.

Tips

The following tips help you have a better commercial management approach:

• Engage early – Identify procurement and contract needs during initiation to avoid delays. Schedule dedicated time with key stakeholders to confirm requirements and potential suppliers.
• Be clear on responsibilities – Define who leads supplier communications, manages procurement activities, and signs off on contracts. Make sure all involved parties fully understand their role.
• Use existing frameworks – If your organisation already has procurement frameworks, leverage them to save time and ensure consistency with organisational standards.
• Track performance – Use clear KPIs to monitor supplier delivery and contract compliance. Review performance regularly, and adjust arrangements if issues arise.
• Plan for closure – Ensure a smooth off-boarding of suppliers, settlement of final accounts, and capture of any commercial lessons learned for future projects.
• Keep it live – The commercial management approach is not static; review and update it at stage boundaries to reflect changes in scope, risks, or market conditions.
• Seek senior input for key decisions – Involve the project board or senior stakeholders when approving major supplier agreements or changes to commercial terms.

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Written by Frank Turley.

If you have questions or doubts after using this wiki, you can ask for help on the Facebook or LinkedIn study groups.