Planning Procurements in Project Management
By Jeremy Siegel
The process of planning procurements involves determining the project’s need for materials or services found outside of the organization and documenting those procurements determined to be required. The scope baseline, requirements documentation, and risk register are key inputs for the process. Different tools used include make-or-buy analysis, contract types, and expert judgment. Make-or-buy analysis weighs the pros and cons of making a deliverable internally or buying it externally. Factors such as cost, risk, time, and legal implications should be considered.
The type of contract that governs the procured work should also be decided upon in the planning for procurements phase. Different contracts are appropriate for different situations. For example, if a project’s scope is clearly defined, the buyer might prefer to pay the vendor a fixed price for the work performed because the requirements are known and the cost to the buyer will not increase. However, if completion of a service is time dependent or quality is very important, the contract could include an incentive clause tied to the seller’s performance. Another fixed price contract type includes automatic price adjustments based on economic conditions. Cost Reimbursable contracts are based on the cost to the seller. The buyer reimburses the seller for costs incurred, plus a fee. Time and Materials contracts are based on the seller’s time, such as an hourly charge, plus the cost of materials used.
The outputs of the planning procurements stage are statements of work, procurement documents, and source selection criteria. These documents help prospective vendors understand the project and prepare their bids accordingly. They also help the project management team record what procurements are necessary.
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