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Procurement Management in Project Management – Source Selection (#2 in the series Procurement Management in Project Management)
By Joseph Phillips

I know lots of people who like to go shopping. One person (who shall remain nameless, but her initials are LISA) plans her vacations based on the shopping malls in the vicinity of her hotel. She buys an extra seat for the flight home, just to carry all of her new shoes and fancy outfits.

As a project manager, you can’t go project shopping just because shoes are on sale. While sales are good, they don’t always help the project to acquire the things it needs to reach project closure.

There’s nothing better than finding a sale on the hardware or software that your project needs, but you and I know that’s just not the way technology and procurement usually works. We have to shop, compare, evaluate, and eventually cough up the cash to get what our projects need.

But here’s some Econ 101 for you: Prices are affected by supply and demand, pending changes, and other factors, from government regulations to the economy as a whole.

Generally, three specific conditions affect how much you pay for the things your project needs:

  • Sole source. In this condition, you’ll likely pay big bucks. Sole source means there is only one qualified seller in the market. This is supply and demand at its finest. If your project needs a Cisco CCIE-certified consultant who must also know how to program in COBOL, speak Spanish, and cook spaghetti for up to forty people, and must live local to your firm, those are some high requirements—you’ll likely have to pay a higher dollar for this expert than for your average spaghetti-cooking hack.
  • Single source. You’re in love. When there’s a single source provider, your organization prefers to work with this provider even though other providers may be less costly or more qualified. The danger is that your single source provider may know your attachment and take advantage of the situation. Or get lax in their commitment to quality. Or go out of business.

  • Oligopoly. This market condition means that there are so few providers of the particular good or service that the events, actions, or circumstances of one seller affect the events, actions, or circumstances of the other sellers. Examples: Airline fares; oil prices; hardware costs; or possibly availability of spaghetti-cooking, COBOL-programming CCIEs who live in your neighborhood.

Joseph Phillips is the author of five books on project management and is a, PMI Project Management Professional, a CompTIA certified Project Professional, and a Certified Technical Trainer. For more information about Project Management Training, please visit Project Seminars.

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