1. Introduction
The first out of four procurement-related project management processes is in the Planning Process group, and is the process which creates the guidelines for all of the procurement activities on the project. It helps document the project procurement decisions, specifies the approach taken to identify potential sellers and carry out the procurements.
2. Inputs
The inputs to this process are numerous, but that’s because from the standpoint of the seller, the producing the procurement is going to be an entire project in and of itself, and thus requires the same knowledge areas that are going to be used in the buyer’s project, of which the procurement is just a part.
Inputs are therefore coming from scope, time, cost, human resources, risk, and stakeholder knowledge areas. Important information from the industry at large (EEFs) and internal procedural guidelines (OPAs) are also crucial to the process.
| 12.1 PLAN PROCUREMENT MANAGEMENT | ||
| INPUTS | ||
| 1. | Project Management Plan | The input for procurement management is the scope baseline, which includes the following three documents:
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| 2. | Requirements Documentation |
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| 3. | Risk Register | Contains the following information with regards to risks that is relevant to procurements:
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| 4. | Activity Resource Requirements | Contains information on specific needs such as people, equipment, or locations. |
| 5. | Project Schedule | Contains information on required timelines or mandated deliverable dates. |
| 6. | Activity Cost Estimates | Cost estimates are used to evaluate reasonableness of bids or proposals from potential sellers. |
| 7. | Stakeholder Register | Details of project participants and their interest in the project. |
| 8. | EEFs |
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| 9. | OPAs |
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| TOOLS & TECHNIQUES | ||
| 1. | Make-or-buy analysis | Determines whether particular work can be best accomplished by the project team or purchased from outside sources. |
| 2. | Expert Judgment | Used to assess the inputs and outputs of this process, including
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| 3. | Market Research | Examines industry-wide and vendor-specific capabilities. |
| 4. | Meetings | Information exchange with potential bidders. |
| OUTPUTS | ||
| 1. | Procurement Management Plan | Describes how a project team will acquire goods and services from outside the performing organization. Also describes how the procurement processes will be managed throughout the project, from developing procurement documents through contract closure. |
| 2. | Procurement Statement of Work | Defines the portion of the project scope that is to be included within the related contract. |
| 3. | Procurement Documents | Used in soliciting proposals from prospective sellers. |
| 4. | Source selection criteria | Used to rate or score seller proposals. |
| 5. | Make-or-buy decisions | The results of the make-or-buy analysis, which tells whether particular work can be best accomplished by the project team or needs to be purchased from outside sources. |
| 6. | Change Requests | If the result of the make-or-buy decision is to procure the goods, services, or results, this typically requires a change request. |
| 7. | Project Documents Updates |
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3. Tools & Techniques
The main tool is the make-or-buy analysis, which is the basis on deciding whether or not a procurement is even desirable. The market research based on the information from EEFs is utilized by the various types of experts, and information on the potential seller companies is either obtained from industry sources or from meetings with the companies themselves.
4. Outputs
The main output of this process is the Procurement Management Plan, which gives guidelines on how to conduct all of the procurement activities on the project. Of course, whether or not there will even be a procurement is the result of the make-or-buy decision. If the decision is to “make” rather than “buy”, then you will need to make a change request stating this, and then you will need the Procurement Statement of Work or SOW, basically the portion of the scope that the seller will be responsible for producing, and the procurement documents and source selection criteria to be used when selecting the seller in the next process, 12.2 Conduct Procurements.
5. Conclusion
This Procurement Management Plan, the output of this process, is the blueprint for all of the other procurement activities that may be conducted during the course of the project. I say “may” be conducted because it is entirely possible that some projects may be done ENTIRELY within the organization, in which case Procurement Management may be unnecessary on those projects.
Before going on to discuss the next process 12.2 Conduct Procurements, it will be necessary to go into some more detail this week and next week on some of the inputs, tools & techniques, and outputs of this process, including
a) the types of procurement contracts used by the organization (part of the OPAs input)
b) make-or-buy analysis (the main tool & technique of this process)
c) elements of the Procurement Management Plan (the key output of this process)
d) the Procurement Statement of Work (output)
e) Source Selection Criteria (output)
The next posts will be on the first of these categories, the types of procurement contracts. Just this topic will take several posts, because I need to discuss a) the three basic types of procurement contracts, b) the sub-types within each of these three types, and c) questions on the PMP examination regarding these types of contracts, which can be very difficult.
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