6th Edition PMBOK® Guide–Process 12.3 Control Procurements: Inputs


During the execution phase of the procurements, you may periodically monitor the progress and make any changes if necessary (the “control” part of the process to which the title of the process refers).   Then when the procurements are completed, just as in the case of Validate Scope for the project at large, the final inspection is done and, once the procurement is accepted, the procurement is considered close.

For this process, the inputs come from the most part from the previous two processes, 12.1 Plan Procurement Management and 12.2 Conduct Procurements.

12.3.1  Control Procurement:  Inputs

12.3.1.1 Project Management Plan

Of course, the procurement management plan is going to be an input to this process:

  • Procurement management plan–contains the activities to be performed in this process

But other components of the overall project management plan may also be inputs as well, such as:

  • Requirements management plan–describes how the contractor requirements will be analyzed, documented, and managed
  • Risk management plan–describes how risk activities created by the sellers will be structured and performed for the project
  • Change management plan–contains information about how seller-created changes will be processed.
  • Schedule baseline–if there are slippages created by sellers that impact the overall project performance, the schedule may need to be updated and approved

12.3.1.2  Project Documents

The project documents that can be considered as inputs to this process include:

  • Assumption log–assumptions that have been made during the procurement process will be added to this log
  • Lessons learned register–as with many other processes, lessons learned earlier in the project can be applied further along in the project, in this case, to improve contractor performance and the procurement process.
  • Milestone list–shows when the sellers are expected to deliver their results
  • Quality reports–identifies seller processes, procedures, or products that are out of compliance.
  • Requirements documentation–may include
    • Technical requirements the seller is required to satisfy
    • Requirements with contractual and legal implications
  • Requirements traceability matrix–links product requirements from their origin to the deliverables that satisfy them, and shows the owner of requirements who should be consulted and/or informed about any issues related to those requirements
  • Risk register–risk related to the approved sellers are added to the register, including those related to:
    • The seller’s organization
    • The duration of the contract
    • The external environment
    • The project delivery method
    • Type of contracting vehicle chosen (fixed-cost or cost-reimbursable)
    • Final agreed-upon price
  • Stakeholder register–includes information about identified stakeholders, in particular contracted team members, selected sellers, contracting officers, and other stakeholders who are involved in procurements.

12.3.1.3  Agreements

The agreements are reviewed during this process to make sure that terms and conditions are being met.

12.3.1.4 Procurement Documentation

The following documents related to procurements may be used in this process.

  • Procurement state of work (SOW)\
  • Payment information
  • Contractor work performance information
  • Plans, drawings
  • Correspondence

12.3.1.5 Approved Change Requests

For the change requests are made as a result of this process, if they were approved by the process 4.3 Perform Integrated Change Request, they are then formally documented in writing and then implemented.  Modifications may include:

  • Terms and conditions of the contract
  • Procurement statement of work (SOW)
  • Pricing
  • Descriptions of the products, services, or results to be provided.

Note that the change requests from one seller may, in the case of a complex project, influence other involved sellers.   The product should have the capability of coordinating changes that impact the work of multiple sellers.

12.3.1.6   Work Performance Data

Seller data on project status may include:

  • Technical performance
  • Activities that have been started, are in progress, or have been completed
  • Costs incurred or committed
  • Seller invoices that have been paid

12.3.1.7  Enterprise Environmental Factors

The enterprise environmental factors (outside of the organization’s control) that can influence this process include:

  • Contract change control system
  • Marketplace conditions
  • Financial management and accounts payable system

Note that, for the contract change control system and financial management and accounts payable system, the software itself is created by an outside company and is therefore an enterprise environmental factor or EEF, in a similar way that the Project Management Information System (PMIS) such as Microsoft Project is an EEF.   The data however that is created on the system by the organization is, however, an organizational process asset.

12.3.1.8  Organizational Process Assets

The organizational process asset (under the organization’s control) that can influence this process includes procurement policies of the organization

The next post covers the tools and techniques of this process.

 

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6th Edition PMBOK® Guide–Process 12.2 Conduct Procurements: Outputs


The outputs for this process should be obvious given the tools and techniques such as Bidder Conferences and Proposal Evaluation discussed in the last post:   the list of selected sellers as a result, and of course the agreements themselves.   NOTE:  for some reason, PMI likes to refer to contracts as “agreements” in this 6th Edition of the PMBOK® Guide.

Then the procurements needed to fitted into the overall project, by making change requests to the project management plan, and if approved, incorporating those changes into the plan and any relevant project documents.

12.2.3  Conduct Procurements:  Outputs

12.2.3.1  Selected Sellers

Based on the proposal or bid evaluation, the selected sellers are those who have been judged to be in a competitive range.   There may be some procurements which are complex, high-value, or high-risk which may require the approve of senior management approval (specification of these thresholds of approval should be specified in the Procurement Management Plan).

12.2.3.2  Agreements

A contract is a mutually binding agreement between the seller and the buyer:

  • the seller is obligated to provide the specified product, service, or result under the specified conditions
  • the buyer is obligated to compensate the buyer according to the specified amount (and specified conditions, as in the case of an incentive or award fee)

This binds each party legally; if one side contests thinks that the other side has broken the agreement, it may to be handled through alternative dispute resolution (ADR) if negotiations between parties break down.   If ADR does not resolve the issue, then as a result each party may file a lawsuit and take the other party to court.   But the only basis for taking the matter to court is the contract.

Okay, what’s in an agreement?  Let’s break it down by knowledge area:

Integration management

  • Performance reporting
  • Change request handling

Scope management

  • Procurement statement of work (or major deliverables)

Schedule management

  • Schedule, milestones, or date by which a schedule is required

Cost management

  • Pricing and payment terms
  • Incentives and penalties

Quality management

  • Inspection, quality, and acceptance criteria
  • Warranty and future product support

Procurement management

  • Insurance and performance bonds
  • Subordinate subcontractor approvals
  • General terms and conditions
  • Termination clause and alternative dispute resolution (ADR) mechanisms

12.2.3.3  Change requests

The procurements of agreed-upon sellers will necessarily add to the original project management plan, based on what the buyer can do alone.   These change requests are sent on to process 4.3 Perform Integrated Change Control.  If approved, then the content of those requests are added to the project management plan (see next paragraph 12.2.3.4) and any relevant project documents (see paragraph 12.2.3.5).

12.2.3.4  Project Management Plan Updates

As mentioned in the post on inputs, not only the procurement management plan component of the overall project management plan, but other components such as the management plans of other knowledge areas and the project baselines (scope, schedule and scope) will be updated as a result of changes that are approved (see paragraph 12.2.3.3).

Here are the components that may be updated as a result of change requests coming from procurements.

  • Requirements management plan–project requirements may be updated due to changes identified by sellers.
  • Quality management plan–sellers may offer alternative quality standards or alternative solutions that impact the quality approaches defined in the original quality management plan.
  • Communications management plan–the communications management is updated  to incorporate the communications needs and approaches of sellers.
  • Risk management updates–each agreement and seller has its own set of risks that may require updates to the risk management plan.  Specific risks are incorporated into the risk register (see project document updates in paragraph 12.2.3.5)
  • Procurement management plan–the results of the contracting and negotiations process are added to the procurement management plan.
  • Scope baseline–the project WBS and deliverables documented in the scope baseline are considered when performing procurement activities.
  • Schedule baseline–if delivery deadline changes are created by sellers that impact overall project schedule performance, the baseline schedule may need to be updated and approved to reflect the current expectations.
  • Cost baseline–The price of contractors and materials may change during the delivery of a project.  These changes can occur because of the fluctuating cost of materials and labor created by the external economic environment and need to be incorporated into the cost baseline.

12.2.3.5  Project Document Updates

Here are the project documents that may need to be updated as a result of this process.

  • Lessons learned register–in a similar way as with all processes, any information or challenges encountered while conducting procurements and how they could have been avoided, as well as approaches that worked well.
  • Requirements documentation–this may include:
    • Technical requirements that the seller is required to satisfy;
    • Requirements with contractual and legal implications
  • Requirements traceability matrix–the requirements register and the traceability matrix may change depending on the capabilities of the specific seller.
  • Resource calendar–schedule resource calendars may be needed to be updated depending on the availability of the sellers
  • Risk register–risk related to the approved sellers are added to the register, including those related to:
    • The seller’s organization
    • The duration of the contract
    • The external environment
    • The project delivery method
    • Type of contracting vehicle chosen (fixed-cost or cost-reimbursable)
    • Final agreed-upon price
  • Stakeholder register–updates are made to the register regarding those stakeholders who are influenced by or who have influence on agreements that are made with specific sellers.

12.2.3.6 Organizational Process Assets Updates

As typical with many processes, the inputs include Environmental Enterprise Factors (external and not just control of the organization) as well as Organizational Process Assets (internal and under control of the organization), but the outputs are confined to updates to the Organizational Process Assets, such as:

  • Listings of prospective and prequalified sellers may be updated with the list of new sellers identified as a result of this process
  • Information on relevant experience with sellers, both good and bad, is added as the procurement proceeds

The final process is 12.3 Control Procurements, which covers monitoring, controlling, and closing the procurement when it is completed.

 

 

6th Edition PMBOK® Guide–Process 12.2 Conduct Procurements: Tools and Techniques


In the last post, I covered the inputs to the process 12.2 Conduct Procurements.   In this post, I am moving on to the tools and techniques used in the process.

12.2.2  Conduct Procurements:  Tools and Techniques

12.2.2.1  Expert Judgment

Experts should be considered from individuals or groups with specialized knowledge or training in the following topics:

  • Proposal evaluation
  • Technical or subject matter related to the project
  • Relevant functional area (finance, engineering, design, development, supply chain management, etc.)
  • Industry regulatory environment
  • Government regulations, laws, and compliance requirements
  • Negotiation

Many organizations centralize their procurement system and will have a procurement manager handle the details of the procurement for you project.

12.2.2.2  Advertising

Communicating with users or potential user of a product, service, or result in order to solicit interest in bidding on a contract for procurement.   Placing advertisements in selected newspapers and/or specialty trade publications can often expand existing lists of potential sellers.

Note that most government jurisdictions require public advertising or online posting of pending government contracts.

12.2.2.3  Bidder Conferences

Also referred to as:

  • Contractor conferences
  • Vendor conferences
  • Pre-bid conferences

These conferences ensure that all prospective bidders have a clear and common understanding of the procurement and no bidders receive preferential treatment.

12.2.2.4  Data Analysis

Proposal evaluation is the technique used for this process.  Using the Source Selection Criteria (one of the outputs included in Procurement Documentation from process 12.1 Plan Procurement Management), the bidder proposals are evaluated to ensure that they are complete and respond in full to the bid documents.   In that way there is no delay in the bidder conferences (see paragraph 12.2.2.3 above).

12.2.2.5  Interpersonal and Team Skills

Negotiation is the interpersonal and team skill that can be used for this process.

Procurement negotiation clarifies the structure, rights, and obligations of the parties so that they mutual agreement can be reached prior to signing the contract.

The negotiation should be led by a member of the procurement team that has the authority to sign contracts.   As mentioned above, many organizations centralize their procurement, in which case a procurement manager will be leading the negotiations.   The project manager and other members of the project management team may be present during negotiation to provide assistance as needed.

And that concludes the tools and techniques involved in this process.  The next post will cover the outputs.

6th Edition PMBOK® Guide–Process 12.2 Conduct Procurements: Inputs


The first process in the procurement management knowledge area, process 12.1 Plan Procurements Management, is in the planning process group.   This process, 12.2 Conduct Procurements, is in the executing process group.   The next process, 12.3 Control Procurements, is in the monitoring and controlling process group.   In the last edition of the PMBOK® Guide, there was a separate process for closing procurements.   However, in the current 6th Edition, closing procurements is considered part of 12.3 Control Procurements, and does not have a separate process.

With that preliminary note out of the way, let’s now consider the inputs to the process 12.2 Conduct Procurements.

12.2  Conduct Procurements:  Inputs

12.2.1.1  Project Management Plan

Of course, the procurement management plan, the output of the last process, is an input to this one.

  • Procurement Management Plan–This contains the activities to be undertaken during the other two processes, including this one of Conduct Procurements.

But there are other components of the overall project management plan that are used as inputs for this process as well, in as far as they involve procurements for the project.   These include:

  • Scope Management Plan–describes how the scope of work performed by sellers will be managed
  • Requirements Management Plan–describe how sellers will manage the requirements they are under agreement to satisfy
  • Communications Management Plan–describes how communications between buyers and sellers will be conducted
  • Risk management plan–describes how risk management activities related to procurements will be structured and performed for the project.  NOTE:  The buyer may decide to sign agreements with more than one seller to mitigate damage caused by relying on a single seller, who may have problems that impact the overall project.
  • Configuration management–just as it is important to control the coordination of changes to the overall project through configuration management, it is also important to include formats and processes for how sellers will provide configuration management in a way that is consistent with the buyer’s approach.
  • Cost baseline–this includes the budget for the procurement as well as the costs associated with the procurement process and sellers.

12.2.1.2  Project Documents

  • Lessons learned register–lessons learned with regard to conducting procurements will be recorded in the register so that they can be applied to later phases in the project (the Control Procurements process) to improve efficiency.
  • Project schedule–the start and end dates of procurement activities are identified, as well as when contractor deliverables are due.
  • Requirements documentation–technical requirements that the seller is required to satisfy, as well as contractual and legal requirements.
  • Risk register–risk related to the approved sellers are added to the register, including those related to:
    • The seller’s organization
    • The duration of the contract
    • The external environment
    • The project delivery method
    • Type of contracting vehicle chosen (fixed-cost or cost-reimbursable)
    • Final agreed-upon price
  • Stakeholder register–contains the details about the identified stakeholders who are interested in and/or have influence on procurements.

12.2.1.3  Procurement Documentation

These are outputs of the process 12.1 Plan Procurement Management.

  • Bid documents–These may include the Request for Information (RFI), Request for Proposal (RFP), Request for Quotation (RFP), or other documents sent to sellers so that they can develop a bid response.
  • Procurement statement of work (SOW)–provides sellers with a clearly stated set of goals, requirements, and outcomes from which they can provide a quantifiable response in their bid.
  • Independent cost estimates–provides a reasonableness check against the proposals submitted by bidders.
  • Source selection criteria–describes how the bidder proposals will be evaluated, including evaluation criteria and the weighting system used.

12.2.1.4  Seller Proposals

These responses to a procurement document package (see paragraph 12.2.1.3 above) form the basic information that will be used to select one or more successful bidders.  The organization may require that the price proposal be submitted separately from the technical proposal.

12.2.1.5  Enterprise Environmental Factors

The factors outside of control of the organization that may influence this process are:

  • Local laws and regulations regarding procurements (including local sourcing requirements)
  • External economic environment constraining procurement processes, including marketplace conditions.
  • Contract management systems

12.2.1.6  Organization Process Assets

  • List of preferred sellers that have been pre-qualified.
  • Organizational policies that influence the selection of a seller
  • Specific organizational templates or guidelines that will determine the way agreements are drafted.
  • Financial policies and procedures regarding invoicing and payment processes.

The next post will cover the tools and techniques of this process.

 

6th Edition PMBOK® Guide–Process 12.1 Plan Procurement Management: Outputs (2)


In this post, I continue going through the various outputs for the Plan Procurement Management process.   The most important output is the Procurement Management Plan, from which the process gets its name.   Here are some additional outputs.

12.1.3.1  Plan Procurement Management

12.1.3.2 Procurement Strategy

Once the make-or-buy decision is complete (output 12.1.3.6) and the decision is made to acquire products or services from outside the project, a procurement strategy should be identified which includes the following three major elements.

  • Delivery methods
    • For professional services, delivery methods include:  no subcontracting, subcontracting, joint venture, and representative.
    • For industrial and commercial construction, delivery methods include:  turnkey, design build (DB), design bid build (DBB), design build operate (DBO), and build own operate transfer (BOOT).
  • Contract payment types
    • Fixed-price contracts:   suitable for predictable work with well-defined requirements
    • Cost-plus contracts:   suitable when work is evolving with not well-defined requirements
    • Incentive fees and awards may be used to align the objectives of buyer and seller
  • Procurement phases
    • Sequencing or phasing of the procurement, with criteria for moving from phase to phase
    • Performance indicators and milestones to be used in monitoring, including monitoring and evaluation plan for tracking progress
    • Process for knowledge transfer to use in subsequent phases

12.1.3.3 Bid Documents

Bid documents are used to solicit proposals from prospective sellers.  Terms such as “bid”, “tender”, or “quotation” are used when the seller selection is based on price, and is usually used when purchasing standard items.   On the other hand, a term such as “proposal” is used when the seller selection is based on other considerations such as technical capability or technical approach, and is usually used when purchasing custom items.   Here are the types of bid documents typically used in procurements:

  • Request for Information (RFI)–used when collecting information about the capabilities of various suppliers.   This is followed by one of the two following documents:
  • Request for Quotation (RFQ)–when the seller selection is based on price
  • Request for Proposal (RFP)–when the seller selection is based on technical capability or technical approach in addition to price

The RFP is obviously the most formal of the “request for” documents, and it includes the following:

  • Description of the desired form of the response
  • Relevant procurement Statement of Work (SOW) (see paragraph 12.1.3.4 below)
  • Required contractual provisions

12.1.3.4  Procurement Statement of Work

In the same way that a seed contains the genetic blueprint for a plant, the SOW contains a blueprint of the procurement in the form of the definition of the project scope to be included within that procurement.   The SOW can include the following:

  • Technical specifications
  • Quantity desired
  • Quality levels
  • Performance data
  • Period of performance
  • Work location

Enough detail is included so that prospective sellers can determine if they are capable of providing the products, services, or results to be included in the procurement.

When contracting for services, sometimes Terms of Reference (TOR) are used in place of a Statement of Work.    A TOR can include the following:

  • Tasks the contractor is required to perform
  • Specified coordination requirements (delivery dates, communication methods, etc.)
  • Standards the contractor will fulfill that are applicable to the project
  • Data that needs to be submitted for approval
  • Detailed list of all data and services that will be provided to the contractor by the buyer for use in performing the contract
  • Definition of the schedule for initial submission and the review/approval time required

12.1.3.5  Source Selection Criteria

The buyer seeks to ensure that the proposals selected in response to the RFP will offer the best quality for the services required.   The PMBOK® Guide lists these in somewhat random order on p. 478.   I’m listing them below organized by the knowledge area they are most relevant to.

Integration Management

  • Suitability of the knowledge transfer program, including training

Scope Management

  • Adequacy of the proposed approach and work plan in responding to the SOW

Schedule Management

  • Delivery dates

Cost Management

  • Product cost and life cycle cost
  • Financial stability of the firm

Quality Management

  • Technical expertise and approach

Resource Management

  • Capability and capacity
  • Specific relevant experience
  • Key staff’s qualifications, availability, and competence
  • Management experience

Communications Management

  • Local content requirements (for international projects)

The specific criteria may be a numerical score, color-code, or a written description on how well the seller satisfies the buyer’s selection criteria listed above.  The criteria form part of a weighting system that can be used to rank all the proposals by the weighted evaluation scores assigned to each proposal, and finally to select a single seller with whom the buyer will sign a contract.

12.1.3.6  Make-or-Buy Decisions

This is the result of the make-or-buy analysis (described in the post on “tools and techniques” for this process).

12.1.3.7  Independent Cost Estimates

For large procurements, the procuring organization may either prepare its own independent estimate or have a cost estimate prepared by an outside professional estimator to serve as a benchmark on proposed responses.

12.1.3.8 Change Requests

If the decision is made to procure goods, services, or resources as a result of the make-or-buy decision (see paragraph 12.1.3.6 above), then this may require a change request to the project management plan, which are then evaluated through the Perform Integrated Change Control process 4.6.

12.1.3.9  Project Document Updates

  • Lessons learned register–updated with any relevant lessons regarding:
    • regulations and compliance
    • data gathering (market research)
    • data analysis (make-or-buy analysis)
    • source selection analysis
  • Milestone list–shows when the sellers are expected to deliver their results
  • Requirements documentation
    • Technical requirements that the seller is required to satisfy
    • Contractual and legal requirements related to the agreements, including:
      • Health
      • Safety
      • Security
      • Performance
      • Environmental
      • Insurance
      • Intellectual Property Rights
      • Equal Employment Opportunity requirements
      • License, permits
  • Requirements traceability matrix–links product requirements from their origin to the deliverables that satisfy them, and indicate the owners of the requirements (who is responsible and/or accountable for them, as well as who to consult and inform when making decisions regarding them)
  • Risk register–each approved seller will comes with its own unique set of risks related to one of the following:
    • Seller’s organization
    • Duration of the contract
    • External environment
    • Project delivery method
    • Type of contracting agreement chosen
    • Final agreed-upon price
  • Stakeholder register–updated with any additional information on stakeholders that may have an impact on procurements, including contracting and/or legal personnel within the organization.

12.1.3.10  Organization Process Assets Updates

Information on qualified sellers is updated to the organization based on the experience gained in this process.

The documentation within the company that relates to procurements includes the following (see previous output paragraphs for details)

  • Procurement Management Plan (paragraph 12.1.3.1)
  • Procurement Management Strategy (paragraph 12.1.3.2)
  • Statement of Work (paragraph 12.1.3.4)
  • Bid Documents (paragraph 12.1.3.3)

There is a summary table 12-1 of all the contents of these documents on p. 461 of the PMBOK® Guide.

And that covers the remaining outputs for the process 12.1 Plan Procurement Management.   The next process, 12.2 Conduct Procurements, is in the Executing process group, and the inputs to this process are covered in the next post.

 

6th Edition PMBOK® Guide–Process 12.1 Plan Procurement Management: Outputs (1)


In this post, I will review what the outputs are to the Plan Procurement Management process, the most important of which is, of course, the Procurement Management Plan.  Also, there will be a Procurement Strategy, Bid Documents (used in the next process), the Procurement Statement of Work, Source Selection Criteria (used in the next process), Make-Or-Buy Decisions, Independent Cost Estimates, Change Requests, and finally Project Documents Updates and Organizational Process Assets Updates.

Because there are so many outputs, I’m going to split up my discussion into a couple of posts.

Let’s go over the first output in this post.

12.1.3  Plan Procurement Management:  Outputs

12.1.3.1  Procurement Management Plan

The procurement management plan contains the activities to be undertaken in the procurement process, which will take place in the next two processes, Conduct Procurements and Control Procurements.

I will list the ones given on p. 475 of the PMBOK® Guide, but will organize them according to what other knowledge area they intersect (if any).   For all others, I’ll list them under the main knowledge area under consideration, namely Procurement Management.

Integration Management

  • Constraints and assumptions that could affect planned procurements.

Schedule Management

  • How procurement will be coordinated with project schedule development.
  • Timetable of key procurement activities.

Cost Management

  • The legal jurisdiction and currency in which payments will be made.
  • Determination of whether independent estimates will be used and whether they are needed as evaluation criteria.

Risk Management

  • Identifying requirements for performance bonds or insurance contracts to mitigate some forms of project risk (for example, cost risk).

Procurement Management

  • Metrics used to manage procurement contracts.
  • If the performing organization has a procurement department, the authority levels and other constraints of the project team.
  • Prequalified sellers, if any, to be used.

Stakeholder Management

  • Stakeholder roles and responsibilities related to procurement.

The level of detail of the plan–whether it is highly detailed or broadly framed, whether it it is written in a formal or informal manner–is based upon the needs of the project and the organization.

The next important output is the Procurement Strategy, which is the subject of the next post.

6th Edition PMBOK® Guide–Process 12.1 Plan Procurement Management: Tools and Techniques


Plan Procurement Management contains some tools and techniques which are generic, that is, common to other similar planning processes for other knowledge areas, and those specific to this particular process.   The generic tools and techniques are Expert Judgment and Meetings.   You talk to the experts who know about this particular knowledge area, and you discuss their findings at meetings with the project team.

You gather data about procurements, you analyze it, and then you use source selection analysis to help you evaluate the proposals for procurements that will come in the next procedure.

12.1.2 Plan Procurement Management:  Tools & Techniques

12.1.2.1 Expert Judgment

As a project manager, you will help from experts who have expertise in the following areas in order to draft your Procurement Management Plan.

  • Procurement and purchasing
  • Contract types and contract documents
  • Regulations and compliance issues

If your company is large enough, it is possible that all procurements will be managed by a procurement manager.   If not, you will need to seek out experts who will assist you in managing them as the project manager.

12.1.2.2  Data Gathering

Market research is a data-gathering technique often used to help create the Project Management Plan.   Market research includes the following examination of industry and specific seller capabilities.   The objectives of market research are to:

  • Leverage maturing technologies
  • Balance risks associated with the sellers who can provide the desired materials or services, particularly with risks to various project constraints such as cost, schedule, and quality.

12.1.2.3  Data Analysis

Make-or-buy analysis is used to determine whether the deliverables of a project (which are found in the project scope statement) can best be accomplished by the project team or should be purchased from outside sources.   The factors to be considered are:

  • the organization’s current resource allocation, as well as their skills and abilities
  • the need for specialized expertise
  • the desire not to expand permanent employment obligations
  • the need for independent expertise
  • the risks involved with the make-or-buy decision

The make-or-buy analysis make use financial tools and techniques, including the same ones used to analyze the viability of the project itself, such as

  • Return on investment (ROI)
  • Internal rate of return (IRR)
  • Discounted cash flow
  • Net present value (NPV)
  • Benefit/cost analysis (BCA)

12.1.2.4  Source Selection Analysis

You need to look into the organization’s method for selecting the source of procurements.   Bidders need to know how they will be evaluated, because some of the selection methods require them to invest a large amount of time and resources upfront.

Commonly used selection methods include the following:

  • Least cost–appropriate for procurements of a standard or routine nature which have well-established practices and standards and from which a specific and well-defined outcome is expected.
  • Qualifications only–if the value of the procurement is relatively small, a full selection process may not make sense.   The buyer establishes a short list and selects the bidder with the best credibility and qualifications.
  • Quality-based/highest technical proposal score.   For products and/or services that involve technology, the sellers are encouraged to submit a proposal with both technical and cost details.  The seller who submitted the highest-ranked technical proposal is selected if their financial proposal can be negotiated and accepted.
  • Quality and cost-based.   If the risk and/or uncertainty are greater for the project, quality should be a key element when compared to cost.   The previous method of “quality-based and highest technical proposal score” is similar, but for products and services that involve technology.
  • Sole source–if there is no competition, this method is acceptable ONLY when properly justified and viewed as an exception.   It is either for sole providers of a product or service, but for trusted providers with a history of past projects with the company.
  • Fixed budget–when the statement of work (SOW) is well-defined, no changes are anticipated, and the budget is fixed and cannot be exceeded, this method may be appropriate.   The available budget is disclosed to invited sellers in the Request for Proposal (RFP) and the highest-ranking technical proposal given in response to that RFP is then selected.

12.1.2.5  Meetings

Meetings are used to determine the strategy for managing and monitoring the procurement, which is essentially the next two processes of procurement management.

The next post reviews the outputs of the Plan Procurement Management process.