Plan Procurement

April 7, 2010


Procurement needs arise from the need to rationalize what needs to be made inside the organization, by the project team, and what ought to be bought from outside the organization. The optimization of this partitioning of make versus buy of project deliverables and related products, services or result arise from the need to minimize risks of project success. The decisions are guided by the need to meet the project time schedules efficiently as well as meeting the cost targets.

The process of Planning for Procurement

The plan process must be able to identify the procurement decisions. The process to be followed in making the procurements, need to be documented so that one could be sure of quality procurements. The plan process also should be able to identify some potential sellers that may be able to fulfill the procurement needs. The plan very clearly must identify the needs in terms of products, services or results that need to be obtained from outside the boundaries of the organization executing the projects. Thereby a clear differentiation must be made with the needs that clearly must be met from within the organizations, by the project team. Not only the items but the means to acquire them, as well as at what times and in what quantity they should be procured need to be determined.

The project schedule will have a significant impact on the procurement planning. Decisions in the procurement planning can affect the project schedule in turn; so these effects on each other should be carefully considered. The exercise to develop a schedule, estimate activity resources and the make or buy decisions are kind of very closely interconnected and influence each other directly. There are risks involved in parceling out parts of the project or depending on inputs coming from outside the organization. The contracts made with sellers/ suppliers must take measures to prevent/ avoid and minimize the impact of any risk events actually happening.

The procurement planning process, like all the other processes described in the PMBOK, is via the model of specifying a set of inputs on which a set of identified tools and techniques must work. Thereby you obtain the expected set of defined results or outputs. The outcome of the process is determined by a set of tools and techniques that include the make or buy analysis. This is the part of the process that clearly determines what parts are done in-house and what products, services or results are going to come from outside the organization. There are no numerical tools available that can clearly tell you what to make and what to buy. This is a totally qualitative process. You then need to use experts that can make judgment calls on the make-or-buy issues. These decisions are crucial and can put a project in jeopardy, unless they are taken effectively. The decisions taken cannot be any better that quality of available collective wisdom of these experts. Thus the experts to be called in, need to have the right subject matter expertise and be backed by sufficient experience enable them to take decisions effectively.

Contracts between the buyer and the seller govern the nature of the relationship and how effective the procurement initiative will be. Thus making up the contract is a crucial exercise as the buyer organization is going to be dependent on this outside agency for the success of their own project. The types of contract that are used are mainly of the types of Fixed price, cost reimbursable contacts and time & material contracts. There are some variations in these categories. For example, the fixed price contracts may come in variations known as firm fixed piece (FPP) contracts, fixed price incentive fee (FPIF) contracts and fixed price with economic price adjustments( FP-EPA) contracts. Cost reimbursable contracts have the variations that include cost plus fixed fee (CPFF) contracts, cost plus incentive fee(CPIF) contracts and cost plus award fee(CPAF) contracts.

Procurement management plans are the main outputs of the process. This document describes how procurement processes will be conducted starting from developing procurement documents through to conclusion of the contract. This document will also include decisions, guidelines, standards about all the activities related to the procurement. Procurement statement of works(SOW) are documents that clearly specify the nature of the work involved in the procurement activity. Make or buy decisions also are clearly documented. Procurement documents such as the request for information(RFI), request for proposals(RFP) , invitation to bid(IFB), request for quite(RFQ) etc are all created for the planned procurements. Source selection criteria are also decided and documented as part of this process. Change requests, if any, arising out of this exercise are also documented and fed into the system via the change management processes.

The relevant inputs are the documents that define the project needs clearly and helps make the process of make or buy easy. Thus the relevant inputs that are to be considered in the procurement plan include scope baseline including the scope statement, WBS and the WBS dictionary, requirements document, teaming agreements, the risk register, risk related contract decisions, activity resource requirements, project schedules, activity cost estimates, cost performance baselines, enterprise environmental factors and the organizations process assets.

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