Introduction |
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| Procurement Planning is the process
of identifying which project needs can be best met by
procuring products and services outside the project
organization. It involves consideration of whether to
procure, how to procure, what to procure, how much to
procure and when to procure it. When the product or service is sourced from outside the organization, the processes from solicitation planning through contract closeout would be performed once for each item. This process is also called the Pre-Award phase of the contracting process. There are two cycles within this phase - requirements cycle and requisition cycle. Requirements cycle
Requisition cycle
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12.1.1 Inputs |
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The scope statement describes the current project boundaries. It provides important information about project needs and strategies that must be considered during procurement planning.
The product description provides important information about any technical issues. It is normally broader than a statement of work (the latter represents the portion of the product to be provided by a seller to a project).
If the performing organization does not have a contract group the project team will have to supply both the resources and the expertise to support project procurement activities.
The procurement planning process must consider what products and services are available in the market place, from whom, and under what terms and conditions.
Other planning outputs that must be considered during procurement planning include:
These limit the buyer's options eg funds availability.
Refer assumptions.
This is a general management technique which can be used to determine whether a particular product can be produced cost-effectively by the performing organization. The "buy" side of the analysis should include the actual purchase cost as well as the indirect costs. It must also reflect the perspective of the performing organization as well as the immediate needs of the project.
Refer expert judgement.
The type of contract depends on the degree of uncertainty facing the project manager.
| Contract Type | Description | Usage |
| Cost Plus Percentage of Costs (CPPC) | The contractor is reimbursed allowablle costs and a percentage of the estimated cost as profit | Prohibited for federal use but used in the construction industry. |
| Cost Plus Fixed Fee (CPFF) | The contractor is reimbursed allowable costs and a fixed fee. | Used in research projects where the effort required to achieve success is uncertain until well after the contract is signed. |
| Cost Plus Incentive Fee (CPIF) | The contractor is paid for allowable performance costs along with a pre-determined fixed fee and incentive bonus. | Used where contracts involve long performance period with substantial development of hardware development and test requirements. |
| Fixed Price Incentive (FPI) | This is composed of a target cost, target profit, target price, ceiling price and share ratio. The savings will be shared by the buyer and seller based on a negotiated formula. | Where the contracts are for a substantial sum and involve a long production time. This enables the seller to develop production efficiency during the life of the contract. |
| Firm Fixed Price (FFP) or Lump Sum | No adjustment for performance costs. | Where reasonably definite production specifications are available. |
The procurement management plan should describe how the remaining procurement processes (from solicitation planning through contract close out) will be managed, for example:
The statement of work (SOW) describes the procurement item in sufficient detail to allow prospective sellers to determine if they are capable of providing the item. "Sufficient detail" may vary based on the nature of the item, the needs of the buyer or the expected contract form.
It may be refined and revised as it moves through the procurement process. Each individual or group of procurement items requires a separate SOW.
The SOW must have the following characteristics: