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Creating the Procurement Planning Outputs
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Once you ve completed a round of the procurement planning, you ll end up with some nifty results to act on in your program The results are the solutions you ll have to enter the planning contract phase
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6: Working with Planning Processes
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Your first order of business is the creation of the contract statement of work this document, sometimes just called the SOW, defines what you d like to purchase from the vendor The SOW fully describes the requirements for acceptance, quality expectations, delivery requirements, scheduling demands, and just about any other characteristic of the program you want the vendor to adhere to The nature of the program work, based on the PWBS, really affects what you ll put into the SOW The details of a SOW in a construction program likely are not the same details you d add to a SOW for an IT program While the SOW deals with vendors, you know that sometimes it s more cost effective to buy than to build Or you don t have the resources internally Or you want your staff to focus on the core work, and you want to outsource work that s not core to the program Or you don t have the time to create whatever it is the vendor can create for you Or any number of reasons why you d rather buy than build And other times it s the opposite, when it s better to build it than to deal with a vendor There are, however, instances where it s all just a financial decision whether you should build a thing or buy a thing Here s a basic approach to determine if you build it or buy it as in Figure 6-16 Let s say you are considering building a piece of software versus buying it You ve determined that you can build a piece of software for $98,450 internally, and it ll cost you $23,780 per month to support the software Your favorite vendor tells you that they can build the software for you at the low, low price of $87,650 With the vendor s deal you ll have to pay $25,500 per month for their support Here s what you ll do: 1 Find the out-of-pocket difference between the buy and the build In this instance it s $98,450 minus $87,650 for a difference of $10,800 2 Find the difference in the monthly maintenance fees Here it s $23,780 minus $25,500 for a difference of $1,720 3 Divide the out-of-pocket difference by the monthly difference In this instance, it s $10,800 divided by $1,720 to equal 627 4 Determine how long you re going to use the solution In this instance if you re going to keep that software around for more than 627 months, you should just go ahead and build the software If that software isn t going to be around more than 6 months, just hire the vendor and enjoy the great deal you ve made NOTE For your PgMP examination, and out there in the real world, you won t always make a purchasing decision on price alone There are lots of other reasons you may build or buy Always do what s best for the program and your organization
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Figure 6-16 Build or buy charts are based on a purely financial decision
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As in most planning processes, you get a plan to guide you through some program activities The plan for this process is the procurement management plan, which will detail how vendors will be contacted, selected, and then managed once you actually get to the contracting stage Your program or organization may also rely on a qualified vendor list
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Planning for Program Contracts
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Now that the program has completed the procurement planning process, it s ready to determine what contracts are needed, the legal issues of the contracts, and the intricacies of contracts in a program Generally, program contracts are going to be more cumbersome than a project contract because of the relationships between the performing organization, the vendors, government agencies, and the projects within the program Figure 6-17 captures all of the inputs and outputs for this process Every contract must be for a legal purpose, contain an offer, and include a consideration for the work The parties involved in the contract must all be in agreement with the terms of the contract and accept the terms by signing the contract Should a party not live up to the terms, then there are claims, mediation, and most probably, litigation between the parties Contracts almost always define the locale of where the legal matters will be resolved such as the court in a particular county and state or which country may have jurisdiction over the legal matters of a contract should claims be escalated to a lawsuit
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