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Plan Procurements Inputs, Tools and Techniques, and Outputs
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The inputs, tools and techniques, and outputs for the Plan Procurements process are as follows
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12: Project Procurement Management
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Inputs Because procurement is an important aspect of obtaining resources outside the project team, the list of inputs for this process is long:
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Scope baseline
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Includes the scope statement, WBS, and WBS dictionary
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Requirements documentation Includes contractual and legal implications around health, safety, security, performance, environmental considerations, insurance, and so on Teaming agreements The team charter Are there existing or new legal contracts that need to be honored or established to facilitate the project Risk register Includes risk-related information, such as identified risks, owners, and response strategy as it pertains to contracts and procurement Risk-related contract decisions Activity resource requirements Project schedule Activity cost estimates deliverables Is insurance needed or bonding of providers Number of people and type of skills needed
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Constraints, timelines, specific deliverables, and target dates From procurement activity, bid process, and cost of
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Cost performance baseline Sets the approved starting point for tracking/reporting Enterprise environment factors Type of structure, market conditions, supplier performance, relationship and credibility, and terms and conditions of the contract Organizational process assets Formal procurement policies, management systems used, and contract type (it is important to know who bears the burden of risk) The following tools and techniques are used in the Plan
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Tools and Techniques Procurements process:
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Make-or-buy decision A technique used to determine if specific work can be performed with the skills and resources available on the project team or if this needs to be acquired outside the team Again, the schedule will often influence this decision Expert judgment In the case of procurement planning, the experts sought out may be financial analysts, business analysts, contract or procurement specialists, and so on Contract types There are three primary types of contracts (fixed-priced, cost-reimbursable, and time and materials) These are covered in more detail later in this chapter
NOTE
Each contract type carries varying degrees of risk between the buyer and seller
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Outputs The outputs of the Plan Procurements process are as follows:
Procurement management plan Includes the types of contract to be used, risk issues, and evaluation criteria for vendor selection Procurement statement of work (SOW) Based on the project scope, this is a narrative description of the procurement work to be performed on the project Make-or-buy decision Conclusions and decisions made to perform the work internal to the project team or external to the team Note that this is a result of the make-or-buy analysis performed as a tool/technique and is also an input to the next process (Conduct Procurements) Procurement documents The documents used to solicit proposals from potential sellers, vendors, or suppliers Source selection criteria The key skills, deliverables, cost, and so on that will be considered as part of the vendor selection process Change requests Items that surface during procurement planning that require changes to the selection process or to the criteria when choosing a vendor
Contract Types
Hundreds of contracts and agreements are available to you as a project manager, so to keep this discussion simple we cover only the ones mentioned in the PMBOK Another important factor when choosing the contract type to use on your project is who will bear the burden of risk between the buyer and seller Each contract type carries advantages and disadvantages, depending on which side of the table you are on The three primary types of contracts recognized by PMI are detailed next
Fixed-price Contracts Fixed-price contracts involve setting a fixed (or lump sum) price for delivery of a product or service This price is fixed at the time the contract is awarded There may also be incentives incorporated into the contract no down payment, delayed payments, factory rebates but the price is usually the price Of course, we try hard to negotiate the price down, but whatever price the seller and buyer agree upon becomes the fixed-price contract Here are the three types of fixed-price contracts mentioned in the PMBOK:
Firm fixed price (FFP) This is the most common and is favored by most buyers because the price is set and the risk goes mostly to the seller If the cost of services or materials goes up, the seller bears the burden of risk in this type of contract
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