1. 12.1 Plan Procurement: Introduction
The process of documenting project purchasing decisions, specifying the approach and identifying potential suppliers.
It identifies project needs that are best met by acquiring products or services from outside of the project organisation. It considers potential suppliers and the contractual arrangements that may be required to manage these external parties to achieve the project objectives.
Closely related to Risk Management
Occurs during Planning
Initiation
Planning
Execution
Close
Monitor
Control
Adapted from PMBOK 4th Edition

2. 12.1 Plan Procurements: Inputs
Inputs to Plan Procurements
Scope Baseline - Scope Statement and WBS
Requirements documentation
Project Schedule
Teaming Agreements - with third parties
Risk Register
Activity Resource Requirements
Activity Cost Estimates
Cost Performance Baseline
Enterprise Environmental Factors
Marketplace conditions and products/services available
Suppliers past performance
Typical terms and conditions
Organisational Process Assets
Formal procurements policies and procedures
Preferred Supplier Agreements
Adapted from PMBOK 4th Edition

3. 12.1 Plan Procurements: Tools and Techniques
Tools and techniques to Plan Procurements –
Preferred
Supplier
Agreements
Make or Buy
Analysis
Contract
Types
Procurement
Approach
Expert
Judgement
Procurement
Policies &
Procedures
Adapted from PMBOK 4th Edition

4. 12.1 Plan Procurements: Tools and Techniques
Make or Buy Analysis
Determines whether particular work can be accomplished by the project team or must be purchased from outside sources
The capability may exist internally but may be committed to other projects
Budget constraints can influence make or buy decisions
Make or buy decisions need to cover the following –
Purchase versus lease
Related costs – direct costs and indirect support costs
Adapted from PMBOK 4th Edition

5. 12.1 Plan Procurements: Tools and Techniques
Expert Judgement
Consulting procurement and legal professionals
May be internal or external to the project organisation
Preferred Supplier Agreements
Many organisations (particularly government) negotiate agreements with pre-qualified suppliers of regularly purchased products or services
The project team then needs to select the supplier from the preferred supplier agreement
It makes it much easier to find reputable suppliers and reduces requests for information within the market
Exceptions normally need to be approved by an internal Procurement Department
Adapted from PMBOK 4th Edition

6. 12.1 Plan Procurements: Tools and Techniques
Procurement Approach
Once the Buy decision has been made, many different approaches can be used to procure the required products or services
Three Quotes – traditionally three quotes are obtained for certain trades and then the cheapest is selected, depending on conditions
Previous Supplier – may be related to preferred supplier agreements, a well known supplier that has been used in the past is automatically chosen
Tender Processes – can be open to the entire market or closed to specific suppliers often from the preferred supplier list
Adapted from PMBOK 4th Edition

7. 12.1 Plan Procurements: Tools and Techniques
Procurement Policies and Procedures
Most large organisations and all government departments will have extensive policies and procedures to govern purchasing
These often include –
Preferred Supplier Agreements
Purchase Ordering and Supply processes
Delegated authorities for approval of expenditure
Contract Types
Fixed Price
Cost Reimbursable
Time and Materials
Click here to view different contract types in detail
Adapted from PMBOK 4th Edition

8. 12.1 Plan Procurements: Outputs
Outputs of this process include –
Procurement Management Plan
Procurement Statements of Work
Derived from the project scope baseline
That portion of project scope to be included in the particular contract
Make or Buy Decisions
Included as a table of decisions in the Procurement Management Plan
Procurement Documents
Requests for Tender
Seller Evaluations
Contracts
Source Selection Criteria: detailed in previous slides
Change Requests
Initiation
Planning
Execution
Close
Monitor
Control
Adapted from PMBOK 4th Edition

9. 12.1 Plan Procurements: Procurement Management Plan
The Procurement Management Plan describes how the procurement processes will be managed.
It is critical that it is linked to relevant industry regulations and organisational policies and procedures.
Common inclusions in the Procurement Management Plan –
Links to organisational procurement management policies and procedures
Types of contracts to be used and contract templates
Delegated authorities and required involvement from internal purchasing, finance and legal experts/departments
Tender document templates
Assumptions, constraints and risks related to procurement
Schedules of contracted deliverables
Preferred supplier lists
Procurement metrics and performance measurements
Adapted from PMBOK 4th Edition

10. 12.1 Plan Procurements: Procurement Management Plan
It is often very useful to document all procurement approaches and decisions in a table known as the Procurement Planning Register
Includes information about the sourcing approach, type of contract, selection criteria, requirements, risks etc
Content can be tailored to organisational policies and procedures
Procurement
Item
Manager
Requirements
Sourcing Approach
Summary Selection Criteria
Contract
Type
Major
Risks
Key Dates
Budgeted
Amount
Name of the item being purchased
Summary requirements for
the product or service
Primary criteria on which the selection will be made
Summary
of Risks
Major date and dependencies
Name and position of the person responsible for managing the procurement – often NOT the Project Manager
Approach selected for the procurement e.g. – three quotes, preferred supplier, tender
Fixed Price, Cost reimbursable or Time and Materials, often includes performance criteria
Budget estimate or allowance

11. 12.1 Plan Procurements: Procurement Management Plan
Selection criteria are often included as part of tender documents and are used to rate or score different suppliers
Facilitate and provides justification for procurement decisions
Can be limited to purchase price for commodity type items or can also include other selection criteria such as reputation, financial viability, fit with requirements etc
Often weighted based on relative importance
Management
Approach
Risk
Technical
Capability
Understanding
Of Requirements
Overall or
Lifecycle Costs
Technical
Approach
Industry
Experience
Business
Size & Type
Financial
Viability
Production
Capacity
Warranty
Past
Performance
& References
Intellectual
Property