Plan Procurement Management 101

What Does Plan Procurement Management Involve and When Do You Perform It in a Project Life Cycle?

• WHAT Plan Procurement Management Is. Plan Procurement Management implies identifying goods and service needed on the project and determining which of them makes sense to have performed inside of the project team or outside.
• WHY Plan Procurement Management Is Important. By performing the Plan Procurement Management process, a project manager makes sure that the right things are procured in the right way, by establishing whether to purchase the goods or services and, if so, how much, when, and from which sellers.
• WHEN Plan Procurement Management Is Executed. Since the project may have multiple subcontractors, procurement can take place anytime during the project life cycle. However, the identification of which items will ultimately be procured is generally made early, during scope definition.
• HOW Plan Procurement Management Operates.

Source: PMBOK® Guide, 6th ed., Chapter 12, section 12.1, p. 466.

Plan Procurement Management Key Terms

What Are the Key Terms to Fully Understand the Process of Planning Procurement Management?

• Agreements. Any and all formal contracts defining intentions around the project or some component of the project.
• Contract. A compulsory agreement between two or more parties with obligations, roles, and responsibilities clearly defined.
• Contract Types. Three basic categories of contracts, with optional incentive fees:
  • Fixed price contract.
    • Firm fixed price (FFP)
    • Fixed price incentive fee (FPIF)
    • Fixed price with economic price adjustment (FP-EPA)
  • Cost-reimbursable contract
    • Cost plus fixed fee (CPFF)
    • Cost plus incentive fee (CPIF)
    • Cost plus award fee (CPAF)
  • Time and material (T&M) contract.
• Make-or-Buy Analysis. A tool for assessing whether some or all of the work should be done by the project team or outsourced.
• Make-or-Buy Decisions. The output from the make or buy analysis that decides whether an organization should contract the work or do it by itself.
• Procurement. A formal process to obtain goods and services.
• Procurement Documents. A range of documents produced by the procurement processes that describe to the seller what needs to be done to win the work and what the work involves. Namely:
  • Request for proposal (RFP)
  • Invitation for bid (IFB)
  • Request for quote (RFQ).
• Procurement Management Plan. A subsidiary of the project management plan that describes how all facets of the procurement – planning, executing, controlling, and closing – are to be conducted.
• Procurement Statement of Work. A narrative description of all the work and activities the seller is required to complete on each procurement. Three types of SOW: performance, functional, and design.
• Source Selection Criteria. A tool for developing a range of approved criteria for evaluating every seller fairly and finding the right seller for a company.

Plan Procurement Management Tips

What Are the Best Tips to Answer Correctly the PMP Certification Exam Questions on Plan Procurement Management Process?

• Buyer Vs. Seller Perspective. On the PMP exam, if a situational question on procurement does not describe explicitly a scenario from a buyer’s or seller’s point of view, assume that you are in the role of the buyer
• Centralized Vs. Decentralized Contracting Environment. Topic not in the PMBOK Guide but possible on the PMP exam. In a decentralized contracting environment, a procurement manager is assigned to one project full-time and reports only to the project manager. In a centralized contracting environment, a procurement manager is assigned to one procurement department and reports directly to the head of this procurement department.
• Contract Vs. Agreement. A contract is typically created with an external entity and can be considered an agreement.  An agreement outlines internal or external relationships and may not necessarily be a contract.

• Selection Criteria of Each Contract Type.
  • Fixed-price – favored when the scope of the project is clearly defined and not subject to change.
  • Cost-reimbursable – used when the scope of work is not well defined or is subject to change.
  • Time and material – used for smaller contracts when there is not a firm scope of work, or when the work is scheduled for an indefinite period.

• Size of Procurements. On the PMP exam, assume that procurements are large and based on contracts. Thus, unless indicated otherwise, the seller provides all of the work external to the buyer’s team rather than supplying only some resources to supplement the team.
• US Contracting. The PMP exam is based on US contracting laws and customs.

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