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Author: Elyse, PMP, CPHIMS
April 4, 2007

The Plan Purchases and Acquisition process provides a pattern which can be used to determine which needs are better met by using an outside organization versus the project team. Common inputs to this decision is when the result is needed and how best to obtain the result.

As with all processes, there are inputs to the Plan Purchases and Acquisitions Process. These inputs provide the foundation for determining what, when, and how to purchase. These input are:

  • Enterprise Environmental Factors – Enterprise environmental factors concerning mark conditions. What products, services, and results are available in the marketplace? Where can you obtain them? Are there terms and conditions which are applicable? Is there a legal or purchasing department? Or is that the project teams responsibility?

  • Organizational Process Assets – Organizational process assets depicts whether formal or informal policies and procedures exist for dealing with procurement within the organization. Some common types of organizational process assets are, all requisitions for purchase orders must be signed by the CIO. All purchase requisitions above $2000 must be initialed by all EVPs. All vendors must have been in business for a period of at least 3 years.

  • Project Scope Statement – Project Scope Statement details the projects boundaries, requirements, constraints, and assumptions. Check out the constraints in the project scope statement to see if there are any required delivery dates or need for skilled resources.

  • Work Breakdown Structure – The Work Breakdown structure illustrates how each work package’s interdependencies.

  • WBS Dictionary – The WBS Dictionary details the work needed to complete each WBS package. Check out the contract info and quality needs when reviewing for the planning and acquisition process.

  • Project Management Plan – The project management plan is the plan for managing the project. With the plan purchases and acquisition process check out the following items:

    • Risk Register

    • Risk-related contractual agreements

    • Activity resource requirements

    • Project Schedule

    • Activity Cost Estimates

    • Cost Baseline

When it is obvious that there may be a need to buy products, services, or results, one should be able to articulate what is needed, when, and all other concerns. Some common tools and techniques used to help articulate what is needed, when, and how are:

  • Make-or-buy Decisions - Make-or-buy analysis involves comparing the relative benefits of in-house versus out-sourcing production of a given product, service, or result. Common considers are if the skill set in house is capable of delivering the product or service and if the same quality or a higher standard can be obtained from outside.

  • Expert Judgment - Expert judgment brings in specialized advice, such as technical, legal, or market knowledge, to inform buying decisions. Sometimes using experts can bring about new approaches which simply were not considered without the expertise or experience of being one that has already been there done that.

  • Contract Types - Contract Types are the types of contracts available for use. Different contracts are used for different purposes and intents. Generally there are three main categories:

    • Fixed-price or lump-sum contracts – Generally involves a total price for a wel-defined product. Fixed-price contracts may include incentives for early delivery. Buying shrink wrapped software is commonly a fixed price contract.

    • Cost-reimbursable contracts – Generally involves payment to the vendor for actual cost plus a fee for profit. Actual costs comprise direct and indirect cost of making the product or providing the service. There are three common types of cost-reimbursable contracts.

      • Cost-Plus-Fee (CPF) or Cost-Plus-Percentage of Cost (CPPC) – In this type, the seller is reimburse for the allowable costs and receives a percentage of the costs as a fee.

      • Cost-Plus-Fixed-Fee (CPFF) – For this type, the vendor is reimbursed for allowable costs and receives a fixed fee. The fee normally doesn’t change unless scope changes allocate a new fee.

      • Cost-Plus-Incentive-Fee (CPIF) – Cost-Plus-Incentive reimburse the seller for allowable costs and allocates a predetermined fee, as an incentive for achieving certain performance objectives.

    • Time and Material contracts – T&M contracts are a hybrid combination of cost-reimbursable and fix price contracts. A common indicator is their open-ended nature. The full value of the agreement and the exact quantity of items to be delivered are not defined at the time of contract award.

When purchasing solutions, it is important to assure that the best choice for the organization has been chosen and it is what was required. These tools and techniques offer a way to assure needs are defined and met. The outputs to the Plan Purchases and Acquisitions process are:

  • Procurement Management Plan – The procurement management plan explains how procurement will be managed from inception to closing. Commonly the procurement management plan details the types of contracts to be used, who is accountable for estimates, the guidelines for the build or buy decision. What are the common lead times and how best to handle them? Finally what is the form and format of the statement of work?

  • Contract Statement of Work (SOW) - The contract statement of work explains the items being purchased with enough detail and clarifications for everyone to be in agreement with what is being purchased. The contract statement of work should have a clear concise description of the services needed and operational support.

  • Make-or-buy Decisions – Make or buy decisions are pretty self explanatory as to the purpose. However, it is good to have a document with a list of the justification for the decision and responsible party.

  • Requested Changes – Requested changes to the plan should be placed into the integrated change control process.

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1 Comments to “Plan Purchases and Acquisitions Process”

I need some diagrams on the process of Procurement in management for school

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