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Lesson 3: Developing Project Proposals
PM Process: 12.1 Plan Procurement Management
You will now step through the first three elements of the Project Procurement Management Knowledge Area. The first of these, the Plan Procurement Management process, is one of the 49 project management processes and includes the documentation of procurement decisions, the specification of the procurement approach, and the identification of potential sellers. Plan Procurement Management is in the Planning Process Group, and the first process in the Project Procurement Management Knowledge Area. The process determines whether to acquire outside support, what to acquire, how to acquire it, how much, and when. Table 3.2 includes the inputs, tools and techniques, and outputs for the Plan Procurement Management process.
| .1 Inputs | .2 Tools and Techniques | .3 Outputs |
|---|---|---|
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12.1 Plan Procurement Management Process Inputs, Tools and Techniques, Outputs Glossary Definitions, and Additional Details
The PMBOK® glossary definition is provided for each of the inputs, tools and techniques, and outputs for this process, shown in italics, for any terms that have not previously been defined. Otherwise, the term is hyperlinked, and you can hover over the link to view the definition. When relevant, the instructors may provide additional information following each definition. See PMBOK® Guide (6th ed.), pp. 466–481.
.1 Inputs to the Plan Procurement Management Process
.1.1 Project charter
.1.2 Business documents
- Business case
- Benefits management plan
.1.3 Project management plan
The components of the project management plan that are most useful for the plan procurement management process are the project scope statement, work breakdown structure (WBS; see Gido et al., 2018, Chapter 1), and the WBS dictionary. These components help in deciding whether the work should be completed in house or contracted out.
- Scope management plan: A component of the project or program management plan that describes how the scope will be defined, developed, monitored, controlled, and validated.
- Quality management plan: A component of the project or program management plan that describes how applicable policies, procedures, and guidelines will be implemented to achieve the quality objectives.
- Resource management plan
- Scope baseline: The approved version of a scope statement, work breakdown structure (WBS), and its associated WBS dictionary, which can be changed using formal change control procedures and is used as a basis for comparison to actual results.
.1.4 Project documents
- Milestone list
- Project team assignments: Indicates which personnel are assigned to work on the team.
- Requirements documentation
Requirements most pertinent to the Plan Procurement Management process are those related to any legal or contractual requirements. - Requirements traceability matrix: A grid that links product requirements from their origin to the deliverables that satisfy them.
- Resource requirements: The types and quantities of resources required for each activity in a work package.
Information from the activity resource requirements will help in making decisions related to using a contract for outside services or performing the work in-house. - Risk register
The risk registry may help to inform decisions regarding whether to use a contract for outside services or performing the work in-house. - Stakeholder register
The stakeholder register is helpful in determining whether the decision to contract out work or use suppliers has any impact on any project stakeholders.
.1.5 Enterprise environmental factors
The most pertinent factors are those related to the marketplace, such as availability and price of goods and services.
.1.6 Organizational process assets (OPA)
This can include many factors, but the most critical factor is the procurement contract type. There are three primary contract types, and each of these have their own variations.
If you would like to learn more about contract types, please visit this website (this link includes an example for each type): Types of Procurement Contracts Used in Project Management.
PMBOK® Guide Highlights
For each contract type, be sure you know
- how the seller is paid (is it based on delivery, effort, or time?);
- who has more risk: the buyer or seller; and
- how detailed the statement of work (SOW) is (Is it clearly defined? Is there flexibility?).
.2 Tools and Techniques for the Plan Procurement Management Process
.2.1 Expert judgment
Expert judgment related to purchasing or legal issues is most relevant to this process.
.2.2 Data gathering techniques
- Market research: The process of gathering information at conferences, online reviews, and a variety of sources to identify market capabilities.
It provides information on the availability, pricing, and new alternatives related to needed goods or services.
.2.3 Data analysis techniques
- Make-or-buy analysis: The process of gathering and organizing data about product requirements and analyzing them against available alternatives, including the purchase or internal manufacture of the product.
When deciding to make or buy, consider all costs, as highlighted in the Boeing case study.
.2.4 Source selection analysis
Several selection methods are available to choose from in selecting the source when multiple bidders are available. Best practice is to include the selection method in the procurement documents so that bidders know in advance how the bids will be evaluated. The PMBOK® Guide reading includes a description of each: least cost, qualifications only, quality-based/highest technical proposal score, quality and cost-based, sole source, and fixed budget. Least cost and qualifications-based selection (QBS) are discussed in more detail in the supplemental readings. The least cost method is appropriate for project outcomes that are well defined, standard or routine, and have well-established standards and practices. For nonstandard projects that involve risk, qualifications and experience become much more important.
.2.5 Meetings
These may include pre-bid meetings with potential bidders.
.3 Outputs From the Plan Procurement Management Process
.3.1 Procurement management plan
A component of the project or program management plan that describes how a project team will acquire goods and services from outside the performing organization.
.3.2 Procurement strategy
The approach by the buyer to determine the project delivery method and the type of legally binding agreement(s) that should be used to deliver the desired results.
.3.3 Bid documents
All documents used to solicit information, quotations, or proposals from prospective sellers.
Procurement documents: The documents utilized in bid and proposal activities, which include the buyer’s Invitation for Bid, Invitation for Negotiations, Request for Information, Request for Quotation, Request for Proposal, and seller’s responses.
- Request for information (RFI): A type of procurement document whereby the buyer requests a potential seller to provide various pieces of information to a product or service or seller capability.
Used when information is wanted from a potential bidder but before a request for proposal or invitation to bid is initiated. - Request for quote (RFQ) (may also be called an "invitation for bid" or "tender notice"): A type of procurement document used to request price quotations from prospective sellers of common or standard products or services. Sometimes used in place of request for proposal and, in some application areas, it may have a narrower or more specific meaning.
These are often used in place of an RFP when the purchasing decision is most likely going to be determined based on the low price technically acceptable offer (LPTA). - Request for proposal (RFP): A type of procurement document used to request proposals from prospective sellers of products or services. In some application areas, it may have a narrower or more specific meaning.
An RFP is typically used when the purchase decision will include other aspects beyond price, such as the proposer’s past performance, reputation, and technical approach.
.3.4 Procurement statement of work
Describes the procurement item in sufficient detail to allow prospective sellers to determine if they are capable of providing the products, services, or results.
Please see the document for a Statement of Work Template. You can use this template for either the project statement of work or the procurement statement of work.
PMBOK® Guide Highlights
Be able to identify differences between the procurement statement of work and the project statement of work. Remember, for purposes of the course quizzes and the PMI exams, you are on the project team that is working on a project for your customer. As the project team, you might decide to purchase additional products or services from another seller:
- Project statement of work: This comes from your customer describing what they want from the project you are working on for them.
- Procurement statement of work: This comes from you describing what you want to purchase from your potential bidder.
For more on the difference between the two, read Rowley's 5th Edition PMBOK® Guide—Procurement Statement of Work vs. Project Statement of Work post.
.3.5 Source selection criteria
A set of attributes desired by the buyer which a seller is required to meet or exceed to be selected for a contract.
You should finalize source selection criteria prior to reviewing bids.
Rowley (2013) developed a set of questions that the organization can ask in order to score proposals against criteria (Table 3.3).
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Category |
Criterion |
Explanation |
|---|---|---|---|
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1. |
Integration |
Management approach |
Does seller have, or can it develop, management processes and procedures to ensure a successful project? |
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2. |
Scope |
Understanding of need |
Does proposal address the procurement statement of work (SOW)? |
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3. |
Time |
Deadline |
With what degree of confidence can the seller produce the product within the specified deadline? |
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4. |
Cost |
Overall or life-cycle cost |
What is the total cost of the procurement (purchase cost plus operating cost)? |
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5. |
Cost |
Financial capacity |
Does seller have necessary financial resources? |
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6. |
Cost |
IP rights |
Does seller assert intellectual property rights in the product they produce for the project? |
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7. |
Cost |
Proprietary rights |
Does seller assert proprietary rights in the product they produce for the project? |
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8. |
Quality |
Technical approach |
Can seller’s technical methodologies, techniques, and solutions meet the technical requirements in the procurement documents? |
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9. |
Quality |
Warranty |
What will seller cover by warranty, and for what time period? |
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10. |
Quality |
Production capacity |
Does seller have sufficient production capacity to meet potential future requirements? |
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11. |
Human Resources |
Technical capability |
Does seller have technical knowledge and skills needed? |
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12. |
Risk |
Risk response |
How much risk is being assigned or transferred to the seller? How does the seller mitigate risk? |
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13. |
EEFs |
Business type and size |
Does seller’s enterprise meet a specific category of business (disadvantaged, etc.) defined by the organization or established as condition by government agency? |
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14. |
OPAs |
Past performance |
What is the past performance of selected sellers? |
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15. |
OPAs |
References |
Can seller provide references from prior customers verifying compliance with contractual requirements? |
.3.6 Make-or-buy decisions
Decisions made regarding the external purchase or internal manufacture of a product.
Factors that influence the decision to make or buy include the core capabilities of the organization, the value delivered by vendors, and the risks associated with each option. The decision to make or buy determines the next steps, if the decision is to make, and the project progresses with the other project management processes. If the organization makes the decision to buy, then the project proceeds with the remaining processes in the Procurement Management Knowledge Area. When deciding to make or buy, consider all costs, as highlighted in the Boeing case study.
.3.7 Independent cost estimates
A process of using a third party to obtain and analyze information to support prediction of cost, schedule, or other items.
.3.8 Change requests
Deciding to purchase goods or services instead of using in-house resources can affect the project plan and other project documents and may require change requests. Change requests are an output of all of the monitoring and controlling processes and many of the executing processes, but this is the only planning process with a change request as an output.
.3.9 Project Documents Updates
- Lessons learned register: A project document used to record knowledge gained during a project so that it can be used in the current project and entered into the lessons learned repository.
- Milestone list
- Requirements documentation
- Requirements traceability matrix
- Risk register
- Stakeholder register
.3.10 Organizational process assets (OPA) updates
Figure 3.1 shows the relationships between the various predecessor and successor processes, as well as the data flow for the Plan Procurement Management process.
PMBOK® Guide Highlights
- Plan procurement management is one of only four processes in the Planning Process Group that has change requests as an output.
- No closing process has change requests as an output.
- Change requests are outputs for all Monitoring and Controlling processes.
- Change requests are outputs for 8 out of 10 of the executing processes.
PMBOK® and PMBOK® Guide are registered marks of the Project Management Institute, Inc.