Enterprise Environmental Factors in this context refer to "the conditions of the marketplace" (comp. PMBOK3, p. 275).

• And the Organizational Process Assets in this context "[...] provide the existing formal and informal procurement-releated policies, procedures, guidelines [...]" or anything else( comp. PMBOK3, p. 275)

Contract Type Selecting Rule (of Thumb): If the contract statement of work can be formulated at the level of design, than one can select fix price contracts, if it can be formulated at the level of functionality, the corresponding form of contract typically is the form of Cost plus contracts. And if the contract statement of work still must be developed, one typically select a time and material contract (comp. CROSSWIND7, p. 460)

(9.1) Plan Purchases and Acquisition

(9.1.1) Process Input

... generated by predecessor processes

... introduced by external units

  • Enterprise Environmental Factors
  • Organizational Process Assets

(9.1.2) Process Definition

Plan Purchases and Acquisitions is the process for "[...] determining what to purchase or acquire and determining when and how"  (comp. PMBOK3, p. 269): It "[...] identifies which project needs can best be met by purchasing or acquiring products, services, or results outside the project organization, and which project needs can be accomplished by the project team during project execution". Mainly this process "[...] includes reviewing the risks involved in each make-or-buy decision [...] (and) [...] reviewing the type of contract planned to be used [...]". Target is to mitigate risks and to transfer risks to the seller (comp. PMBOK3, p. 274):

The subject Procurement Management operates on the base of other contracts concerning concepts

(9.1.3) Tools and Techniques

PMBOK Mentioned Methods

  • Make-or-buy analysis is the collection and comparement of opportunities and threats evoked by the make-solution and the buy-solution (comp. PMBOK3, pp. 276f)
  • Expert judgement is used to evaluate the possible solutions and the corresponding contract types (comp. PMBOK3, pp. 276f)
  • Contract types is a contract typology for deducing opportunities and threats evoked by the kind of the contract (comp. PMBOK3, pp. 276f):
    • Fixed price contracts (also known as lump-sum contracts): The bought result is exactly specified and the seller gets a fixed sum  for his work. The simpliest form is a "purchase order for a specified item to be delivered by a specified date for a specified price". Disadvantage of this type is the fixed scope, scope changes can't be managed well (comp. PMBOK3, p. 277). The disadvantage may be mitigated by constructing contracts like "Fixed price incentive fee". And if one wants to establish a long running contract one has to construct contracts like "Fixed price economic price adjustment" (comp. CROSSWIND7, p. 458)
    • Cost-reimbursable contracts: The buyer pays all real costs of the seller "[...] plus a fee, typically representing seller profit". The kind / computation of this fee allows a subclassification of this contract type (comp. PMBOK3, p. 278):
      • Cost-Plus-Fee (CPF) or Cost-Plus-Percentage of Cost (CPPC): the fee is determined by the costs. The disadvantage of this type is: Increasing the cost implies increasing the seller profit (comp. PMBOK3, p. 278)
      • Cost-Plus-Fixed-Fee: the fee is fixed. The disadvantage of this type is: one cannot influence the performance of the seller (comp. PMBOK3, p. 278)
      • Cost-Plus-Incentive-Fee (CPIF): the fee is determined by reaching some performance points (comp. PMBOK3, p. 278)
      • Cost-Plus-Award-Fee is nearly the same as Cost-Plus-Incentive-Fee, except the pay mode: the award-fee will be distributed over a time, the incentive-fee will be payed at the end (comp. RITA5, p. 372)
    • Time and Material contracts is a mixture between Fixed price contracts and Cost-reimbursable contracts: persons are paid for work, kind and targets are more or less determined by the buyer, but the worker may get fees. Disadvantage of this contract type is that risk of reaching the target lies on the side of the buyer (comp. PMBOK3, p. 278).


Open Source Tools

  • NN

(9.1.4) Process Output

  • The Procurement Management Plan determines
    • which contracts shall be used
    • "who will prepare independent estimates [...]"
    • which shall be done by the organizational procurement part and which by the project team
    • which standard documents shall be used
    • how multiple providers shall be managed
    • how the procurement is embedded into the other project management plans
    • which constraints mus be respected
    • how the time for purchasing or acquiring is integrated into the schedule plan
    • how the work of make-or-buy-decision is linked into the activity list
    • which insurances can be used to mitigate procurement risks
    • how the contract work breakdown structure shall be maintained
    • which format shall be used for the contract statement of work
    • which sellers are known as good (or bad) partners
    • how the contracts and sellers shall be evaluated
  • The Contract Statement of Work is a scope definition of a specific portion of the project work, which  shall be bought: "Each contract statement of work defines, for those items being purchased or acquired, just the portion of the project scope that is included within the related contract". And naturally "the statement of work (SOW) for each contract is developed from the project scope statement, the project work breakdown structure (WBS), and WBS dictionary" 
  • Make-or-by Decisions are the documented results of the method "make-or-buy-decision"
  • Requested Changes can be evoked by the "make-or-buy-decisions" or the contract selections

(comp. PMBOK3, pp. 279f)

(9.1.5) Output Using Successor Processes

Successors using the initially generated output as own input(1):

  1. For details see FAQ::Q001:1