HKSM

The planning process that determines what work or products will be obtained from external sellers, why they are needed, when they are needed, the contracting approach, and how the procurement will be managed from request through contract closeout.

Purpose & When to Use

• Define how the project will obtain goods and services from outside the organization and how those agreements will be managed.
• Used whenever external suppliers might provide materials, services, software, or expertise, including staff augmentation.
• Starts during project planning and is refined as scope, schedule, and budget become clearer.
• Ensures compliance with organizational policies, legal requirements, and any centralized purchasing procedures.
• Produces the procurement management plan, procurement strategy, bid documents, statement of work or outcomes, and source selection criteria.

Mini Flow (How It’s Done)

• Confirm needs and boundaries: clarify scope to be outsourced, internal capabilities, constraints, and required approvals.
• Make-or-buy analysis: compare in-house versus external sourcing on cost, schedule, capability, capacity, and risk.
• Market research: scan suppliers, lead times, capacity, commercial terms, and regulatory considerations.
• Select delivery and contract approach: choose contract type that best balances risk (e.g., fixed price for well-defined scope; cost-reimbursable or time-and-materials when scope is uncertain, with appropriate controls).
• Define supplier scope: create a clear statement of work or outcome-based description with acceptance criteria and interfaces.
• Develop procurement strategy: competitive vs. sole-source, single vs. multiple awards, geographic considerations, and make a preliminary procurement schedule.
• Prepare documents: draft RFIs, RFQs, or RFPs; set objective source selection criteria and weighting; establish evaluation and negotiation plans.
• Plan management and governance: roles and responsibilities, communications, performance measures, change control, reporting, and invoice review.
• Plan risk allocation: identify procurement risks, warranties, incentives, penalties, and required insurances; update the risk register.
• Integrate with the project baseline: align procurement milestones, budget, cash flow, and lead times with the overall plan.
• Review for compliance: include legal, finance, security, and data protection requirements; obtain required approvals.
• Finalize and communicate the procurement management plan, strategy, and solicitation package for the next process.

Quality & Acceptance Checklist

• Make-or-buy decision documented with clear rationale and assumptions.
• Contract type chosen with stated reason and risk sharing rationale.
• Supplier scope and acceptance criteria are complete, testable, and unambiguous.
• Source selection criteria are measurable, weighted, and aligned to objectives.
• Procurement schedule integrates vendor lead times, reviews, and approvals.
• Governance defined: roles, communications, performance metrics, and change control for the contract.
• Commercial terms considered: payment structure, incentives, penalties, and warranty/maintenance.
• Compliance confirmed: legal, regulatory, IP, data privacy, export controls, and ethics.
• Risks identified with allocation and responses; contingency and reserves updated.
• Coordination with central procurement or purchasing is planned and approved.

Common Mistakes & Exam Traps

• Confusing processes: planning procurement versus running the solicitation. Planning defines the approach; conducting solicitations happens later.
• Picking contract type on habit rather than risk: fixed price fits stable scope; cost or time-based contracts need extra oversight and cost limits.
• Ignoring lead times and legal reviews, which can delay the critical path.
• Writing either vague or overly prescriptive scopes; for evolving needs, prefer outcome-based descriptions with clear acceptance criteria.
• Defaulting to lowest price; exams often favor best-value criteria when technical capability and risk matter.
• Skipping make-or-buy analysis and assuming outsourcing is always faster or cheaper.
• Not planning controls for time-and-materials (e.g., ceilings, timesheets, and approvals).
• Leaving procurement risks out of the risk register and not aligning them to contract terms.
• Overlooking IP ownership, confidentiality, and data protection obligations.
• Forgetting to align vendor reporting and change control with the project’s processes.

PMP Example Question

Your team expects evolving requirements and needs a specialized supplier. You are in planning. What should you do first to prepare for the external work?

1. Issue the RFP immediately to gain schedule advantage.
2. Select a firm fixed price contract to cap total cost.
3. Define an outcome-based scope with acceptance criteria and choose a suitable contract approach with controls.
4. Ask the supplier to propose the procurement plan to reduce your workload.

Correct Answer: C — Define an outcome-based scope with acceptance criteria and choose a suitable contract approach with controls.

Explanation: In planning, first clarify what will be purchased and how risk will be shared. With evolving requirements, outcome-focused scope and controlled cost-reimbursable or time-based approaches are more appropriate than rushing an RFP or defaulting to fixed price.