HKSM
Make-or-Buy Decisions
Choices about whether to obtain a required item from an external supplier or produce it within the organization.
Key Points
- Compares in-house capability and capacity versus outsourcing to meet scope, cost, schedule, and quality needs.
- Looks at total cost of ownership, including procurement, integration, operations, maintenance, and potential exit costs.
- Evaluates risks such as supplier reliability, intellectual property, lead times, and strategic control.
- Results feed the procurement management plan and may trigger solicitations or internal resourcing plans.
Example
A project needs a specialized analytics engine within four months. The team estimates that building it internally would take six months and require new tooling, while a reputable vendor offers a proven component with integration support. After analyzing cost, schedule, risk, and support, the team decides to buy the component and focus internal effort on integration and testing.
PMP Example Question
During planning, the team weighs whether to outsource a custom subsystem or develop it in-house to meet a tight deadline. What type of decision is this?
- Source selection
- Make-or-buy decision
- Contract type selection
- Procurement negotiation
Correct Answer: B — Make-or-buy decision
Explanation: The scenario is about choosing between external procurement and internal development, which defines a make-or-buy decision, not vendor selection, contract choice, or negotiation.
