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Chapter 11:Project Procurement Management Importance of Project Procurement Management Procurement means acquiring goods and/or services from an outside source Other terms include purchasing and outsourcing Experts predict that by the year 2003 the worldwide information technology outsourcing market will grow to over $110 billion Why Outsource? To reduce both fixed and recurrent costs To allow the client organization to focus on its core business To access skills and technologies To provide flexibility To increase accountability Project Procurement Management Processes Procurement planning: determining what to procure and when Solicitation planning: documenting product requirements and identifying potential sources Solicitation: obtaining quotations, bids, offers, or proposals as appropriate Source selection: choosing from among potential vendors Contract administration: managing the relationship with the vendor Contract close-out: completion and settlement of the contract Figure 11-1. Project Procurement Management Processes and Key Outputs Procurement Planning Procurement planning involves identifying which project needs can be best met by using products or services outside the organization. It includes deciding whether to procure how to procure what to procure how much to procure when to procure Collaborative Procurement Several organizations, even competitors, have found that it makes sense to collaborate on procurement for some projects Kodak worked with several competitors to develop the Advantix Advanced Photo System (see What Went Right?) Procurement Planning Tools and Techniques Make-or-buy analysis: determining whether a particular product or service should be made or performed inside the organization or purchased from someone else. Often involves financial analysis Experts, both internal and external, can provide valuable inputs in procurement decisions Make-or Buy Example Assume you can lease an item you need for a project for $150/day. To purchase t