Plan Sourcing Strategy

Plan Sourcing Strategy

“Plan Sourcing Strategy” (often called Procurement Planning) focuses on how the project will acquire products, services, or results from outside the organization to maximize valuue. Plan Sourcing Strategy is the process of determining what to procure, how to procure it, from whom, and under what terms, aligned with organizational strategy and project objectives.

Key Objective

Ensure the right resources are obtained at the right time, cost, quality, and risk level

Core Decisions in Sourcing Strategy

1. Make-or-Buy Analysis

• Decide whether to:

  • • Make internally

    • Buy from external vendors
      
      

Example:

• Develop solar panels internally

• Procure from specialized vendor 

2. Sourcing Approach

• Single supplier vs multiple suppliers

• Local vs global sourcing

• Strategic partnership vs transactional vendor
  
  

3. Contract Type Selection

• Fixed Price (FP)

  • • When scope clarity is very high and uncertainty is low 

    • In all fixed price contracts, the Cost risk is with the Seller  where as all other risks like Schedule, Quality etc is high on the Buyer. 

• Cost Reimbursible (CR)

  • Used when there is high uncertainty 

  • In all cost reimbursible contracts, the cost risk is high on the buyer. The seller will never make a loss. 

• Time & Material (T&M)

  • Used when Scope is higly flexible 

  • The cost risk is high on the buyer 

• Purchase Order 

  • Used to procure off the shelf, standard items 

4. Procurement Process Definition

• How vendors will be selected

• Evaluation criteria (technical, cost, experience)

• Approval workflows
  
  

5. Risk Allocation

• Identify procurement risks

• Decide who bears which risks (buyer vs seller)
  
  

6. Supplier Evaluation Criteria

• Cost

• Quality

• Experience

• Delivery capability

• Financial stability

7. Integration with Project Plan

• Align procurement with:

  • Schedule

  • Budget

  • Risk plan

  • Stakeholder expectations
    
    

Inputs to Sourcing Strategy

• Project charter

• Business case

• Scope baseline

• Organizational policies (OPA)

• Enterprise Environmental Factors (EEF)
  
  

Outputs

• Procurement management plan

• Make-or-buy decisions

• Procurement strategy document

• Bid documents (RFP, RFQ, etc.)
  
  

Project Example (Practical)

Project:

 Solar Power Plant 

Sourcing Decisions

• Solar panels → Buy from international supplier

• Civil works → Local contractor

• Software system → Outsourced to IT vendor
  
  

Strategy Insights

• Use Fixed Price contract for construction

• Use T&M contract for software development

• Select vendors based on past performance and cost efficiency
  
  

Procurement is not just buying. It is strategic decision-making to optimize value and manage risk

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