Procurement Strategy
Procurement strategy defines the project delivery method, the type of legally binding agreement, and the approach for managing procurements throughout the project lifecycle.
Explanation
A procurement strategy addresses three key dimensions: the delivery method (such as design-bid-build, design-build, or turnkey), the contract payment type (fixed-price, cost-reimbursable, or time and materials), and the procurement phases (single-phase or multi-phase). The strategy is shaped by project risk, complexity, schedule urgency, and the competitive landscape.
Selecting the right procurement strategy is critical because it determines how risk is allocated between buyer and seller. For example, a fixed-price strategy shifts cost risk to the seller, while a cost-reimbursable strategy keeps cost risk with the buyer but provides more flexibility for poorly defined scope. The strategy also influences how many sellers are engaged and whether competition or sole-source selection is appropriate.
The procurement strategy is documented as part of the procurement management plan and guides all downstream procurement decisions, from writing the statement of work to selecting source evaluation criteria and negotiating contracts.
Key Points
- •Covers delivery method, contract payment type, and procurement phases
- •Determines risk allocation between buyer and seller
- •Influences the number of sellers and selection approach
- •Documented within the procurement management plan
Exam Tip
When an exam question asks about choosing a contract type or delivery method, think "procurement strategy." The right strategy depends on how well the scope is defined and where the risk should be allocated.
Frequently Asked Questions
Related Topics
Plan Procurement Management
Plan Procurement Management is the process of documenting project procurement decisions, specifying the approach, and identifying potential sellers.
Fixed-Price Contracts
Fixed-price contracts are a category of agreements where the seller is paid a set price for delivering a defined product or service, regardless of the seller's actual costs.
Cost-Reimbursable Contracts
Cost-reimbursable contracts are agreements where the buyer reimburses the seller for all legitimate actual costs incurred in performing the work, plus a fee representing the seller's profit.
Time and Materials (T&M) Contracts
A Time and Materials (T&M) contract is a hybrid agreement that combines elements of both fixed-price and cost-reimbursable contracts, paying the seller fixed rates per unit of time or materials with the total cost determined by actual quantities used.
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