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.
Most-studied PMP concepts
High-yield topics our learners drill most before exam day.
Burndown Chart
A Burndown Chart is a graphical representation of work remaining versus time in a Sprint or release, showing whether the team is on track to complete the planned work.
Resource Leveling
Resource leveling is a resource optimization technique in which adjustments are made to the project schedule to keep resource usage at or below a defined limit, often resulting in a longer project duration.
Risk Register
The risk register is a project document that records the details of individual project risks, including their identification, analysis results, response plans, and current status.
Stakeholder Mapping
Stakeholder mapping is the visual representation of stakeholder relationships, influence, interest, or other attributes using grids, matrices, or diagrams to support analysis and engagement planning.
Relative Estimation
Relative Estimation is an agile technique where work items are sized in comparison to each other rather than in absolute units like hours or days, providing faster and more accurate estimates.
Cost Performance Index (CPI)
Cost Performance Index (CPI) is an EVM efficiency metric that measures cost performance as the ratio of earned value to actual cost: CPI = EV / AC.
Schedule Performance Index (SPI)
Schedule Performance Index (SPI) is an EVM efficiency metric that measures schedule performance as the ratio of earned value to planned value: SPI = EV / PV.
Earned Value Management (EVM)
Earned Value Management (EVM) is a methodology that integrates scope, schedule, and cost data to assess project performance and progress objectively.
Power/Influence Grid
The power/influence grid is a stakeholder classification model that groups stakeholders based on their level of authority (power) and their active involvement or ability to affect the project (influence).
Part of
Procurement Management
Test your knowledge
Practice scenario-based questions on this topic with detailed explanations.