Procurement is simply how you manage external commitments: work, products, or services delivered by someone outside your organization. On the exam (and in real projects), procurement questions often test whether you treat vendor work as “just another task” or as a governed relationship with defined obligations, acceptance rules, and formal change paths.
1) Make-or-Buy Thinking: Deciding What Should Be External
Make-or-buy is a structured way to decide whether to do the work internally (“make”) or obtain it from a vendor (“buy”). The goal is not to “save money” by default; it’s to choose the option that best fits constraints like capability, time, risk exposure, and long-term ownership.
What you are really comparing
- Capability: Do we have the skills/tools to deliver at the required quality?
- Capacity: Even if we can do it, do we have time/people available when needed?
- Speed: Can a vendor deliver faster due to specialization or existing assets?
- Risk: Which option reduces the chance of failure (technical, schedule, compliance)?
- Control: How much day-to-day direction do we need? (More control often favors “make.”)
- Total cost of ownership: Not just purchase price—include support, licensing, maintenance, training, and transition.
Practical step-by-step: a simple make-or-buy checklist
- Define the deliverable boundary: What exactly would be outsourced? (Outputs, interfaces, acceptance criteria.)
- List constraints: Deadlines, regulatory requirements, security, internal policies.
- Compare options: Use a small table for cost, time, risk, and control.
- Decide and document assumptions: “We buy because internal team lacks certified capability” is an assumption you may need to defend later.
- Plan the handoffs: If you buy, plan how vendor outputs integrate into your project and who accepts them.
| Factor | Make (Internal) | Buy (Vendor) |
|---|---|---|
| Control | High | Medium to low (depends on contract) |
| Speed | Depends on capacity | Often faster if specialized |
| Risk | Kept internal | Can be shifted/shared via contract |
| Long-term ownership | Usually easier | May require transition plan |
Scenario cue: “We can do it, but we’re slammed”
Cue: The team has the skills, but no capacity for the next 3 months. A vendor can start next week.
PM action: Treat it as a capacity constraint. Recommend “buy” if schedule is critical, but explicitly plan integration and acceptance. Ensure the statement of work is clear enough to avoid rework and disputes.
2) Contract Types (Conceptual): How Risk Shifts
Contract type is mainly about who carries cost risk when reality differs from the plan. If you remember that, many exam questions become straightforward.
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Fixed Price (FP): vendor carries more cost risk
Idea: You pay a set amount for a defined deliverable. If the vendor underestimates effort, that’s usually their problem (unless you change the scope).
- Best when: Scope is stable and acceptance criteria are clear.
- Risk shift: Vendor takes more cost risk; buyer takes more risk if requirements are unclear (because ambiguity leads to change requests).
- PM focus: Tight scope definition, clear acceptance criteria, and disciplined change control.
Cost Reimbursable (CR): buyer carries more cost risk
Idea: You reimburse allowable costs (often plus a fee). If the work takes longer, you pay more.
- Best when: Scope is uncertain or exploratory, and you need flexibility.
- Risk shift: Buyer takes more cost risk; vendor has less incentive to control cost unless incentives/limits exist.
- PM focus: Cost monitoring, clear rules for allowable costs, frequent reviews, and strong governance.
Time & Materials (T&M): hybrid—rate is fixed, total cost varies
Idea: You pay for hours at agreed rates plus materials. Rates are known; total spend depends on time used.
- Best when: You need staff augmentation or short-term specialized help, but exact effort is uncertain.
- Risk shift: Buyer carries cost risk if work expands; vendor carries less cost risk but must provide qualified resources.
- PM focus: Control hours, define deliverables or timeboxes, and set not-to-exceed limits when possible.
Risk shift cheat sheet
| Contract type | Cost risk mostly on | Works best when | PM must be strong at |
|---|---|---|---|
| Fixed Price | Vendor | Clear scope | Defining/controlling scope and acceptance |
| Cost Reimbursable | Buyer | Unclear scope | Cost governance and oversight |
| Time & Materials | Buyer (total), shared | Uncertain effort | Managing hours, limits, and priorities |
Scenario cue: “Scope not clear, but leadership wants a fixed price”
Cue: Requirements are still evolving, but someone insists on a fixed-price contract “to cap the cost.”
PM action: Explain that fixed price does not remove uncertainty; it often converts uncertainty into change requests and disputes. Recommend clarifying scope first, using phased procurement, or selecting a contract approach that matches uncertainty (e.g., T&M with limits, or cost reimbursable with strong oversight). Document the rationale.
3) Procurement Documents and Vendor Selection: Picking the Right Partner Without Drama
Procurement documents are the tools you use to communicate needs, compare vendors fairly, and set expectations. On the exam, the “right next step” often involves using the correct document, following the defined evaluation method, and documenting decisions.
Core documents (plain language)
- Statement of Work (SOW): What the vendor must deliver and how you’ll know it’s acceptable (deliverables, requirements, acceptance criteria, constraints).
- Request for Information (RFI): Market research—used when you’re not sure what options exist.
- Request for Proposal (RFP): You want vendors to propose solutions and approaches (common for complex work).
- Request for Quotation (RFQ): You know what you want and mainly need pricing for a defined item/service.
- Evaluation criteria / scoring model: How you will compare offers (technical fit, past performance, schedule, cost, risk, compliance).
- Contract terms: Payment terms, acceptance, warranties, liability, dispute process, change procedure.
Practical step-by-step: from need to vendor selection
- Define what “done” means: Write acceptance criteria that are measurable (tests, performance thresholds, review steps).
- Choose the right solicitation document: RFI to learn, RFP for solution proposals, RFQ for price on a defined spec.
- Publish evaluation criteria before reviewing bids: Prevents “moving the goalposts.”
- Evaluate objectively: Use a scoring table; keep notes on why each score was assigned.
- Check risk and capability: References, financial stability, capacity, key personnel, security/compliance fit.
- Negotiate within policy: Clarify assumptions, deliverables, acceptance, and change handling.
- Award and document: Ensure approvals and records are complete (audit trail mindset).
Vendor selection considerations that show up in exam scenarios
- Lowest price is not always best value: If quality, schedule, or risk is critical, weight criteria accordingly.
- Acceptance criteria reduce conflict: If acceptance is vague, disputes become likely.
- Integration points matter: Define interfaces, data formats, environments, and responsibilities for handoffs.
- Communication and governance: Define meeting cadence, reporting, escalation paths, and who can authorize changes.
Scenario cue: “Two vendors—one cheap, one reliable”
Cue: Vendor A is lowest cost but has limited relevant experience. Vendor B costs more but has strong references and a proven approach.
PM action: Use the predefined evaluation criteria and select based on best value, not personal preference. If criteria are missing or unclear, the correct move is to define/approve them before evaluation (per organizational policy), then document the decision rationale.
4) Changes and Claims: Handling Problems Without Turning Them Into Wars
Once a contract is in place, changes must follow the contract’s change procedure. A common PMP trap is trying to “fix it informally” to be helpful. Informal agreements create scope creep, cost surprises, and disputes.
Change vs. claim (in plain language)
- Change: Both sides agree to modify scope, schedule, cost, or terms using the defined process (e.g., change order).
- Claim: One side believes the other violated the agreement (or owes time/money). It’s a dispute that follows the contract’s resolution steps.
Practical step-by-step: when a vendor requests a change
- Stop and check authority: Confirm who is allowed to approve changes (often not the PM alone).
- Review the contract and SOW: Is the request truly out of scope, or was it already included?
- Document the request: What is changing, why, and what is the impact?
- Analyze impact: Cost, schedule, quality, risk, and downstream integration.
- Use the formal change mechanism: Submit/route per contract terms and organizational policy.
- Update records: Ensure the contract, deliverables list, and acceptance criteria reflect the approved change.
Practical step-by-step: when there is a dispute (claim)
- Collect facts: Contract clauses, correspondence, meeting notes, deliverable reviews, timestamps.
- Follow the contract’s dispute process: Many contracts specify negotiation first, then mediation/arbitration, then litigation.
- Communicate formally: Use written notices when required; keep a clean audit trail.
- Negotiate in good faith: Aim for resolution aligned with contract terms and project objectives.
- Escalate when required: Involve procurement/legal/contracting authority per policy.
Scenario cue: “Vendor delay—delivery slipped two weeks”
Cue: A vendor misses a milestone and says they’ll “try to catch up,” but provides no recovery plan.
PM action: Review the contract for schedule obligations, reporting requirements, and remedies. Request a documented recovery plan and updated dates through the agreed governance. Document impacts and communications. If the contract includes penalties, incentives, or formal notice requirements, follow them. Escalate to the contracting authority if the vendor is nonresponsive or if formal notice is required.
Scenario cue: “Contract dispute—vendor says it’s extra, you say it’s included”
Cue: The vendor submits an invoice for “additional work.” Your team believes it was part of the original scope.
PM action: Do not approve payment or agree verbally. Review the SOW, acceptance criteria, and any clarifications from procurement. Compare the disputed work to contract language. Document findings and route through the contract’s change/claim process. Negotiate based on facts; escalate to procurement/legal if needed.
Scenario cue: “Scope not clear—team keeps giving the vendor ‘small asks’”
Cue: Team members send the vendor extra requests via email, assuming it’s minor and won’t affect cost.
PM action: Reinforce that only authorized channels can change vendor scope. Centralize requests, map each request to contract scope, and submit formal change requests when needed. Document communications and remind stakeholders that informal direction can create contractual liability.
What the exam often wants you to do next
- Review the contract first when a vendor issue arises (deliverables, acceptance, change, dispute clauses).
- Follow the formal process for changes and disputes; avoid side agreements.
- Document everything (requests, impacts, decisions, notices).
- Negotiate and collaborate within the contract framework.
- Escalate appropriately to the contracting/procurement authority when approvals, notices, or disputes require it.
