Components of a procurement plan

Components of a procurement plan

A procurement plan is a document that describes the procurement requirements and procurement strategy of an organization or a particular project or program. It essentially describes what and when to procure or buy and from what sources. Furthermore, a procurement plan should define and explain the standards of an effective procurement activity.

How to write a procurement plan: The three major components of a procurement plan

1. Statement of Work

A statement of work is a standalone document routinely used in project management to define activities, deliverables, and timelines or schedules. Similarly, in a procurement plan, a statement of work outlines the basis for the planning and execution of a procurement activity by enumerating and describing what products or services to contract, as well as describing the roles and responsibilities, or deliverables of the suppliers or vendors.

Take note that the statement of work includes specific subcomponents to include the scope of work, particular tasks and deliverables, schedules or timelines, terms of payment, expected outcomes, and other conditions or requirements.

2. Make-or-Buy-Analysis

A make-or-buy analysis provides a justification for procuring products or services from suppliers or vendors. Essentially, this component of a procurement plan explains the need to procure a particular resource by describing in details what resources can be produced or used in-house and what resources can be procured instead. Remember that procurement is reasonable if it is less costly and less risky or if there is a shortage of in-house capabilities.

Included in a make-or-buy analysis are a reiteration of the products or services needed to procure, the rationalization for procuring these resources, delivery time, quantity, and an estimation of their costs.

3. Strategic Supplier Selection

A strategic supplier selection or supply risk analysis is another critical component of a procurement plan that involves evaluating the risks associated with doing business with and thus, becoming dependent on prospective suppliers or vendors. Note that the risks can be related to the products or services provided by these suppliers or vendors, the behavior or performance of these organizations, and external market factors. The benefits that would come from selecting suppliers or vendors should far exceed the cost.

This component of a procurement plan also includes a detailed description of the procurement methods and activities to include a call for bid and proposals, such as a capability statement, or the preparation of required procurement documents, networking and partnership or relationship building, and negotiating techniques. The strategic supplier selection should essentially explain the reason for choosing a prospective supplier or vendor.

FURTHER READINGS AND REFERENCES

  • McCue, C. P. and Eric W. P. (2007). Local Government Procurement and Safeguards Against Corruption. In ed. Anwar Shah, Local Public Financial Management. Washington, DC: The World Bank
  • Sanghera, P. (2008). Fundamentals of Effective Program Management: A Process Approach Based on Global Standard. Florida: J. Ross Publishing