project-planning-9Planning of the project is essential for the achievement of the project in time with in budget, the key activities are required for the projects are:

Refine Project Scope: The development of a Project Scope Statement provides the basis for future project decisions. This statement is of singular importance to the project because it sets the overall guidelines as to the size of the project. The content of this statement, at a minimum, will include the following:

What will be created in terms of deliverables (and their characteristics) and/or what constitutes a successful phase completion. A link to the Phase Exit Plan is useful here.
What type of process or technology will be used?
What is and is not included in the work to be done
Approval by Sponsor and Key Stakeholders.

Determine Procurement and Sourcing Strategy: It is very uncommon for an organization to be able to create or supply all the resources, materials, etc., necessary to complete a project internally. In those circumstances where it is necessary to go outside the organization, the response is to purchase the product or service from an external source or enter into a contract with an outside vendor to perform a service or develop the product for the department.

Develop a Procurement and Sourcing Strategy that identifies those needs of the project that can be met by purchasing products or services from outside the organization. Details of this strategy are entered into the Procurement Plan document. The Procurement and Sourcing Strategy deals with the following:

What to Procure
• How does this product serve the needs of the project and the organization as a whole?
• Does the product or something similar already exist somewhere else within the organization
• Is there a service provider available in the marketplace for this product?
• Does the organization have the means (staff, money, contract, etc.) to produce or to acquire the product?

When to Procure
Make-or-Buy Analysis: This is a simple method to determine the cost-effectiveness of creating a product in-house as compared to the cost of buying the product or having it produced outside. All costs, both direct and indirect, should be considered when performing a make or buy analysis. The costs should then be compared with each other with consideration given to any compelling argument on either side by the Project Team. Consideration should also be given to the potential of leasing vs. purchasing items. This could save money for the organization if cost is applied correctly against the useful life of the product or service supplied. Many of the decisions will be based on the length of need for the item or service, as well as the overall cost.
• Expert Judgment: This process uses the expertise of people from within and outside the organization who have knowledge or training in the area in question to determine what steps should be taken. These people review the needs and the costs and deliver their opinion for consideration in the procurement decision.

How to Procure (contract types)
• Fixed-Price/Lump-Sum Contract: This is a contract that involves paying a fixed, agreed-upon price for a well-defined product or service. Special consideration must be given to these contracts to ensure that the product is well defined to reduce risk to both the organization and the contractor.

• Cost Reimbursement Contract: This contract type refers to a reimbursement to the contractor for actual cost of producing the product or service. Costs within the contract are classified as direct (e.g., salaries to staff of the contractor) and indirect (e.g., salaries of corporate executives for the contractor). Indirect costs are normally based on a percentage of direct costs.

• Unit Price Contract: The contractor is paid a preset amount for each unit or unit of produced. The contract equals the total value of all the units produced.

How Much to Procure
• Will there project-planning-10be need beyond the immediate project for this product?
• How much of the budget has been allocated for this product?
• Is the need for the product clearly defined enough for the department to know exactly how much of the product will be needed?
• Develop framework for contract/vendor administration.