Plan Sourcing Strategy

Plan Sourcing Strategy is about making deliberate "make-or-buy" and supplier decisions before procurement begins. The project manager determines what goods, services, or resources are needed, what should be performed internally versus obtained from external sellers, how sellers will be evaluated, and what overall sourcing approach will best support the project's objectives. The important PMP mindset is that procurement is not simply "buying something" — it is a project decision involving scope, cost, schedule, resources, risk, quality, and stakeholders.

The Project Charter establishes the high-level context: what the project is trying to achieve, its major deliverables and constraints, and the authority of the project manager and sponsor.

The project manager then looks across the Project Management Plan and project documents. Scope and requirements tell us what may need to be procured; quality requirements tell us how good it must be; schedule and milestones tell us when it must be delivered; financial information establishes cost considerations; and resource information shows whether the organization has the people, skills, materials, or equipment to perform the work internally.

The risk register is particularly important because sourcing decisions can create or reduce risks—for example, dependence on a single supplier. The stakeholder register identifies people such as procurement, legal, finance, or business stakeholders who may influence the decision.

Finally, the project manager considers the external and organizational context. EEF includes marketplace conditions, supplier capabilities, regulations, and contracting policies. OPA provides organizational knowledge such as approved suppliers, previous contracts, templates, and lessons learned.

The project manager uses expert judgment, market research, make-or-buy analysis, source-selection analysis, and document analysis to determine the best approach.

The central question is: "Should we MAKE it ourselves, or BUY it from an external seller?"

But PMP questions rarely expect the decision to be based on price alone. Consider cost, capability, capacity, schedule, quality, risk, strategic value, and the organization's ability to perform the work.

If the decision is to buy, the project manager must also decide how sellers will be evaluated. Source-selection criteria might emphasize least cost, qualifications, quality, fixed budget, or overall best value depending on the project.

The result is a sourcing strategy that documents the insource/outsource decisions, rationale, source-selection criteria, and—where applicable—the procurement and contract approach. The strategy should be tailored to the project rather than unnecessarily formal or complicated.

Once the strategy is established, the practical procurement process follows a logical sequence: 1. Identify needs → 2. Create procurement strategy → 3. Prepare documents → 4. Advertise → 5. Hold bidder conference → 6. Receive proposals/quotes → 7. Evaluate sellers → 8. Select & negotiate → 9. Monitor performance → 10. Close procurement.

Think of this as moving from "What do we need?" to "Who should provide it?" to "Are they delivering what we agreed?"

Procurement documents such as the SOW, RFI, RFP, and RFQ communicate the opportunity and requirements to potential sellers. During a bidder conference, the project team clarifies questions and ensures that prospective sellers receive consistent information. Sellers then submit proposals or quotes, which are evaluated against the established criteria.

The selected seller and buyer negotiate the contract, including scope, cost, schedule, payment terms, responsibilities, and applicable contract type. Once the contract is active, procurement does not end: the project manager must monitor performance against the agreement and ultimately verify completion and close outstanding obligations.

A major PMP concept is that the contract type determines how financial and performance risk is shared between buyer and seller.

Fixed Price: The price is agreed for a clearly defined scope. The buyer gains greater price certainty, while the seller carries more cost risk if it underestimates its costs. Therefore, fixed price is attractive when the scope is well understood.

Cost Reimbursable: The buyer reimburses allowable actual costs plus an agreed fee or profit. This is useful when the scope is uncertain or evolving, but it places more cost risk on the buyer.

Time & Material: Payment is based primarily on labor time and materials used. It provides flexibility when the exact amount of work is difficult to define, but the buyer must monitor expenditure carefully. It is commonly encountered in consulting, IT support, and maintenance work.

Target Cost: Buyer and seller establish a target cost and agree how savings or overruns will be shared. This creates shared financial incentives and can encourage efficiency, making it useful for complex work where both parties benefit from controlling costs.

When a question asks "Should we perform this work ourselves or obtain it externally?" → think Make-or-Buy Analysis.

When it asks "What is available in the marketplace?" → think Market Research.

When it asks "How will we compare vendors?" → think Source-Selection Criteria/Analysis.

When it asks "How will the organization acquire external goods or services?" → think Procurement Management Plan.

When it asks "What work is in-house versus outsourced, and why?" → think Sourcing Strategy.

When it asks "Who carries the cost risk?" → think Contract Type.