What criteria should you use to estimate procurement costs and schedules?

1 Scope and Specifications

The first step in estimating procurement costs and schedules is to define the scope and specifications of the goods and services that you need to procure. This includes identifying the quantity, quality, performance, and technical requirements of each item or service, as well as the delivery mode, location, and date. The scope and specifications should be clear, detailed, and consistent with the project objectives and standards. They should also be aligned with the market availability and capacity of the potential suppliers.

2 Supplier Selection and Negotiation

The next step in estimating procurement costs and schedules is to select and negotiate with the most suitable suppliers for each item or service. This involves conducting market research, soliciting bids or proposals, evaluating and comparing the offers, and negotiating the terms and conditions of the contract. The supplier selection and negotiation process should consider the following criteria: price, quality, reliability, delivery time, warranty, payment terms, currency exchange rate, and risk factors. The outcome of this process should be a formal contract that specifies the scope, specifications, price, schedule, and responsibilities of both parties.

3 Risk Analysis and Contingency

The third step in estimating procurement costs and schedules is to analyze the risks and uncertainties that may affect the procurement process and outcomes. This includes identifying the potential sources of risk, such as supplier failure, delays, defects, disputes, changes, or variations. It also includes assessing the probability and impact of each risk, and developing mitigation strategies or contingency plans to reduce or eliminate the negative effects. The risk analysis and contingency should be based on historical data, expert judgment, and scenario analysis. The contingency should be added to the base estimate of the procurement costs and schedules to account for the possible deviations or changes.

4 Monitoring and Control

The final step in estimating procurement costs and schedules is to monitor and control the procurement performance and progress throughout the project life cycle. This involves tracking and measuring the actual costs and schedules against the planned or estimated ones, and identifying and resolving any issues or deviations. It also involves communicating and reporting the procurement status and results to the relevant stakeholders, such as the project team, the suppliers, and the customers. The monitoring and control should be done regularly and systematically, using tools and techniques such as earned value analysis, variance analysis, performance reviews, and audits.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?