Project Management Knowledge

Make-or-Buy Analysis

A make-or-buy analysis is a general project management technique that is used to identify if a particular work can be accomplished by the project team or should just be purchased from external sources. In most cases, capabilities always exist within the organization that has already been committed to working on existing projects. In such matters, it might be important for the project management team to source work from outside the organization to meet the scheduled commitments.

There are many things that can influence the make-or-buy decisions and one of them is budget constraints.  This is the reason why an analysis should be made to consider all the related costs such as the direct and indirect costs.

Another aspect of project management that should be considered is the available contract types. The risk between the seller and the buyer also determines the contract type to be used.  It is the responsibility of the seller and the contract parties to identify the appropriate types of contract as soon as the applicable law has been agreed on.

The make-or-buy decision is important in project management as it helps project managers decision where to source their task.

This term is defined in the 5th edition of the PMBOK.

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