Initial Procurement Strategy Template – Free Word Download
Introduction to the Initial Procurement Strategy
In complex projects, it is rare for an organization to possess every single skill, material, and tool required to deliver the final outcome internally. When you need to look outside the organization to acquire goods or services, you enter the domain of Procurement. Enjoy this Initial Procurement Strategy Template – Free Word Download
However, Procurement is not merely “shopping.” It is a strategic function that carries significant risk. If you buy the wrong thing, or the right thing at the wrong price, or sign a contract that traps you with a failing vendor, the project will fail. The Initial Procurement Strategy is the document that defines how you will acquire these external resources before you send out a single purchase order.
This strategy is typically developed during the Planning Phase. It connects the project’s technical needs with the reality of the supply market. It answers critical questions: Are we buying a commodity or a partnership? Who carries the risk of cost overruns, us or the vendor? How will we select the winner?
This template guides you through the high-level architectural decisions of purchasing.
It covers the selection of contract types (Fixed Price vs. Time and Materials), the approach to the market (Competitive Tender vs. Sole Source), and the criteria for selection. By establishing this strategy early, the Project Manager and the Procurement Department can align their goals, ensuring that the external supply chain accelerates the project rather than stalling it.
Part 1: Strategic Context and Scope
Before deciding how to buy, you must define what you are buying and why. This section sets the boundaries of the procurement effort.
Procurement Overview
Instructions:
Provide a summary of the project’s external needs.
- Project Name: [Insert Name]
- Procurement Manager: [Name of the Specialist supporting the PM]
- Total Estimated Procurement Value: [Total Budget for external spend]
- Strategic Goal: [e.g., “To outsource the non-core construction work while retaining core design control internally.”]
Scope of Packages (The “Packaging Strategy”)
Instructions:
How will you bundle the work? You can buy everything from one “Prime Contractor” or split it into smaller chunks.
- Approach A: Single Prime Vendor.
- Description: One vendor is responsible for the entire delivery. They manage the sub-contractors.
- Pros: Single point of accountability; less coordination for the PM.
- Cons: Higher cost (margin on margin); risk of “Too Big to Fail.”
- Approach B: Multiple Work Packages.
- Description: The project team manages several specialist vendors directly (e.g., one for wiring, one for plumbing, one for software).
- Pros: Lower cost; best-of-breed selection for each task.
- Cons: High coordination burden on the PM; integration risk.
Decision:
[e.g., “We will utilize a Multiple Work Package strategy. We will separate the Hardware procurement from the Software implementation services to ensure we get specialized expertise in both fields.”]
Part 2: Market Analysis
You must understand the power dynamic. Is it a buyer’s market (many desperate sellers) or a seller’s market (few powerful vendors)?
Supply Market Conditions
Instructions:
Analyze the external environment.
- Competition Level: [High/Medium/Low]
- Analysis: “There are over 20 capable vendors in the region for general construction.”
- Market Volatility: [Stable/Volatile]
- Analysis: “Steel prices are currently highly volatile due to global tariffs. Vendors may be reluctant to sign long-term fixed-price contracts.”
- Power Balance:
- Buyer Power: Low. (We are a small client to these massive vendors).
- Seller Power: High. (There are only two vendors globally who make this specific microchip).
Constraints and Risks
Instructions:
What limits your choices?
- Lead Times: “The current lead time for servers is 12 weeks. We must order by Month 2 to meet the schedule.”
- Regulatory: “Government regulations require us to source at least 20% of the value from Small Business Enterprises (SME).”
Part 3: Contract Type Selection
This is the most critical strategic decision in procurement. The contract type dictates who holds the risk. You must choose the right tool for the job.
Instructions:
Select the contract model for each major package.
Option 1: Firm Fixed Price (FFP)
- Definition: The vendor agrees to do X for $Y. If it costs them more, they lose money.
- Risk Allocation: Vendor carries 100% of the cost risk. Buyer carries 0% (but pays a premium).
- When to Use: When scope is perfectly defined (e.g., buying 100 laptops).
- Application: [e.g., “We will use FFP for the Hardware purchase.”]
Option 2: Time and Materials (T&M)
- Definition: We pay the vendor for every hour worked and every part used.
- Risk Allocation: Buyer carries 100% of the cost risk. If the vendor works slowly, we pay more.
- When to Use: When scope is undefined or evolving (e.g., Research & Development, Emergency Repairs).
- Application: [e.g., “We will use T&M for the initial Discovery Phase consulting, as we do not yet know the full requirements.”]
Option 3: Cost Plus Fixed Fee (CPFF)
- Definition: We reimburse the vendor’s costs and pay a fixed profit fee on top.
- Risk Allocation: Shared. The vendor has no incentive to cut costs, but also no incentive to cut corners.
- When to Use: High-risk projects where no vendor would accept a Fixed Price (e.g., Space exploration, complex custom engineering).
Decision Matrix
Table: Contract Strategy per Package
| Package Name | Est. Value | Risk Profile | Selected Contract Type | Rationale |
| Software License | $500k | Low | Fixed Price | Commodity purchase. |
| Custom Integration | $300k | High | Time & Materials (Capped) | Requirements are vague; flexibility needed. |
| Hardware Install | $100k | Medium | Fixed Price | Standard industry task. |
Part 4: Procurement Route (The “Go-to-Market” Plan)
How will you approach the vendors?
Solicitation Method
Instructions:
Choose the vehicle for asking for offers.
- Request for Information (RFI):
- Purpose: To learn. “We have a problem; what solutions exist?”
- Outcome: Information only. No contract awarded.
- Request for Quote (RFQ):
- Purpose: To compare price. “We need 500 widgets; give us your best price.”
- Outcome: Contract awarded to the lowest bidder.
- Request for Proposal (RFP):
- Purpose: To solve a problem. “We need a new CRM system; propose a solution and a price.”
- Outcome: Contract awarded to the “Best Value” (Price + Quality).
Competitive vs. Non-Competitive
Instructions:
Will you compete this?
- Open Competition: Publicly advertised. Any vendor can bid. (Required for Government).
- Selective Competition: Invitation only. We invite the top 3 trusted vendors.
- Sole Source (No Competition): We negotiate directly with one vendor.
- Justification: “Vendor X is the only company that holds the patent for this technology. Competition is impossible.”
Part 5: Evaluation Criteria
How will you pick the winner? If you do not define this now, you will be accused of bias later.
Weighting Strategy
Instructions:
Assign a weight to the key factors.
Table: Selection Criteria
| Criteria Category | Weighting | Description |
| Technical Fit | 40% | Does the solution meet our requirements? Is the technology sound? |
| Price (TCO) | 30% | Total Cost of Ownership (License + Maintenance). |
| Vendor Capability | 20% | Financial health, past references, team experience. |
| Contract Terms | 10% | Willingness to accept our legal terms and SLAs. |
The Scoring Mechanism
Instructions:
Define how scores are calculated.
- Method: “Each evaluator will score independently on a 1-5 scale. Scores will be averaged and multiplied by the weighting.”
- Threshold: “Any vendor scoring below 3 on ‘Technical Fit’ is automatically disqualified, regardless of price.”
Part 6: Procurement Schedule
Procurement takes time. You must map the steps to ensure the vendor is on board before the project needs them.
Instructions:
Draft the timeline.
Table: Sourcing Timeline
| Milestone | Duration | Owner | Dependency |
| Draft Scope of Work (SOW) | 2 Weeks | PM | Requirements Sign-off |
| Issue RFP | 1 Day | Procurement | SOW Complete |
| Vendor Response Window | 3 Weeks | Vendors | RFP Issued |
| Evaluation & Scoring | 1 Week | Team | Bids Received |
| Contract Negotiation | 2-4 Weeks | Legal | Selection Decision |
| Award / Sign-off | 1 Week | Sponsor | Legal Approval |
| Total Duration | ~ 9 Weeks |
Warning:
“Project teams often underestimate the ‘Negotiation’ phase. If Legal departments get involved in redlining terms, this can drag on for months. We have allocated 4 weeks as a realistic buffer.”
Part 7: Procurement Risks
What could go wrong in the buying process?
Instructions:
Identify specific procurement risks.
- Bid Protest Risk: “If we do not follow the evaluation criteria strictly, a losing vendor may sue or protest, freezing the project.”
- Mitigation: “Strict adherence to the scoring matrix; Procurement Officer present at all meetings.”
- No Bids Received: “The budget is too low or the requirements are too strict; no vendors respond.”
- Mitigation: “Conduct a pre-RFP market sounding to validate our budget expectations.”
- Scope Gap: “The SOW leaves out a critical item (e.g., training), and the vendor charges extra for it later.”
- Mitigation: “Comprehensive technical review of the SOW before release.”
Part 8: Roles and Responsibilities
Who does what? This clarifies the line between the Project Manager (PM) and the Procurement Manager (Buyer).
Responsibility Matrix (RACI)
| Activity | Project Manager (PM) | Procurement Manager | Technical Lead | Legal Counsel |
| Write SOW | Accountable | Consulted | Responsible | Informed |
| Issue RFP | Consulted | Accountable | Informed | Informed |
| Evaluate Bids | Responsible | Responsible | Accountable | Informed |
| Negotiate Terms | Consulted | Accountable | Consulted | Responsible |
| Sign Contract | Informed | Informed | Informed | Consulted |
Key Distinction:
“The Project Manager owns the Scope (what we buy). The Procurement Manager owns the Process (how we buy it).”
Part 9: Approval of Strategy
Before you talk to vendors, get this strategy approved.
Signature Block:
- Project Manager: Confirms the timeline and scope meet project needs.
- Procurement Director: Confirms the strategy complies with corporate purchasing policy.
- Project Sponsor: Authorizes the potential spend range.
Part 10: Step-by-Step Guide for Creating the Strategy
Step 1: Decompose the WBS
Look at your Work Breakdown Structure. Highlight every task that you cannot do internally. Group them into logical bundles (e.g., all electrical work together).
Step 2: Check the “Approved Vendor List”
Most companies have a list of pre-vetted suppliers. If you can use one of them, you save weeks of time. Using a new vendor requires financial vetting (credit checks).
Step 3: Define the “Make or Buy” Boundary
(Covered in detail in Template 36). Ensure you have justified why you are outsourcing.
Step 4: Draft the SOW (Scope of Work)
You cannot get a price without a SOW. Be specific. “Build a website” is bad. “Build a website with 5 pages, a search bar, and Stripe integration” is good.
Step 5: Select the Contract Model
Ask yourself: “Are the requirements clear?”
- Yes: Fixed Price.
- No: Time & Materials.
Step 6: Plan the “Response Window”
Give vendors enough time. If you give them 3 days to respond to a complex RFP, they will either No-Bid or pad their price with risk money. 3 weeks is standard for medium complexity.
Part 11: Glossary of Procurement Terms
- SOW (Statement of Work): The narrative description of products or services to be supplied.
- SLA (Service Level Agreement): Part of the contract defining metrics (e.g., “Must answer phone within 1 minute”).
- Sole Source: A non-competitive procurement method used when only one supplier possesses the unique ability to satisfy the requirement.
- Tender: The formal process of inviting bids for a project.
- Redlining: The process of editing a contract during negotiation (marking text in red).
Conclusion
The Initial Procurement Strategy is the blueprint for your commercial relationships. It moves the project from an internal effort to an external partnership. By defining the rules of engagement early—specifically the contract type and evaluation criteria—you set the stage for a fair, transparent, and efficient selection process.
A good strategy prevents the common nightmare of “Vendor Lock-in” or “Scope Creep.” It ensures that when you finally sign on the dotted line, you are signing a deal that incentivizes the vendor to deliver success, rather than just billing hours.
Final Checklist for this Template:
- Have you defined the “Packages” (how work is bundled)?
- Is the Contract Type (Fixed vs. T&M) selected for each package?
- Have you justified the Solicitation Method (RFP vs. RFQ)?
- Are the Evaluation Criteria weighted and clear?
- Is the Timeline realistic, including negotiation buffers?
- Are the roles of PM and Procurement clearly defined?
Meta Description:
A template for Initial Procurement Strategy. Learn to select contract types (Fixed Price vs. T&M), define evaluation criteria, and manage vendor selection risks.