Make-or-buy Analysis
“Make-or-Buy Analysis” is a tool/technique for the process “Plan Procurement management”.
A make-or-buy analysis is a general management technique used to determine whether particular work can best be accomplished by the project team or should be purchased from outside sources. Sometimes a capability may exist within the project organization, but may be committed to working on other projects, in which case, the project may need to source such effort from outside the organization in order to meet its schedule commitments.
Budget constraints may influence make-or-buy decisions. If a buy decision is to be made, then a further decision of whether to purchase or lease is also made. A make-or-buy analysis should consider all related costs?both direct costs as well as indirect support costs. For example, the buy-side of the analysis includes both the actual out-of-pocket costs to purchase the product, as well as the indirect costs of supporting the purchasing process and purchased item.
Available contract types are also considered during the buy analysis. The risk sharing between the buyer and seller determines the suitable contract types, while the specific contract terms and conditions formalize the degree of risk being assumed by the buyer and seller. Some jurisdictions have other types of contracts defined, for example, contract types based on the obligations of the seller?not the customer?and the contract parties have the obligation to identify the appropriate type of contract as soon as the applicable law has been agreed upon.
This definition was found in the PMBOK V5
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