Project Management: Foundations to Practice · Procurement and Contract Management
Make-or-Buy Decisions
Before any vendor conversation begins, a more fundamental question needs answering. This chapter covers the make-or-buy analysis and why strategic importance often overrides short-term cost logic.
Before any procurement activity begins, a project team must decide whether a given piece of work should be performed internally or purchased from an external vendor, commonly called a make-or-buy analysis [1]. This decision should be made deliberately and explicitly, rather than defaulting reflexively to whichever option is most familiar to the team or was used on the previous project without reconsidering whether that same choice still fits the current situation.
Key Takeaways
- A make-or-buy analysis should be an explicit, deliberate decision, not a reflexive default to the familiar or previous choice.
- Factors include in-house skill availability, relative cost, time sensitivity, and strategic importance to competitive position.
- Work core to competitive advantage is generally kept in-house even at higher short-term cost, to avoid dependency on an outside party.
- Make-or-buy decisions should be periodically revisited as strategic importance and the maturity of external alternatives both evolve over time.