Procurement starts with a simple question: should we do this work ourselves or buy it from outside? This is make-or-buy analysis. You compare cost, time, available expertise and risk. If you decide to buy, you write a statement of work (SOW) that clearly describes what the seller must deliver, so they can make an accurate offer.
Contracts fall into three main families. Fixed-price: the seller commits to a set price, and if costs rise the seller absorbs them, so the risk sits with the seller; it suits well-defined work. Cost-reimbursable: the buyer pays the actual costs plus a fee or incentive, so the risk sits with the buyer; it suits work that is still unclear. Time and materials (T&M): a rate per hour or per unit, with risk shared; it suits small or short jobs, or bringing in an expert quickly.
To select a seller, you set evaluation criteria in advance, such as experience, price, quality and ability to meet the deadline, and then assess the proposals fairly. The lowest price isn't always the best choice; a cheap seller who delivers late can end up costing you more.
Once signed, the contract is the reference point. The project manager monitors the seller's performance and approves payments based on work done, but doesn't change the contract terms with a verbal agreement; any change goes through contract change control, with the contracts or legal team involved. When the work ends, the contract is formally closed: confirm every deliverable was accepted, settle claims and payments, and archive the records.
💡 Key points
- Make-or-buy analysis comes first, then the SOW describing what the seller must deliver.
- Fixed price = seller's risk, cost-reimbursable = buyer's risk, T&M = shared risk.
- The contract rules: no verbal changes, and involve the contracts or legal team.
- Formal contract closure covers accepting deliverables, settling claims and archiving records.
🌍 Real-life example
A private school wants an online student registration system. Its tech team is small, so it decides to buy rather than build. It writes a detailed SOW and signs a fixed-price contract because the requirements are clear. When the principal asked to add a parents' mobile app, the project manager didn't agree it with the seller over the phone; he raised a contract change through the procurement department.
📖 Key terms
| English | العربية |
|---|---|
| Make-or-Buy Analysis | تحليل الصنع أو الشراء |
| Statement of Work (SOW) | بيان العمل |
| Fixed-Price Contract | عقد بسعر ثابت |
| Cost-Reimbursable Contract | عقد استرداد التكاليف |
| Time and Materials (T&M) | عقد الوقت والمواد |
| Seller / Buyer | البائع (المورد) / المشتري |