|A procurement need exists when an agency determines that it must
purchase either a product or service to fulfill its mission. An agency’s
business unit or end user generally identifies a procurement need and
contacts the agency’s procurement professional to initiate the
If an agency’s business unit or end user is able to identify the
procurement need, priorities and objectives early in the process, then
the procurement professional and procurement team can more fully address
potential solutions that can satisfy the agency’s need.
A procurement file contains all information related to the
procurement. Depending on the cost and type of procurement method, an
agency must include certain planning documentation in its procurement
file. Generally, for open market procurements, an agency should develop
or initiate the following documentation during the Plan stage and
include it in the procurement file:
- Procurement plan.
- Market research.
- Product specifications.
- Scope of work.
- Evaluation strategy (Competitive Sealed Proposals).
Document management begins early in the planning phase and extends
through procurement, contract administration, closeout and beyond,
according to the state’s retention requirements for the type of
procurement. Refer to Document Management
for more information on establishing and maintaining a procurement
Early in the planning phase, the agency business unit and end users
should work with their agency procurement professional to identify the
stakeholders who will participate in the procurement, either on the
procurement team or as resources to the procurement. A stakeholder is an
individual who has an interest in the needed product or service.
Stakeholders are important because they possess knowledge and experience
that may assist in identifying critical business requirements within a
Stakeholders may be made up of management or executive-level
personnel with extensive program knowledge. Stakeholders are familiar
with the specific needs of a program and have a clear understanding of
how to ensure that procurement activities support a program, and they
may be heavily involved in developing and implementing policies,
procedures and program priorities.
A procurement team typically needs both technical and end user
expertise. A technical subject matter expert (SME) can guide the
procurement team’s effort in developing the specifications, scope of
work and sample contract or agreement that comprise a solicitation
An end user SME should possess a deep understanding of the
functional or business requirements of the product or service being
procured. This role can be filled by a business analyst or by an end
user or recipient of the product or service. The end user SME
contributions should enable the procurement team to develop the
functional or performance requirements of the product or service. An end
user SME should understand how the product or service is ordered,
invoiced and paid for, and should be familiar with any challenges
associated with a previous procurement of the product or service.
The procurement professional relies on the procurement team to
provide a vast amount of data that can include technical specifications,
written procedures, executive summaries, background statements and
infrastructure details. Additionally, the procurement team assists in
developing evaluation criteria, scoring methodologies, contract terms
and conditions and the contractor’s insurance requirements. Tools used
for contract administration are also developed by the procurement team.
This can include report forms such as performance reports or volume
The work of the team will persist throughout the procurement life
cycle, from defining and documenting the requirements for the product or
service, through activities that support the solicitation, evaluation,
award, negotiation and eventually management of the contract. The
procurement team should be diverse and its members should represent
their stakeholder and end user communities.
Confidentiality is critical to maintaining the integrity of the
procurement process and even a perceived conflict of interest can harm
the process. Individuals who serve on procurement teams are required to
sign a conflict of interest certification form (a link to the form is provided in the top right of this webpage under "resources"). This ensures that participants clearly understand their roles and responsibilities.
The procurement professional will work with the procurement team
and, as needed, additional stakeholders to identify and document the
scope of the need. Consulting the correct stakeholders is essential to
ensure the scope of the procurement need is understood, defined and
matches the needs of the end user. The scope of a procurement need
refers to the factors defining the range or span of the potential
purchase. Examples of a procurement need’s scope could include:
- Frequency (one-time or recurring).
- Span (single unit or multiple programs and agencies).
- Other factors that are identified and analyzed during the Plan stage.
The procurement team must define the scope of the procurement need
to properly conduct a potential competitive procurement. By consulting
with identified stakeholders, as well as conducting market research
procurement professional can validate the priorities and objectives of
To discover the critical business requirements, a procurement
professional should establish an open dialogue with the procurement
stakeholders. Critical business requirements are those essential
functions that must be met by the needed product or sservice. The
procurement team should encourage discussion and ask sufficient
pertinent questions to ensure it fully understands the critical business
Examples of the types of questions the procurement team should consider:
- Why is the product or service needed?
- Who is impacted by this procurement?
- What are the key functions the needed product or service must meet?
- What factors will impact this procurement?
- What is the budget?
- When is the product or service needed?
- Where will the product be delivered or the service performed?
- How must the service be provided?
- What key approvals are necessary and who must approve?
- What specific quality or quantity needs must be considered?
Identifying the critical business requirements will strengthen the
market research that the procurement professional will conduct.
Starting with the Buy Decision, an agency must determine if the
needed product or service can be fulfilled using mandatory methods. An
agency must make its Buy Decision in the priority order specified in
administrative rule (refer to OAR 125-247-0200).
It is important for an agency to document the information that
supports a procurement and the decisions that are made during the Plan
stage that will frame the procurement strategy. This information should
be included or referenced in a procurement plan.
The procurement plan will compile the results of analysis conducted
on a procurement, including the procurement authority, procurement
method, market research and requirements of the product or service. At
this point in planning, if a procurement professional has determined the
procurement need can be met by a Buy Decision source, and the
procurement is advanced to the Procure stage, the procurement plan can
be updated with this information and included in the procurement file
(Procurement Plan Part A).
If the procurement professional determines the source selection
will be open market or other procurement method, the procurement team
should continue to define the procurement requirements and document
decisions and planning information in Part B of the Procurement Plan. In
strategy meetings the procurement team will analyze the procurement
requirements and review the results of market research, develop an
evaluation strategy, determine the procurement method, and develop a
procurement schedule, among other items.
Through this process, the procurement team will make decisions that
will drive the execution and management of the procurement through the
remainder of the procurement lifecycle. Some of the key topics that
should be discussed and documented at strategy meetings include:
- Project scope and specifications.
- Project deliverables.
- Critical business requirements.
- Method of procurement.
- Contract type.
- Estimated schedule.
- Estimated cost and budget.
- Anticipated benefits.
- Performance measures (if applicable).
- Key considerations.
- Constraints and risks.
- Team assignments and procurement deadlines.
When the procurement is advanced to the Procure stage, the
documentation (Procurement Plan Part A/B) should be updated with this
information and included in the procurement file.
The procurement professional should update the procurement plan
throughout the planning process and include it in the procurement file.
Throughout its procurement planning, an agency must document and
file all research that it conducts, collects and analyzes to support the
procurement requirements and plan. These written documents will guide
and support the agency’s procurement method, supplier selection,
contract execution and management processes. Together, or by reference,
this information comprises the procurement plan and must be included in
the procurement file.
A procurement professional will conduct market research to identify
a variety of potential supply sources that is capable of meeting an
agency’s business requirements. Among other factors analyzed, market
research will assess the level of competition available in the market.
Through its market research, an agency can determine the level of
competition and other factors that will influence and should be
incorporated in the procurement strategy. An agency generally conducts
market research when the product or service has a high level of
expenditure, is subject to fluctuations in availability or cost due to
market volatility, requires a complex procurement, involves inherent
risks or is critical to the performance of the organization. Refer to the full section on Conduct Market Research
for more information on this planning activity.
An agency that seeks to procure a service must be aware that if the
estimated contract price exceeds $250,000, the agency must demonstrate
that the procurement will cost less than performing the service itself
or that performing the service is not feasible (refer to OAR
125-247-0110). This analysis should be conducted during the Plan stage
and must be documented in the procurement file.
An agency must conduct and document an analysis of the direct costs
for its own personnel and resources to perform the service, including:
- Salary or wage and benefit costs for employees who directly
perform the service or who inspect, supervise or monitor the performance
of the service.
- Material costs, including costs for space, energy, transportation, storage, raw and finished materials, equipment and supplies.
- Planning, training, start up, implementation, transportation and
delivery costs associated with the service, including decommissioning
and dismantling costs.
- Miscellaneous costs related to performing the service.
To analyze the cost to procure a contractor to perform the service, an agency should estimate:
- Contractor costs, including average or actual salary or wage and
benefit costs for contractors and employees who work in the industry or
business most closely involved in performing the service the agency
seeks and who are directly involved in performing the service or who
would inspect, supervise or monitor the performance of the service.
- Material costs, including costs for space, energy, transportation, storage, raw and finished materials, equipment and supplies.
- Miscellaneous costs related to performing the service.
The agency must compare the difference between the cost estimated
to perform the service and the cost estimated to procure the service. It
may proceed with the procurement only if the agency would incur more
cost in performing the service with the agency’s own personnel and
resources than it would incur in procuring the service from a
An agency may proceed with the procurement of a contract for
service without conducting a cost analysis if the agency determines and
documents that it is not feasible for its own personnel or resources to
perform the service that the agency intends to procure. The written
determination should document that:
- The agency lacks the specialized capabilities and experience (technical or other expertise) necessary to perform the service.
- Special circumstances require the agency to procure the service by contract. These circumstances, among others, may include:
- The terms under which the agency receives a grant or other.
- Other state or federal law.
- The needed service is incidental to a contract for purchasing or leasing real or personal property.
- The agency cannot accomplish policy, administrative or legal goals when using the agency’s existing personnel.
- Provisions of an Emergency procurement apply to the service.
- The needed service is urgent, temporary or occasional, and
attempting to perform the service with the agency’s own personnel or
resources would delay and frustrate the purpose for obtaining the
- The needed service will be completed within six months after the date on which the contract for the service is executed.
Another key decision that must be made during the planning phase is
what contract type to use. Unlike the method of procurement, which
determines how a procuring agency will solicit bids or proposals for a
project, the contract type determines how potential bidders or proposers
will price the products or services. The contract type also defines the
contracting environment that will govern the contractual relationship
between the agency and the supplier.
Based on its market research the procurement professional should
have a good idea how the supplier industry gauges various pricing models
to the requirements of the needed product or service. This market
research will be critical in helping a procurement professional to
determine the contract type to solicit.
A key factor that drives the contract type is the level of project
risk and how to fairly allocate that risk between the agency and the
supplier. A risk that is high for the buyer (agency) will be low for the
Fixed price contract
A fixed price contract places responsibility on the supplier for
the delivery of the products, or the performance of services, according
to the contract terms at a price that may be firm or subject to
contractually specified adjustments. This contract type is appropriate
to use when the agency’s requirements for the extent and type of work
can be reasonably specified, and the cost can be reasonably estimated,
as is the case for standard commercial products or certain services.
There are two types of fixed price contracts: firm fixed price, and
fixed price with price adjustment. The firm fixed price provides a
price that is not subject to adjustment due to variations in the
supplier’s cost of performing the work specified in the contract. It
should be used whenever fair and reasonable prices can be established at
The fixed price contract with price adjustment provides for
variation in the contract price under special conditions defined in the
contract, other than customary provisions authorizing price adjustments
due to modifications to the work. The formula, pricing index or other
basis by which the adjustment in contract price can be made, must be
specified in the solicitation and the resulting contract. Adjustment
allowed may be upward or downward, only or both, depending on the
The indefinite quantity contract, is a type of fixed price contract
in which the unit price is set but the total number of units may not
Time and materials/labor hour contract
A time and materials contract provides an agreed basis for payment
for materials supplied and labor performed. It is important, to the
extent possible, that a time and materials contract contain a stated
ceiling or an estimate that must not be exceeded without prior agency
A labor hour contract provides only for the payment of labor
performed. A labor hour contract must contain the same not to exceed
pricing ceiling as the time and materials contract. A labor hour
contract also requires the same determination as required for a time and
Cost reimbursement contract
The cost-reimbursement contract provides for payment to a supplier
of allowable costs, as specified in the contract and incurred in the
performance of the contract. This contract type establishes at the
outset an estimated cost for performance, and a dollar ceiling which the
supplier may not exceed, except at its own expense, without prior
approval or subsequent approval by the agency. A contract reimbursement
contract provides that the supplier agrees to perform as specified in
the contract until the contract is completed, or until the costs reach
the specified ceiling, whichever occurs first.
This contract type is appropriate when the uncertainties involved
in performance are significant enough that the cost of contract
performance cannot be estimated with sufficient certainty to realize
economy by use of any type of fixed price contract. It is particularly
suitable for research, development and study contract types. This
contract type requires appropriate monitoring by agency personnel during
performance to provide reasonable assurance that the objectives of the
contract are being met.
Throughout the Plan stage the procurement team defines the
procurement need, and develops and refines the strategy, objectives, and
requirements to frame comprehensive specifications for the
Through a discovery – or information gathering – process, the
procurement team works with an agency business unit and end users to
fully define the business problem and establish the conditions that must
be met for a solution to be determined successful. These requirements
are the basis of the specifications of a procurement.
Specifications determine and control the:
- Minimum quality level of the product or service.
- Extent to which competition can be leveraged.
- Suitability or fit of the product or service for its intended purpose.
- Evaluation factors that support a best value determination or award.
An evaluation strategy is the documentation of the process that the
procuring agency will use to evaluate proposals received in response to
an RFP or similar procurement method where factors other than
acquisition cost are considered. The procurement team should develop an
evaluation strategy in conjunction with the procurement plan.
An evaluation strategy ensures that the evaluation committee
conducts an evaluation and selection of a product or service in an
impartial, fair, efficient, transparent and non-discriminatory manner.
To facilitate this, the procurement team must establish and include
objective criteria for evaluation in the solicitation:
- Determine whether a particular proposal is responsive, that is,
whether it materially meets the requirements of the solicitation.
- Assign scores or ratings to each of the evaluation factors established in the solicitation and responded to by a proposer.
- Record all determinations of the evaluation process in writing along with the justification for determination.
In a competitive sealed proposal procurement method, a procuring
agency must consider life cycle costing which calculates the cost to
acquire, operate, support and dispose of a product over its useful life.
This consideration should be included in the evaluation strategy. A
procuring agency may use this method to include any additional costs
that relate to adverse impacts of a product, for example, impacts to the
environment or public health.
Aside from cost as a determination for award, a best value analysis
considers multiple elements that may include service delivery factors,
such as service areas, service provider’s availability, past performance
and service rates. A best value analysis process should serve as
documentation of a procuring agency’s selection method and should be
included in an agency’s evaluation strategy.