Procurement Strategy in Major Projects: Make vs Buy
In major projects -- infrastructure, IT system implementations, capital equipment installations -- the make-vs-buy decision is among the most consequential choices a project team makes. Get it wrong and you spend years managing a supplier who is doing work you should have kept in-house, or tying up internal resources on work that a specialist could execute faster and cheaper. Get it right and your project benefits from optimal capability at optimal cost.
Despite its importance, the make-vs-buy decision is often made informally -- a senior leader has a preference, or the organisation defaults to whatever it did last time, or a supplier happens to be well-positioned and pushes their proposal through. A structured approach produces consistently better outcomes.
Core Competency: What Should You Own?
The first question is strategic: does this work fall within your core competency? Core competency refers not just to what your organisation currently does well, but to what it must do well to deliver its unique value. Work that sits within your core competency is generally a candidate for in-house delivery, because outsourcing it transfers knowledge and capability to a third party, creates dependency, and risks diluting the expertise that differentiates you.
Work that sits outside your core competency -- even if you could theoretically do it -- is generally a candidate for procurement. The question is not just can we do this, but should we be the ones doing it, and at what cost to the things we should be focused on?
Cost Comparison: The Fully Loaded View
Cost comparisons between make and buy options must be fully loaded on both sides. For in-house delivery, this means including not just labour but overhead absorption, opportunity cost of staff time diverted from other work, ramp-up time for skills your team may not currently have, and the ongoing cost of maintaining capability after the project ends. For external procurement, include not just the contract price but procurement process costs, contract management and oversight effort, coordination overhead, and transition costs at both ends.
The most common error is comparing the supplier's all-in price against only the direct variable cost of doing work internally -- an apples-to-oranges comparison that systematically understates the true cost of the in-house option.
Risk Transfer: What Are You Actually Buying?
Procurement can transfer risk -- but only if the contract is structured to do so and only if the supplier has the financial capacity to absorb the risk being transferred. Paying a supplier to take on completion risk, performance risk, or interface risk can be valuable. But if the supplier cannot financially absorb those risks, the transfer is illusory: when the supplier fails, the risk lands back with the project owner, often with less time and budget remaining to respond.
Assess the realistic risk-bearing capacity of prospective suppliers as part of your make-vs-buy analysis, not just as part of vendor due diligence after the decision is already made.
Control, IP, and Knowledge Retention
For some types of work, control and intellectual property retention are decisive factors. If the output of the work will form the basis of proprietary systems, competitive methods, or regulated assets, examine carefully whether external delivery creates IP risks or reduces your ability to maintain and evolve the asset over its lifecycle without ongoing supplier dependency.
Market Capacity and Schedule
Two frequently underweighted factors in major project make-vs-buy decisions are market capacity and schedule. Market capacity asks: are there enough qualified suppliers to run a genuine competitive procurement? If the market has only one or two credible providers, procurement may not deliver the cost or risk benefits expected. Schedule asks: is internal capacity available when the work is needed? An in-house option that requires staff who are committed to other priorities for the next six months may not be viable regardless of its theoretical cost advantage.
Governing the Decision
Make-vs-buy decisions on major projects should be documented, reviewed, and approved through a defined governance process -- not decided informally and then justified after the fact. The documentation should capture the decision criteria, the assumptions underlying the cost comparison, the risk assessment, and the alternatives considered. This creates accountability and enables post-project learning about which decisions proved well-founded.
Common Mistakes to Avoid
Defaulting to the previous project's approach without reassessing the current context.
Allowing suppliers to influence the make-vs-buy decision through early engagement before the analysis is complete.
Treating make-vs-buy as a one-time decision rather than reviewing it as the project scope evolves.
Ignoring the cost of transition -- both into the contract and out of it at project end.
Comparing only direct costs rather than fully loaded total cost of ownership.
XNM Consulting supports major project owners with procurement strategy, make-vs-buy analysis, and sourcing governance.