Make-or-Buy analysis is termed as a procurement tool or technique used to determine whether a particular product

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Question:

Make-or-Buy analysis is termed as a procurement tool or technique used to determine whether a particular product or service should be made or performed inside the organization or purchased from someone else. For a project, you need to have a utility software and for the same you issued an RFP. One of the vendors has proposed doing the project for $75,000. (The cost for the project is $68,000 and their profit will be 57,000)

1. If you want to develop in-house, the product will require seven software developers working four months. Salary of each software developer is $3,000 per month. The overhead costs apportioned to the project will be $ 1,500. Which option will you choose make or buy?

2. Based on the analysis performed in part 1, if you decide to buy the utility from a vendor, which type of contract is most suitable if the type of work is predictable and the requirements are well-defined and not likely to change? Justify your answer.