Strategic Procurement Planning:
Develop and implement procurement strategies aligned with the organization's overall
goals and objectives.
Establish procurement policies, procedures, and best practices to guide the procurement
team.
Sourcing and Vendor Selection:
Identify cost-effective and reliable sources for goods, services, or works.
Conduct market research and analysis to stay informed about industry trends, pricing, and
potential sources.
Select suppliers and vendors based on criteria such as quality, cost, reliability, and
compliance with regulations and ethical standards.
Risk Management:
Assess and manage risks associated with the procurement process, including supply chain
disruptions, market fluctuations, and regulatory changes.
Develop and implement risk mitigation strategies to ensure continuity of supply.
Contract Management:
Negotiate and draft procurement contracts that clearly define terms, conditions, and
performance expectations.
Ensure compliance with contractual agreements and manage contract renewals or
modifications as needed.
Cost Management:
Optimize procurement processes to reduce costs and improve cost efficiency.
Monitor and control procurement-related expenses, including budget adherence.
Identify opportunities for cost savings and implement cost-reduction initiatives.
STAGES IN THE PROCUREMENT PROCESS
identifying Needs:
The process begins with identifying the organization's needs, which could involve goods,
services, or works. This stage requires clear definition and specification of what is
required.
Supplier Identification:
Potential suppliers are identified based on the nature of the procurement, whether through
an existing supplier database or through market research.
Supplier Evaluation and Selection:
Potential suppliers are evaluated based on various criteria, such as their capabilities,
reliability, financial stability, reputation, and compliance with regulations.
The organization selects the most suitable supplier(s) for further consideration.
Request for Information (RFI) or Request for Proposal (RFP):
Depending on the complexity and value of the procurement, the organization may issue
an RFI or RFP to shortlisted suppliers.
An RFI seeks information about suppliers' capabilities and qualifications, while an RFP
solicits detailed proposals.
CATEGORIES OF PROCUREMENT
1. Direct Procurement:
o Direct procurement involves the acquisition of goods, materials, and components
that are directly used in the production of finished products. These items are
essential for an organization's core operations and may include raw materials,
machinery, and equipment.
2. Indirect Procurement:
o Indirect procurement, often referred to as indirect spend or non-production
procurement, involves the acquisition of goods and services that are not directly
incorporated into the end product but are necessary for the organization's overall
functioning. Examples include office supplies, maintenance services, and utilities.
3. Services Procurement:
o This category encompasses the acquisition of various services required by an
organization, such as consulting, legal services, marketing, IT support,
transportation, and facility management.
4. Capital Procurement:
o Capital procurement focuses on the purchase of long-term assets and investments
that contribute to an organization's growth and development. This category
includes major acquisitions like real estate, large machinery, and infrastructure
projects.
5. Public Procurement:
o Public procurement is specific to government agencies and public sector
organizations. It involves acquiring goods, services, or works for the public
benefit, often subject to legal regulations and public procurement laws.
6. Sustainable Procurement:
o Sustainable procurement emphasizes environmentally responsible and socially
conscious practices in acquiring goods and services. Organizations in this
category prioritize eco-friendly products, fair labor practices, and ethical sourcing.
7. Strategic Procurement:
o Strategic procurement involves a comprehensive approach to procurement that
aligns with an organization's long-term goals and strategies. It may encompass
various categories and often requires cross-functional collaboration and supplier
relationship management.
8. Emergency Procurement:
o Emergency procurement is employed when there is an urgent need for goods or
services due to unforeseen circumstances, such as natural disasters or unexpected
events. The process is expedited to meet immediate needs.
9. Global Procurement:
o Global procurement extends the acquisition process to international markets. It
involves sourcing goods, services, or works from suppliers located in different
countries, considering factors like currency exchange rates, international
regulations, and global supply chain management.
10. Reverse Auction Procurement:
o In a reverse auction, potential suppliers compete to offer the lowest price for a
specific requirement. This category is often used for standardized, readily
available items where cost savings are a priority.
11. Strategic Outsourcing:
o Strategic outsourcing is a procurement approach where an organization contracts
out certain functions or services to specialized third-party providers, aiming to
leverage the expertise and efficiency of external partners.
12. Collaborative Procurement:
o Collaborative procurement involves cooperation among multiple organizations to
achieve economies of scale, reduce costs, and enhance procurement efficiency
through group purchasing arrangements or consortiums.
COMPONENETS OF PROCUREMENT
1. Needs Assessment: This involves identifying and understanding the organization's
requirements and determining what needs to be procured, such as goods, services, or
works.
2. Specification and Description: Clearly defining the specifications and requirements for
the goods or services to be procured. This includes quality standards, quantity, technical
specifications, and any other relevant details.
3. Supplier Selection: Identifying potential suppliers through research, market analysis,
and evaluation of supplier capabilities. The selection process considers factors such as
price, quality, reliability, and compliance with regulations.
4. Sourcing: Determining the sources from which the required goods or services will be
obtained. This can include sourcing from multiple suppliers, considering global or local
sources, or exploring sustainable procurement options.
5. Request for Information (RFI) and Request for Proposal (RFP): Issuing RFI or RFP
documents to potential suppliers to collect information or detailed proposals about their
capabilities and offerings.
6. Bid Evaluation: Evaluating supplier responses to RFPs based on predefined criteria.
This involves comparing proposals, conducting supplier assessments, and selecting the
most suitable supplier(s).
7. Negotiation: Engaging in negotiations with selected suppliers to finalize contract terms,
pricing, and other details.
8. Contracting: Drafting and formalizing procurement contracts that outline the terms and
conditions of the procurement, including legal and performance-related aspects.
9. Purchase Order (PO) Issuance: Issuing a purchase order to the selected supplier,
specifying quantities, delivery dates, and other details. The PO serves as a legally binding
agreement.
10. Receipt and Inspection: Receiving and inspecting the delivered goods or services to
ensure they meet specified quality and quantity standards. Any discrepancies or issues are
documented and addressed with the supplier.
11. Invoice Processing and Payment: Receiving and verifying supplier invoices against the
purchase order and contract terms. Invoices are approved and processed for payment
according to agreed-upon payment terms.
12. Supplier Relationship Management (SRM): Building and maintaining positive
relationships with suppliers to ensure ongoing performance, collaboration, and
improvement. This involves monitoring supplier performance and addressing any issues.
13. Quality Assurance and Control: Implementing quality control processes to ensure that
procured goods or services meet the required standards. Addressing any quality-related
issues through corrective actions.
14. Risk Management: Assessing and managing risks associated with the procurement
process, including supply chain disruptions, market fluctuations, and regulatory changes.
Developing strategies for mitigating risks and ensuring business continuity.
15. Compliance and Ethical Considerations: Ensuring that procurement activities comply
with legal, ethical, environmental, and social standards. Upholding ethical practices in
dealings with suppliers.
16. Record-Keeping and Documentation: Maintaining thorough records of all procurement
activities, including contracts, invoices, correspondence, and audit trails. Ensuring
compliance with regulatory and reporting requirements.
17. Continuous Improvement: Regularly reviewing and assessing the procurement process
to identify areas for improvement. Seeking efficiency gains, cost savings, and better
supplier relationships.
METHODS OF PROCUREMENT
1. Open Tendering:
o Open tendering, also known as open competitive bidding, is a widely used method
in which any interested supplier can submit a bid in response to a public invitation
to tender. The contract is awarded to the supplier with the lowest responsive bid
that meets the specified requirements.
2. Selective Tendering:
o In selective tendering, the organization invites a prequalified list of suppliers to
submit bids. These suppliers are chosen based on their qualifications and capacity
to meet the requirements of the procurement.
3. Single-Source Procurement (Sole Sourcing):
o Single-source procurement occurs when an organization selects a specific supplier
or vendor without seeking competitive bids. This method is typically used when
there is only one qualified supplier, such as for proprietary products or specialized
services.
4. Framework Agreements (Blanket Purchase Orders):
o Framework agreements establish long-term relationships with suppliers and allow
for the procurement of goods or services over a specified period. The terms and
conditions are agreed upon in advance, and orders are placed as needed.
5. Two-Stage Tendering:
o Two-stage tendering involves an initial prequalification or expression of interest
stage, followed by a competitive bidding stage. This method is used when the
organization seeks input or ideas from suppliers before proceeding with a final
competitive bid process.
6. Request for Proposals (RFP):
o An RFP is a competitive method where organizations request detailed proposals
from suppliers, often for complex or specialized projects. The evaluation criteria
may include factors beyond price, such as technical capability and experience.
7. Request for Quotations (RFQ):
o RFQs are used for straightforward procurements. Organizations request price
quotations from suppliers for specific goods or services. The contract is typically
awarded to the supplier with the lowest responsive quotation.
8. Electronic Procurement (e-Procurement):
o E-procurement involves using online platforms and systems to manage the
procurement process, from soliciting bids to awarding contracts. This method can
streamline the procurement process and improve transparency.
9. Reverse Auctions:
o In a reverse auction, potential suppliers compete to offer the lowest price for a
specific requirement. This method is often used for standardized, readily available
items where cost savings are a priority.
10. Collaborative Procurement:
o Collaborative procurement involves cooperation among multiple organizations to
achieve economies of scale, reduce costs, and enhance procurement efficiency
through group purchasing arrangements or consortiums.
11. Minority and Women-Owned Business Procurement:
o Organizations may use this method to promote diversity and inclusion by giving
preference to businesses owned by minority groups or women.
12. Emergency Procurement:
o Emergency procurement is employed when there is an urgent need for goods or
services due to unforeseen circumstances, such as natural disasters or unexpected
events. The process is expedited to meet immediate needs.
13. Public-Private Partnerships (PPPs):
o PPPs involve collaboration between public and private sectors to deliver public
infrastructure or services. The private sector is often responsible for design,
construction, operation, and financing in exchange for revenue-sharing or user
fees.
