Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

How to Create a Procurement Evaluation Plan?

What is a procurement evaluation plan? Essentially, it is a document that mirrors the strategies and plans for monitoring and evaluating procurement processes.

It also includes the previous and current evaluation results to determine what kind of improvements to develop and to make well-informed decisions overall. Moreover, it is a plan that serves as a roadmap for the procurement evaluation process–basically an outline.

Here’s how you can make one:

1. Define Purpose and Scope

Start the process by clearly identifying the purpose of the evaluation. This is where you ask all of your “why’s” behind the procurement evaluation. This includes assessing supplier performance, evaluating the cost-effectiveness of procurement decisions, and promoting transparency and accountability in the entire procurement process. Moreover, in this step, you’ll also need to identify what will be included and excluded from the entire evaluation.

2. List Criteria and Relevance

This ensures that you and your procurement team have a clear understanding of what factors are most important when maintaining a great procurement process. In addition to that, it’s important that you make a list, enumerating the evaluation criteria, and assigning an appropriate weight of importance to each one of them.

3. Data Collection Method

Define and specify how data will be gathered–whether it be through documents, surveys, interviews, or on-site visits. In addition to this step, define data sources with required information to identify which appropriate methods to use. Moreover, it’s also imperative to use strategies like sampling methods to gain information faster.

4. Scoring System

Thoroughly explain the scoring system that will be used for assessment. Apply a customized scoring range best suited for your needs yet still ensure the procurement’s consistency and clarity. Apply scoring methods like absolute scoring, relative scoring, and weighted scoring. 

5. Risk Assessment

Put in detail how risk factors will be evaluated and incorporated into the decision-making process. This step is important so that you can identify potential risks that may endanger your procurement processes and plans to mitigate them. It’s also important to consider them when making decisions.

6.  Decision-Making Process

Describe how scores, rankings, and risk assessment will collectively guide your decision-making. All of the steps in the procurement evaluation will lead to deciding what’s best for your company and ultimately making decisions to ensure that your stay on top of your game.

Procurement Evaluation Example

Kiefer, a 42-year-old procurement director at a global automotive company is responsible for sourcing key components for vehicle production. His company is in the process of selecting a new supplier for lithium-ion batteries, a crucial component for their electric vehicles. 

Three suppliers submit their proposals:

• Supplier A offers the lowest price but has a history of inconsistent delivery times.
• Supplier B provides the highest quality batteries but is significantly more expensive.
• Supplier C offers mid-range pricing with a strong reputation for reliability.

Kiefer and his team follow a structured procurement evaluation process:

• Defining Objectives: The company prioritizes cost-effectiveness, battery performance, and supply chain stability.
• Gathering Information: The procurement team analyzes supplier proposals, past performance data, customer reviews, and financial stability reports.
• Establishing Criteria: Each supplier is evaluated based on price, product durability, on-time delivery rates, and long-term partnership potential.
• Scoring and Ranking: Supplier A ranks highest in affordability, while Supplier B leads in quality. However, Supplier C scores well in delivery reliability and overall balance. 
• Risks Assessment: Supplier A’s history of delivery delays presents a risk of production slowdowns, while Supplier B’s high pricing could affect profitability. 
• Final Decision: After a thorough evaluation, Kiefer’s team selects Supplier C, which offers a balance of cost, quality, and reliability, ensuring stable production without major financial strain. 

This example shows that following a well-structured procurement evaluation process leads to an informed decision that balances cost, quality, and risk management, ensuring a sustainable partnership that benefits both parties. 

Here’s another example:

Yuri, a 38-year-old procurement manager at a major financial institution, is leading the selection process for a new IT system to enhance transaction processing speed, cybersecurity, and regulatory compliance. Three vendors submit proposals:

• Vendor J offers the lowest-cost solution but lacks extensive experience in banking security compliance;
• Vendor A provides a feature-rich, high-end system but comes with a significantly higher price tag; and
• Vendor Y offers mid-range pricing with a strong track record in financial industry compliance and long-term support. 

To ensure a well-informed decision, Yuri and her team conducted a procurement evaluation. They first define their objectives—prioritizing security, cost-effectiveness, and system reliability. The team then gathers information by reviewing vendor case studies, consulting industry reports, and analyzing customer feedback. Each vendor is assessed based on criteria such as cost, security features, scalability, ease of integration, and ongoing technical support. Vendor J ranks highest in affordability, Vendor A leads in advanced features, and Vendor Y scores well in compliance and long-term reliability. 

After performing a risk assessment, Yuri identifies potential challenges like Vendor J’s limited experience in banking security could pose compliance risks, while Vendor A’s high price might strain the IT budget. Considering all factors, Yuri and her team decided to select Vendor Y which provides a secure, scalable solution with reliable support while staying within the budget. 

By following a thorough procurement evaluation process, Yuri ensures the company adopts an IT system that meets security and compliance without unnecessary overspending. Vendor Y also benefits by strengthening its presence in the financial sector, creating a mutually beneficial partnership. This case demonstrates how a well-structured evaluation can balance cost, quality, and risk management to drive a successful procurement decision. 

Why is Evaluation in Procurement Important?

Aside from getting better deals and overall assessment of the performance of both parties, here a few reasons why evaluation in procurement is important:

1. Quality Assurance

This might be the most prioritized criterion in the evaluation process. Evaluation ensures that purchased goods and services meet quality standards and up-to-par customer satisfaction while also decreasing the risk of defects as a potential money loss.

2. Cost-Effectiveness

A successful evaluation means a huge aid in selecting options that provide the best value for money and resource allocation optimization. Why? It’s because through careful evaluation you get to identify areas that you need intervention and improvement which will help you in increased revenue and decrease unnecessary expenses.

3. Risk Mitigation

As aforementioned, a thorough evaluation identifies and pinpoints potential risks which minimizes disruptions in the entire procurement process and supply chain.

4. Transparency and Accountability

A well-structured and defined evaluation process fosters transparency, accountability, and fair competition among suppliers and vice versa. Both parties will see where it goes wrong and will collaborate on making strategies to make things better.

5. Informed Decision-Making

Furthermore, evaluation equips your procurement project managers with data-driven insights that will ultimately lead to well-informed choices that align with your company’s objectives.

Conclusion

Procurement evaluation is an integral part of the procurement process because it empowers businesses like yours to make strategic decisions to enhance business efficiency and minimize risks in the future.

By following a systematic approach and crafting a well-defined evaluation plan, you can unlock transparency and accountability, cost-optimization, quality assurance, and your own company’s full potential in growing and advancing your business operations. 

But before you proceed to read the whole article, I have created a free-to-download editable procurement benchmarking template. It’s a PowerPoint file you can use to analyze the effectiveness of the different processes in your procurement. I even created a video where I’ll explain how you can use this template.