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

The Procurement Procedures: How it Works?

We must first understand how the procurement procedure works. Procurement procedures define the process of implementing your policies. They are the series of steps that your procurement team will follow until you’ve reached the goal. 

The goal is always the result that your procurement process wants to achieve. The procurement procedure is consistently repeated until everyone understands the operation. 

The only way to create a procedure is to come up with several procurement policies first. You can start procurement procedure creation once you establish a set of policies.

For example, a procurement procedure can come out in a certain way if it has a competitive bidding policy. Below is an example of the policy:

• Establishing clear requirements for a product or service your company will procure.
• Developing and approving an RFP or Request for Proposal. This process is followed to gather potential proposals and reduce possible risks.
• Identify prospective vendors
• Respond to vendor questions
• Receive, evaluate, and score proposals
• Down-select vendors and conduct interviews and demos
• Create scoring workbooks for proposal evaluation
• Perform pre-contract risk assessment and due diligence on the finalist supplier.
• Negotiate and award the contract.

Most companies have tools to help them constantly implement procedures. These tools range from templates, forms, and checklists. An example of these include an RFP template and a contract checklist. A proposal evaluation scorecard is also a great example.

At Ahold Delhaize and Friesland Campina, The strategic sourcing department takes charge. They develop the procurement policy and establish set guidelines. It was helpful to have direction on what a procurement manager should and should not do. Various documents outline the role of individuals in certain tasks. 

There’s one designated for deal approval. One checks if the deal passes the regulatory framework. In short, if they’re viable for business. Policies are established to organize and regulate procurement services. It’s crucial to centralize this process to avoid abuse and promote procurement fairness.

Contents of a Procurement Policy

A procurement policy outlines the guidelines and procedures. It allows a business to organize and plan when acquiring goods and services. A procurement policy’s content varies from one organization to another. Though, for general knowledge, here are some elements found in such policy:

• Policy Statement and Purpose
• Authority and Responsibility
• Procurement Process Overview
• Procurement Method
• Supplier Selection Criteria
• Ethical Standards and Code of Conduct
• Budget and Spending Limits
• Supplier Diversity and Sustainability
• Documentation and Recordkeeping
• Contract Management
• Communication
• Compliance and Consequences

Remember, your procurement policies must align with the needs of your business. Additionally, you must also consider the industry’s requirements. The document must use clear and accessible language. This characteristic is for the benefit of the employees and the company. 

How to Write a Procurement Policy?

Creating an effective procurement policy is crucial for streamlining company operations. Moreover, it allows them to align their procurement processes while safeguarding their interests.

This section outlines a concise, three-step guide on how to write a procurement policy:

1. Define your goals and needs

Spend some time thinking about what your procurement policy needs to do. Consider the surrounding factors and how they can potentially affect the company.

This way, you can build business and growth momentum while protecting the business. Ensure that the procurement policy aligns with these goals. Keep it in mind so that objectives are clear and goals are achievable.

2. Research and start writing a draft

Researching what a procurement policy should contain is crucial to establish its authority. Find policies that you think can be beneficial to your company. 

After that, draft an initial policy that can be agreeable and valid for everyone. Remember to be concise and clear with the purpose and intention of the policy.

3. Get the approval of key stakeholders

The third step is meeting with your key stakeholders. Discuss the initial policy and gather ideas. It’s crucial to establish ground and ideas with them to enforce the policy. 

Moreover, it can highly benefit from the procurement manager’s advice. You can also consider your direct supervisor’s insights on the policy.

After going through the stakeholders, move through the crucial departments. Consult with the finance, legal, and operations department. This way, you can polish the procurement policy and establish its authority.

Of course, the final edit of the procurement policy draft lies in the hands of the one who pursues it. While you listen to their suggestions, consider if they are viable for the final policy. After all of the effort, submit it for executive approval. 

Best Practices for Procurement Policies and Procedures

You must also understand the best practices for building procurement policies and procedures. Knowing this crucial knowledge can help you establish its validity and authority.

Think of how you will document these policies and procedures. These documents must reflect the things you want to cover in the company. 

These procurement policies and procedures must also be readable and accessible. This way, your procurement teams can use them to its full effect.

Here are some of our pointers to ensure its maximum efficiency:

• Assign someone who will manage and maintain the procurement policies and procedures.
• Provide a clear identification of the roles and responsibilities of the procurement team.
• Choose people who can help in interpreting and resolving problems.
• Reference forms, templates, checklists, and other tools that the staff can use
• Establish policy statements that address the procurement policies and procedures.
• Develop procedures that offer employees the flexibility to move around the work environment.
• Use clear and simple instructions that your procurement team can understand.

Conclusion

In conclusion, a robust procurement policy and procedure can guide businesses toward success. This process is crucial, especially for those in this business field. 

Businesses that must continuously grow their procurement needs must establish procurement policies. It provides a stable framework, allowing for flexibility and leniency in their procurement.

Moreover, having a comprehensive procurement policy reduces risks and issues. It addresses concerns such as supplier vetting and contract negotiation.

It also enhances risk management. This enhancement is especially important in safeguarding the organization. Be it from financial or legal challenges.

Putting a robust procurement policy is crucial. It can help establish the confidence of the organization toward efficient procurement.