Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Procurement Policy — The Ultimate Guide 2025
As taught in the Annual Procurement Strategy Course / ★★★★★ 4.9 rating
Table of contents
What is a procurement policy?
- A procurement policy is the established guideline that an organization follows to ethically and efficiently obtain goods and services.
- While procedures specify how such policies are to be implemented, procurement policy provides overarching principles and standards.
- Clearly defining roles, designating an owner, and giving clear instructions are all recommended practices when developing procurement rules and processes.
What is a Procurement Policy?
A procurement policy is an outline or set of procurement rules. It provides the overarching principles and standards used in the field. It sets the decisions and directions of the procurement process. Moreover, it guides an employee’s decision-making.
Through a framework set by the company, goals and objectives are more achievable. It helps individuals and teams organize their procurement activities. In simpler terms, this is a rule that professionals must follow.
Doing so will make a company’s procurement process better and objectives aligned and achievable. Of course, these policies and procedures are changeable.
Through modernization and considerations, they must adapt and accommodate these ideas. Ultimately, it can help a company push toward growth.
Procurement Policy Template Example
Creating a clear and effective procurement policy can be overwhelming, especially if you’re starting from scratch. To help you out, we’ve created a Procurement Policy Template that covers everything from roles and approval limits to procurement methods, bidding, and contract management.
We know that drafting your own policy takes time, so we’re also sharing a fully editable template that you can download and customize for your organization. It’s designed to be practical and aligned with donor and audit expectations, without the legal jargon or overly complex language.
To make the customization process even easier, we created a step-by-step guideline to walk you through everything. This will explain how to:
- Understand your current procurement setup
- Gather relevant documents and approval rules
- Customize each section of the policy based on your actual operations
- Review and get it formally approved
- Roll it out with your team
- Keep it updated over time
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. Conduct a baseline assessment
Understand your current procurement setup. Evaluate your existing policies, practices, and challenges. This step provides clarity on what’s working and what needs improvement.
This baseline assessment allows you to measure success later and identify gaps in your current procurement flow. It also highlights areas that need more focus when drafting the policy.
3. 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.
4. Create a procurement team
The next step is to assign a group of individuals to oversee the creation of the policy. Include members from different departments such as procurement, finance, operations, and legal. Their perspectives ensure a well-rounded policy.
Having a dedicated team increases accountability and ensures that the procurement policy covers every necessary aspect. It also speeds up the development process.
5. Identify key policy components
The fifth step is to list out the necessary elements your procurement policy should include. These may consist of authority levels, spending thresholds, procurement methods, and compliance requirements.
Defining these components early makes the drafting process smoother. It also allows everyone involved to stay aligned with the goals of the policy.
6. Align with legal and regulatory requirements
Ensure that the policy follows applicable local, national, or industry-specific procurement laws. This includes anti-corruption laws, ethical standards, and data protection policies.
Doing so protects the company from compliance risks. It also strengthens the policy’s credibility and enforces discipline across procurement activities.
7. Get the approval of key stakeholders
The seventh 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 departments. This way, you can polish the procurement policy and establish its authority.
8. Finalize and review the draft
Once the stakeholders have provided their feedback, it’s time to finalize the policy document. Check for consistency in language, tone, and structure. Make sure that the policy is clear and easy to follow.
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 also viable for the final policy. After all of the effort, submit it for executive approval.
9. Implement and communicate
Distribute the approved policy to every department. Make sure that everyone understands the purpose and process of the policy.
It’s important to brief the entire company, as this avoids confusion and sets expectations. A well-informed workforce is key to successful implementation.
10. Train and educate your team (Optional)
Conducting training sessions or workshops is not mandatory, but can help employees familiarize the procurement policy. It provides clear guidance on how to apply the policy in daily operations.
Training ensures that your staff doesn’t just receive the policy but understands and follows it. This helps prevent or at least minimize the errors and enforces consistency across teams.
11. Monitor, evaluate, and update
The last and final step is to continuously monitor the effectiveness of the procurement policy. Identify areas for improvement through regular feedback and performance metrics.
Update the policy as needed to adapt to changes in the business, industry, or regulations. A flexible and evolving policy is a key to long-term success.
Pro Tip: Writing a procurement policy is just the beginning. The real challenge lies in getting people to follow it. Build in regular check-ins with department heads and procurement users to catch misalignments early. The more involved they feel, the more likely they’ll support and stick to the policy.
⭢ Want a deeper framework to align your policy with strategy? Explore our Annual Procurement Strategy Course.
Why Businesses Should Have a Procurement Policy?
Usually, individuals ask “Why do we need a procurement policy?” It starts when businesses grow their operations. In hindsight, businesses require less management and formalities when they’re beginning.
However, as they develop, they must handle their funds efficiently. Finances go here and there. Procurement businesses with fast-paced action face these challenges. Now comes a procurement policy.
It serves as a guide to helping businesses with their operations. It makes operations manageable, and information digestible. It also prevents unnecessary spending. Thus, procurement policies reduce risks and encourage efficiency. Procurement policies vary from one company to another.
The details within it are based on the company’s requirements. It starts from their standardized operation and moves toward quality. Such an efficient policy can only work if carefully planned and executed.
Procurement procedures and policies are not prescriptive. Meaning, these rules are not meant to constrict or restrain operations. Rather, they emphasize the value and importance of having a guide. Additionally, how having an organizational flow is crucial.
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.
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.
Frequentlyasked questions
What is a procurement policy?
A procurement policy is a set rule followed by the procurement team. These are rules that help in setting smoother transactions for procurement processes.
Why is procurement policy important for businesses?
Procurement policy serves as a guide to help businesses with their operations. It makes operations manageable, and information digestible. It also prevents unnecessary spending. Thus, procurement policies reduce risks and encourage efficiency. Procurement policies vary from one company to another.
How to create a procurement policy?
To create a procurement policy, data must first be gathered. List down all rules that can help in achieving the best outcome for the procurement process.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
