Procurement Policy & Procedures – The Ultimate Guide 2021
For a procurement manager, the procurement policy and procedures are two of the most important documents for the procurement process. Without those documents, your procurement process is sorely lacking in core policies and standards.
In this article, we are going to talk about procurement policies, procedures and how important they are for establishing your procurement process. Once you’re done reading the article, you should now have an idea of how to create your procurement procedures and policies.
What is a Procurement Policy?
By definition, a procurement policy is a set of rules that outline the overarching principles and standards used to set the direction and decisions of the procurement process. It helps guide employee decision-making under a given set of circumstances in a framework of goals and objectives set by the management.
To make the explanation simple, procurement policy means the set of rules followed to create an effective procurement process. These rules are created by the people who began the procurement process within the company. While these rules are open to change, there is also a chance that the rules will be changed to accommodate new and useful ideas.
Each procurement policy has its details. The details are set by the procurement team and they will decide which rules or data under the policy works well in creating an efficient procurement process. Each policy is usually written as a guideline to follow, but again, it is not prescriptive about how to go about performing a competitive bid.
For the policy to work, this is where procurement procedures come to play.
The Procurement Procedures – How it Works?
Before we dive into how procurement procedures work, we need to first understand what it is.
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 in the team becomes so used to it that it’s already become a routine.
The only way to create a procedure is to come up with several procurement policies first. Once you have a set of policies that you can follow, you can start the creation of procurement procedures to follow.
For example, if your company has a Competitive Bidding Policy where a buyer is expecting the procurement to exceed the price threshold for competitive bids, then the procurement procedure for such a policy may go like this:
- Create clear requirements in a work statement for the product or service that you are procuring.
- Develop and approve the Request for Proposal while following the RFP standards of getting great proposals and reducing the risk.
- Identify prospective vendors
- Respond to vendor questions
- Receive, evaluate, and score proposals
- Down-select vendors and conduct interviews and demos
- Creating 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 templates, forms, checklists, and other tools that can help in supporting the constant implementation of these procedures. Examples of these include an RFP template, a contract checklist, a proposal evaluation scorecard, and others.
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Best Practices for Procurement Policies and Procedures
Once you have the basic idea of creating procurement policies and procedures, you also need to know about the best practices for building these important documentations.
These are just a few tidbits that we’d like to share with you. If you want more information, our Negotiation Gamechanger course has more ideas and strategies for creating the best procurement procedures and policies.
Before you start creating your procurement policies and procedures, you need to think about how each policy and procedure will be documented. You must document your policies and procedures in a way that each should reflect all the things that you want to cover. The policies and procedures must also be written in a way that your procurement team can use them while following the policies and procedures.
So in a nutshell, your procurement policies and procedures must be part art and part science.
So how do you go on achieving that? Here are some of our best pointers:
- Assign an owner whose job is to maintain and continually refresh your procurement procedures, policies, and documents.
- Identify the roles and responsibilities of each member of your procurement team to avoid confusion.
- Choose people who can help in interpreting and resolving problems.
- Reference forms, templates, checklists, and other tools that the staff can use
- Create policy statements that specifically address the rule, and procedures that direct the implementation of activities.
- Develop procedures that offer employee options, when needed, as some procedures are unnecessarily restrictive and may not be of use.
- Use clear and simple instructions that your procurement team can understand.
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.
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.
What is a procurement policy example?
A good procurement policy example is the Competitive Bidding policy. It is a policy created to help procurement managers in setting up the procurement bid.
Create good procurement policies and procedures for your company today!
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