The procurement process is often complex, with the procurement cycle involving several steps. There are many stakeholders involved in the decision-making process, especially when it comes to feasibility issues and cost approvals. With so many steps in the procurement cycle, creating a procurement policy checklist is one of the most important things your company can do. A procurement policy checklist helps you keep track of the necessary steps in a procurement cycle and outlines the procurement process, keeping it free from fraud and maverick spending. A well-designed procurement policy checklist espouses procurement best practices and puts in place a set of guidelines to ensure that your company’s procurement policy is followed to a T. A practical procurement policy checklist is succinct and user-friendly. Below are the 10 steps that a basic procurement policy checklist should cover to ensure a fuss-free and successful procurement process.
Identify what is needed
Before commencing the procurement process, take a moment to consider whether the product or service that you intend to procure is essential to your business. You want to be sure that the people responsible for approving the cost of this procurement will agree that it’s a necessary purchase, so the product or service that you’re looking to acquire should be essential to daily business operations, or is capable of improving business performance. As a start, you could perform an assessment to determine whether the products or services are already available within your organisation before making a requisition. The ultimate goal of any procurement policy is to reduce costs, but doing that requires you to first understand your business requirements.
Estimate the cost of procurement
According to Deloitte’s 2016 Global Chief Procurement Officer (CPO) Study, 74% of CPOs are citing cost reduction as a strong business priority for the upcoming 12 months. Knowing this, it would be helpful to carry out research on the market prices of the product or service you are looking to acquire, and subsequently prepare a realistic estimate of the amount needed. Remember to include taxes and other miscellaneous charges when determining your estimate. Once you’ve obtained a final estimate, consider whether the figure meets or exceeds the allocated budget. A realistic estimate of all phases of a product or service is important to aid you in the procurement decision-making process, and helps you take stock of the company budget.
Secure approvals for funding
With your procurement estimate in hand and the available research documents to back up your business case, you may now proceed to present your findings and proposal to the management and other relevant stakeholders. Be prepared to provide solid answers to questions on why a particular product or service is required, and how their procurement can help to boost business performance. Once the procurement price is approved, the relevant budget holder should be requested to approve the expenditure. It’s important to allocate sufficient time to obtain all the necessary approvals from the relevant personnel so as not to disrupt the procurement cycle.
Determine the best procurement strategy
A strong procurement strategy is one that is cost-effective and creates value for the organisation. To implement a procurement strategy with those features, consider putting in place procedures that help to minimise casual or ‘once-off’ purchases. Rather, design a procurement strategy that caters to the long-term needs of your company, which brings savings in terms of time, cost and resources. Be sure to determine whether a draw-down contract is already available for use, or if a framework agreement is in place for the product or service you are looking to acquire; otherwise, it’s good to develop one. It would also be helpful to refer to your procurement policy during this process to ensure that your procurement strategy is in line with the company’s vision, mission and goals.
Determine which tendering process to use
When deciding on the appropriate tendering process, it’s important to consider the size and characteristics of the contract to be awarded and the nature of your organisation. The two main types of tendering procedures are the open procedure – where interested parties are invited to tender – and a restricted (or selective) procedure, where tendering is restricted to suppliers believed to have the required expertise and capacity. Following an appropriate competitive tendering procedure will avoid breaches to your procurement policy.
Manage the tender process
This involves preparing your Request for Tender (RFT) form, providing suppliers with enough time to prepare and submit their tenders, responding to requests for clarification and supporting documents, receiving and opening tenders, as well requesting for clarification on any issues regarding the tenders received. When preparing the RFT, set out the criteria that will be considered for the award process, as well as the relative weightage of each criterion. It’s also important to ensure that the RFT is clear and comprehensive as this will help eliminate the need for clarifications at later stages of the tender process.
Evaluate the submissions
Once the deadline for tender submissions has passed, all tenders received thereafter must be returned unopened to the tenderer, having recorded their existence and date of receipt. When commencing tender evaluations, practice transparency and objectivity, taking care to evaluate based on the criteria stated in the RFT. Upon completing the evaluations, inform and debrief unsuccessful tenderers by providing an objective assessment of their strengths and weaknesses.
Grant the contract to the successful tenderer
Naturally, the recipient of the award should be the supplier that best meets the specifications outlined in the RFT, is able to meet all your business requirements, and who provides the best value for money. The contract should clearly specify the roles and responsibilities of both the buyer and the supplier, as well as the final cost of the product or service procured, including taxes and other miscellaneous charges.
Publish contract award notice
The value of a contract that is awarded to a supplier determines whether you are required to publish details of the contract on certain contract finder portals. This requirement usually applies to contracts with values that are above a certain specified threshold. Publishing a contract award notice ensures the transparency of the procurement process, in case there are any enquiries from non-participants about the awarding of the contract. Be sure to also set out information about the contractor and the value of the contract, as well as details of the winning tender.
Manage the contract
At the tail end of the procurement cycle is the process of managing the contract, a step that is necessary to assess the performance of the supplier and whether it has improved business processes and provided value for money. To carry out this step, develop a procedure to verify whether the supplier has delivered the product or service as outlined in the contract and complied with the procurement policy. Be sure to also determine areas for improvement and suggest any remedial actions that must be taken by the supplier. It’s helpful to maintain a record of your supplier’s performance as this information will come in handy during the annual review process, where you will decide whether to retain the services of the current supplier or select a new one.
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