Contract Procurement Process: Everything You Need To Know
The contract procurement process includes the procedures followed by a business when purchasing services or products.3 min read
The contract procurement process includes the procedures followed by a business when purchasing services or products. The process starts when company managers identify a business need that must be fulfilled and ends when the contract is awarded and signed. Responsible stewardship of business and public funds should be maintained whenever products or services are procured.
Many projects succeed or fail based on the performance of their suppliers in combination with the project team. This makes it all the more essential to managing vendors and procurement carefully so that all deliverables meet your needs and expectations.
The Purpose of Procurement
With an established procurement process in place, your business will be able to manage relationships with suppliers to maintain a high level of service and value. You'll have a streamlined method of ordering, receiving, approving, and paying for item deliveries.
Ideally, you'll be able to use the same basic process each and every time you purchase products or services for your business. This will allow you to resolve issues quickly when they arise. Goals of a successful procurement management process include:
- Identifying appropriate products and services.
- Creating and issuing purchase orders.
- Ensuring timely delivery.
- Approving payments.
- Establishing and meeting milestones in supplier contracts.
- Resolving issues with product delivery.
- Communicating issues among the management team.
- Reviewing proper fulfillment of contracts.
Steps in the Procurement Process
Having established guidelines in place will support the procurement goals of your management team.
- External or internal sources illuminate the need for a new product or service for your business. This could be a brand-new item or a reorder of something you've purchased in the past.
- Determine the exact features and specs of the product or service you need. This may depend on standards established by your industry. Where available, include specific part or product numbers as well as identifiers such as size and color.
- Consult the approved vendor list for your business to determine if the product you need is available from those suppliers. If not, you may need to research the product online or with the help of sales representatives to create a list of potential suppliers for that item.
- Compare the offerings of at least three vendors to find the best available payment terms and price.
- Create a purchase order, which lists the specific items to be purchased and terms and conditions of the sale, including price. Both parties should sign the purchase order and keep a copy on file.
- If the delivery of the product or service purchased is time-sensitive, the purchase order should include terms for expedition. Clearly list deadlines for work completion, delivery dates, and payment dates.
- When products are delivered, you can accept the items and make payment or reject them if they do not meet the terms of the purchase order.
- Check the invoice against the purchase order and the receipt. Resolve any issues before making payment.
- Keep records of all purchases in case you are subject to an IRS audit. This is also important so that you have warranty information and can reference previous purchases next time you have a similar procurement need.
Public procurement may have additional required steps and usually also comprises contract administration (another term for contract management). In other organizations, procurement ends when the contract is awarded and administration/management is a separate phase. Despite this separation, contract administration is just as important as procurement since it has a substantial impact on supplier relationships.
Steps in public procurement include:
- Identifying requirements.
- Deciding on a method of procurement.
- Conducting strategic planning.
- Processing requisitions.
- Preparing and publicizing solicitation documents.
- Visiting sites.
- Conducting pre-bid proposal meetings.
- Processing and evaluating bids.
- Making award recommendations.
- Negotiating contracts.
- Awarding and signing the contract.
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