Typical procurement procedures include a series of processes involved in the cycle of acquiring goods and services including the identification of products, budget analysis, purchase and delivery. It starts with researching available options, tendering, negotiating with qualified suppliers over pricing, signing contracts and delivery times.
As a first step in the procurement cycle, a company identifies the need for goods and services. A common policy in businesses is to have end users plan for and accumulate their requests for supplies over a period of time. This may include setting value thresholds that call for different procurement approaches for purchases that cost more than a certain amount; for example, a particularly expensive item might require a purchase order to be pre-approved by several levels of management.
Another procurement policy revolves around determining the procurement method. Suppliers must meet predefined criteria and are required to apply for selection to supply goods or services. Depending on the scale of the project, a wide range of requirements are imposed on potential suppliers, including proof of ability to supply or compliance with legal requirements. In some cases, suppliers may be required to present and defend their proposals.
A policy containing a set of objectives agreed upon in contract documents between a supplier and the business ensures that goods or services are delivered at the best cost that is consistent with the need to achieve acceptable quality within an acceptable time frame. This policy should clearly defines who is liable for any risk that cannot be eliminated from the project.