Procurement Policyndmd

Procurement Policy
How to write a procurement policy that

empowers and Protects?
Prepared by: Moamen Emam

Procurement Engineer
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Introduction:
Writing a procurement policy is a big undertaking. If you’re considering
creating a new policy, you may find yourself asking: Why do we need one?
What should it say? Will people actually follow it? What will it accomplish?
All good questions — and ones I asked myself as I set out to create a
procurement policy for my company.
My ultimate goal was to empower our team with an efficient process while
also protecting the organization from risk. As I researched and considered, I
was disappointed to find lots of outdated practices, inefficient policies, and
over-engineered processes. So, I wanted to share what I’ve learned to help
others in a similar position.
In this blog, we’ll explore everything you need to know about procurement
policies. We’ll start with the basics: What is a procurement policy? How do
you know if you need one? And, what should be in it? Next, we’ll go
through the steps of how to write your first procurement policy (or update
an old one). Finally, we’ll offer a procurement policy example and
template.
Contents:
1. Procurement policy basics
2. How to write a procurement policy?
3. Quick tips for success.
4. Sample procurement policy and template.
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1-Procurement policy basics
What is a procurement policy?
A procurement policy is a set of guidelines used to establish and standardize
the procedure for purchasing goods and services within an organization.
Also called a purchasing policy, it provides specific instructions to help
employees successfully navigate common procurement scenarios.
Why do businesses create procurement policies?

Often, small businesses don’t have a procurement policy, because they only
have a few employees and don’t often buy expensive goods or services.
This is particularly true in businesses that provide services rather than
physical products. For these organizations, tracking budgets and spending
is relatively simple. Therefore, a formalized procurement policy isn’t
necessary because the few employees that have purchasing power also
have direct visibility of the company’s needs. However, the story usually
changes as the business grows.
As an organization grows, so too does the need to spend. For instance, the
sales department needs software. A consultant is hired to help with
product development. And, the marketing team wants to buy ads. Before
you know it, money is flying out the door from every department and you
have no idea where it’s going or why. It makes it difficult to know where
the bottom line is. This is a common scenario for rapid-growth businesses.
Fortunately, a procurement policy helps get things back on track. Indeed,
the goal of a formalized policy is to improve spend visibility, increase
consistency, control maverick spend and reduce risk.
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What should a procurement policy cover?
Every business has unique needs. Consequently, there’s no one-size-fits-all
procurement policy. However, if you explore sample procurement policies,
common themes emerge. While the contents of each policy should be
customized to address the business’s needs, there are a few sections that
most procurement policies include.
Sections in a procurement policy

Policy objective
Introduce your procurement policy by sharing why it was created. What are
the goals of the policy? For example, our own policy begins with this short
statement:
Objective: Provide a centralized process for requesting the purchase of a
product or service for company or departmental use. Streamline and
compress the traditional RFX process to be in line with company goals and
values, while still providing the necessary due diligence with vendor
selection.
Process overview
Give a high-level summary of the procurement process. Share a brief
description of the steps in the process. In addition, it’s helpful to include a
workflow diagram if possible to illustrate the process.
Submit a procurement request form with general information about the
need
1. Procurement reviews the request and gathers more specific information
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2. Based on the needs and impact, the request may require an RFX
3. A vendor is selected and the purchase moves through executive
approvals
4. Contract negotiation and execution
Procurement thresholds
Give guidelines for what level of spend requires procurement oversight. For
instance, it’s not a good use of procurement time to approve the purchase
of every stapler. However, for larger purchases, it’s important to protect
the business from risk.
Outline a few common scenarios: When does a purchase need to be
approved and through what channels? At what level of spend or impact is
an RFX required? The answers to these questions will be different for every
organization.
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RFX process
This section offers an overview of your RFX process for purchases that meet
the established criteria. Whether you use a request for information, a
request for proposal, or a request for quotation (RFI, RFP, or RFQ), the
steps of the process are similar.
Not sure which RFX to use? Check out this infographic, RFX selection guide:
RFI vs RFP vs RFQ.
1. Gather RFX requirements
2. Establish scope and evaluation criteria
3. Create the RFX questions
4. Select vendors and issue the request
5. Review, score the RFX and select a winner
If you use Word and Excel to manage your RFP process, you’ll need to keep
track of all of the documents separately. However, if you use RFP
management software the entire RFX workflow happens in a single,
centralized place.
Sustainability and diversity statement

Organizations that have sustainability and diversity goals often include a
brief overview of their initiatives in their procurement policy. Typically, this
section simply serves as a quick reminder. Rather than going into detail,
consider linking to sustainable sourcing and supplier diversity policies.
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Ethics and anti-bribery
Like the sustainability and diversity statement, the ethics and anti-bribery
section often links to a more detailed policy. However, it serves as a
reminder of best practices when making purchasing decisions and awarding
contracts. This section is common in larger organizations, regulated
businesses, or nonprofits that regularly make substantial purchases.
Other sections found in procurement policies

In addition to the common procurement policy sections found above,
depending on the needs of your business, you may also consider including:
 Supplier selection policy

 Contracting requirements and review process
 Signature authority guidance
 Key procurement definitions
 Common questions and answers
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How to write a procurement policy?
1. Define your goals and needs

Before you put pen to paper to start writing your procurement policy,
spend some time thinking about what it needs to accomplish.
For example, businesses that are scaling rapidly need a purchasing policy
that enables them to maintain momentum while still protecting the
business. On the other hand, established organizations may struggle with
maverick spend. Their procurement policy needs to be clearly defined and
easy to navigate to encourage compliance.
So, what are your goals and needs?
 Improve spending visibility

 Provide parameters for small, low-impact purchasing
 Increase process consistency
 Control Maverick’s spend
 Improve procurement speed
 Reduce third-party risk
 Gather data for procurement analytics
As you write the policy, keep this information in mind. Which of these goals
is your top priority? Does every step of your procurement process help
achieve one or more of these goals?
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2. Research and write
While no two procurement policies should be identical, it certainly helps
not to start by staring at a blank page. So, it’s wise to do some research,
review a few examples and check out a template (see below).
Then, start writing section by section. Remember, try to keep it as concise
and clear as possible. Make good use of section headers, short paragraphs
and sentences, minimal jargon, and bullet points.
Things to consider when drafting a procurement policy

 Does this policy improve or support our ability to audit spend?
 Is it easy to understand and navigate?
 Does it maximize the value procurement adds to purchasing?
 Is it effective and efficient for both users and procurement?
 Can it be easily scaled to accommodate growth?
 Does it protect our business from risk?
 Can we easily gather vendor and contract data?
3. Stakeholder review and approval

Once you have your first draft, it’s time to solicit feedback from a few key
stakeholders. One by one, engage the necessary parties. Generally, it’s best
to start with your manager or direct supervisor. Then, move on to
operations, legal, finance, IT, or any other departments that are regularly
involved with purchasing that might offer helpful input.
Admittedly, writing and editing by committee is always a risk, so approach
stakeholders with the intent to inform and consult. It’s important to
welcome suggestions, but carefully consider edits. Above all, remember
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your goals. Does the suggestion add time but not significant value? Always
weigh the benefit versus the impact on your end-user.
When you’ve arrived at your final draft, submit it for executive approval.
With any luck, you’ll emerge with an official procurement policy that
empowers users and protects your business.
Quick tips for success

Ensure it’s scalable
Writing a procurement process and policy takes a lot of time. So, write it to
last a while. How will the policy fare if your company doubles in size over
the next year? If twice as many people are coming to you with requests, is
the workload manageable with the current policy? Compliance and
consistency go hand-in-hand when it comes to procurement policies.
Write your own rules

Don’t let yourself feel constrained by what other businesses do. If a low
spend threshold before requiring an RFP causes tons of work for
procurement and yields minimal savings, change it. Many common
procurement practices cause challenges that make the process painful.
Creating a policy without considering how it would actually work in your
organization won’t do you any favors in the long run. Take this opportunity
to think differently.
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Make it modular
Procurement projects come in all shapes and sizes — and your
procurement policy should accommodate that. Making your process
modular means only using the right parts of the process for the right
projects. The flexibility will improve efficiency.
Some projects will need the full-court press before moving forward:
internal approvals, requirements discovery, an RFI, a vendor selection
process, a full RFP, a vendor risk assessment, a vendor evaluation process,
negotiations, and final contracting. While another low-value contract may
just need a 10-question RFP lite and a risk assessment. Your procurement
policy shouldn’t make the process harder than it needs to be.
Use an intake form

Creating an easy intake form makes it simple for stakeholders to engage
with procurement. In addition, it makes it easy for you to determine what
level of procurement involvement is required. Basic fields to include:
 Name of requestor
 Type of request (good or service)
 Description of purchase
 Budget or expected spend
 Department owner
You can’t plan for everything — so don’t

Don’t get caught up in writing policies and scenarios for every possible
outcome. If you do, you’ll end up with 25 pages of unreadable, difficult-to-
navigate red tape. Besides, I can tell you from experience, your team will
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always come up with a crazy curveball you haven’t planned for. Instead,
focus on communicating the goals and intent of the policy. That way,
stakeholders know what kinds of situations require collaboration with
procurement.
Ask for feedback and optimize

While consistency is crucial for compliance, don’t live with a bad or broken
process just because it’s what you’ve always done. As you receive requests
and complete projects, ask stakeholders for candid feedback on the
process. Gather that feedback and once a year, set aside time to review
what’s working and what isn’t. Additionally, consider if there are any new
procurement trends that would serve your business well. There’s always
room for improvement.
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Thank you
for your time and attention.
If you have any questions, please feel free to contact me.
www.linkedin.com/in/moamen-emam/
Let's build a community of knowledge-sharing and collaboration
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Procurement Policy

How to write a procurement policy that

Prepared by: Moamen Emam

Why do businesses create procurement policies?

Sections in a procurement policy

Sustainability and diversity statement

Other sections found in procurement policies

 Supplier selection policy

1. Define your goals and needs

 Improve spending visibility

Things to consider when drafting a procurement policy

3. Stakeholder review and approval

Quick tips for success

Write your own rules

Use an intake form

You can’t plan for everything — so don’t

Ask for feedback and optimize

Let's build a community of knowledge-sharing and collaboration

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