What Is Procurement? Not Such A Simple Answer
So what is procurement? Well in its basic sense procurement is buying things, but if you say what is procurement to a business person the definition is much more complex. They will say that procurement:
- is the purchase of goods or services
- of the correct quality,
- the appropriate quantity,
- at the required time
- from the best supplier
- with the optimum terms,
- generally with some kind of contractual obligation.
Procurement usually happens automatically from regular suppliers that have a Master Agreement with the company. A Master Agreement is a contract that allows for a range of goods or services to be supplied at set prices and set terms. It is a way to ensure that purchasing happens quickly and smoothly for both the buyer and the seller.
Where there are ad hoc or large purchases procurement happens via a tendering or bidding process. So if you ask what is procurement in this case it is a formalized, staged process where a number of suppliers answer an advert requesting a service or group of products.
The first stage is when a PQQ or pre qualifying questionnaire is sent to all interested suppliers. It asks questions as to the suitability of the supplier to provide what is required. These will be questions as to the size and reliability of the company and the type of products it provides.
The next stage is to choose a small group of companies from these PQQ who will be allowed to tender for the work. A RFP (Request For Proposal) is then sent out to these suppliers. A RFP is a formal document that details the goods and services required as well as when they are to be delivered. It includes your terms and conditions as well as full details about the project.
The suppliers will then go away and produce their proposals that will answer the needs of the RFP. These are then reviewed and evaluated to find the best potential supplier. There then follows a period of negotiation until the resulting terms, conditions and prices are entered into a formal contract.
So you see, if you ask what is procurement, there are several possible answers.
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