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Procurement definition, goals, and principles. |
In this part, we will look at procurement definition, goals, and principles that would help us achieve transparency and the best value for money in obtaining goods and services.
Procurement: Definition, Goals, and Principles
Procurement is a key part of the supply chain process in ensuring that goods and services are sourced and obtained. To achieve this, it is important that people carrying out procurement must follow the procurement principles and goals.
They also need to build relationships with the people who are requesting goods and services, and with the suppliers who provide them.
Procurement Definition
Procurement can be defined as a process of identifying and obtaining goods and services. It also refers to the method of identifying, shortlisting, selecting, and acquiring suitable goods and services from the right supplier via fair and competitive bidding or tendering process.
What Does Procurement Mean in Humanitarian Logistics?
Procurement in humanitarian logistics is defined as a process of identifying, sourcing, and purchasing goods and services at the right price and quality from the right source through detailed specifications, competitive bidding, and smart contracting to get them delivered in the right quantities, to the right place, and at the right time.
To achieve this, it is important that people carrying out procurement should build good relationships with the people who are requesting goods and services, and with the suppliers who will provide them.
Procurement Goals
- Right quality
- Right source
- Right cost
- Right quantity
- Right place
- Right time
The aim and objective of procurement are to carry out this process in order to get the goods and services that are of the right quality from the right source at the right cost and can be delivered in the right quantities, to the right place, at the right time.
In general, Procurement’s goals are to:
- Purchase the proper good or services to suit all the possible business needs.
- Try to get the best possible value for goods or services you procured for your company or organization.
- Enable continuous operations by providing goods or services wherever and whenever they are needed.
- Ensure a continuous supply of needed goods and services.
- Ensure that all bidders are given a fair opportunity to compete.
- Protection from any conflict of interest in all supplier relationships.
- Ensure to build a good and sustainable relationship with potential suppliers and local communities.
Procurement Principles
It is important to recognize that procurement within humanitarian organizations also needs to follow the important procurement principles. These principles are important because donors have provided the money which is being used to procure goods and services. The three principles are:
- Best Value for Money
- Competition
- Transparency
- Proportionality
- Accountability
- Segregation
Best Value for Money means the selection of the offer which presents the optimum combination of life-cycle costs and benefits, which meet our organization's needs. It does not mean that you have to select the cheapest offer but you have to balance the quality and availability according to the organization's needs.
The principle “Value for Money” embraces “Total Cost of Ownership” which takes a “big picture” perspective on purchase evaluation criteria that include:
- Fitness for purpose of the goods or services.
- Timely delivery.
- Proper planning and scope of purchases.
- Consideration for all other relevant price and non-price factors.
The optimum combination of the best value for money we speak of is cost, quality, and sustainability that best meet our organization's requirements.
- Cost can be understood as costs of the entire life cycle of the procured products or services. Total Cost of Ownership takes into consideration not only the price but all the costs involved in buying and using a product over time.
- Quality can be understood as sufficient specifications to meet the organization's requirements.
- Sustainability means taking into consideration the economic, social, and environmental impacts.
Competition means that the process of selecting suppliers must be based on a competitive process. The competitive process entails:
- Promoting neutral specifications avoiding over/under-specification.
- Providing all suppliers with adequate information and notification to ensure that there is sufficient time to participate in the procurement process.
- Ensure that there is a comprehensive, impartial, and timely evaluation of all offers.
As a good practice, you should give feedback to the non-successful bidders, explaining to them the reasons for not being selected to allow them to improve their process.
Transparency: All procurement processes and phases must be fair and accurately documented. So, achieving transparency at procurement will contribute to building sound and reliable work relations with suppliers, vendors, and contractors.
Proportionality means there must be strict control measures and procedures that should increase proportionally to the value of the procurement. This means that the higher that value, the more measures, and stricter procedures will be required.
Accountability towards donors who require certain rules and procedures to be followed when using the fund they have provided.
Segregation of duties means having more than one person involved in the procurement process.
Conclusion
To sum up, procurement is the process of getting the right goods and services from the right suppliers at the right price that suits the organization's needs.
