Procurement is the process of sourcing or purchasing goods and services. It starts with planning and research, and ends after final acceptance, payment, and closeout.

Effective procurement can help businesses save on costs, maintain relationships, and mitigate risks. Establishing consistent practices is an important part of ensuring your business’s success.

Procurement and Finance are both involved in spending, but approach management differently. Finance uses accounts payable, budgets, and invoicing to track purchases, while Procurement focuses on policies/procedures, supplier relationships, and negotiating contracts.

There are four (4) main types of Procurement - Direct, Indirect, Goods, and Services.

Direct: purchasing materials and components used to create your final products and services. (E.g., wood and fabric used to make furniture items)

Indirect: purchasing goods and services to support business operations (E.g., office supplies, maintenance contracts, janitorial services, etc.)

Goods: acquiring physical products your business needs (E.g., equipment, computers, inventory items, etc.)

Services: acquiring services that provide expertise, labor, or specialized knowledge to help your business (E.g., consulting, IT support, legal services, etc.)

Procurement might also be defined in different ways based on other factors:

Procurement Method/Strategy: You might hear terms like “full and open competition” or “restricted/set-aside” to designate the types of businesses that can respond to a solicitation.

Contract Type: You may hear terms like “firm fixed-price” or “cost-reimbursable” to state the type of contract pricing that will be used.

Policies and regulations will vary depending on who you are working with. 

A Federal Government Agency must adhere to the Federal Acquisition Regulations (FAR) and their specific supplemental documents, like the Defense Federal Acquisition Regulation Supplement (DFARS) or Veterans Affairs Acquisition Regulations (VAAR).

A Local Government Municipality might have required regulations or statutes from the state to follow along with their own charter and policies.

A Commercial Entity will typically have their own standard practices and policies that they follow to ensure fairness, competition, and efficiency, but will also meet other requirements if working with another private or public entity.

An Educational Institution may prefer to work with non-commercial terms and conditions, depending on the type of services provided.

No matter who you do business with, there will always be policies to follow and terms to negotiate. This is where a Procurement professional can provide guidance to ensure your business is aware of and/or meeting third-party requirements.

The Procurement process can be broken down into 10 general steps:

1. Identify the Need: A department/team identifies a requirement.

2. Requests & Approvals: A Purchase Request is submitted and approved.

3. Market Research: Locate potential sources and suppliers. This can include posting a Request for Information (RFI).

4. Solicitation: If required, issue a solicitation (E.g., Request for Proposal (RFP), Request for Quote or Qualifications (RFQ), Invitation for Bid (IFB), etc.)

5. Evaluation: Assess responses from the solicitation.

6. Negotiation & Award: Finalize terms and select a Contractor/Supplier.

7. Award/Purchase Order: Execute a Contract/Agreement and/or Purchase Order.

8. Receiving & Inspection: Goods/services are received and accepted.

9. Invoice & Payment: Process invoices and pay Contractors/Suppliers.

10. Administration & Closeout: Complete modifications/amendments if needed, ensure compliance with requirements, and closeout the PO.