2. What is Procurement | Procurement
Methods | Procurement Process
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What is Procurement?
Procurement in any company is a strategic process of acquisition or purchasing of
goods, works, and services from external sources or organizations by inviting them
through the different procurement methods like tenders, rate contracts, and purchase
orders mainly.
The need for Procurement:
In any business sector, every organization always trying to improve the profitability
using different processes and strategies. In this procurement is one of the processes
that every business follows. Procurement is viewed as a strategic function working to
improve the organization's profitability.
Procurement can save money, time, and be the way to success for any business, most
of the organizations are agree with this. Its savings directly impact bottom-line profits
and are one of the most beneficial models for driving a company’s profitability and
increasing shareholder value.

3. The goal of public procurement is to satisfy the public interest or to give the
community value for the money spent
A good procurement process is one that –
 Obtains goods works or services
 In the correct quantity
 Of the appropriate quality
 At the required time
 From the best supplier
 With the optimum terms
 Under appropriate contractual obligations
Good procurement should –
 Meet community needs
 Secure value for money for the community
 Be fair to bidders
Different Methods of Procurement:
Procurement methods are the processes of inviting suppliers or vendors to fulfill the
organization’s needs in terms of auxiliary products, services, and goods at the best
possible cost.
Fig.- Different Types of Procurement Methods

4. This procurement invitation process gets done by different methods:
1. Auction
2. Acquisition
3. Rate Contract
4. Purchase Order
5. Agreement
6. Tenders
Auction:
An auction is a sales event wherein potential buyers or vendors place competitive bids
on goods or services either in an open or closed format. Auctions are popular because
buyers and sellers believe they will get a good deal of buying or selling assets.
Acquisition:
The acquisition is the method of acquiring a company and reporting the purchase on
the balance sheet of the company that acquires it. The resources of the targeted
organization are added to the balance sheet.
Rate Contracts:
Rate Contracts is the agreement between the purchaser organization and supplier firm
to provide assets at a specified price for the mentioned period as in agreement.
Rate contracts are mainly Fixed Price(FP) contracts, Time and Material(T&M)
contracts, and Cost Reimbursable(CR) contracts.
Purchase Order:
In this method purchaser or buyer send a legal document called Purchase Order(PO)
to the vendor or supplier. This document outlines the specific goods or services that
buyers want to purchase. When the vendor accepts it becomes a Bidding Contract.
Agreement:
In this method, a legal document is signed by both purchasers and buyers that is called
an agreement. This is between a buyer and a seller in which the buyer agrees to
purchase goods or/and services from the seller in exchange for payment transactions.
The agreement outlines detailed price lists, conditions of delivery, date of delivery,
payment method and information, legal terms, and condition.
Tenders:
A company or organization specifies its requirement of goods or services in front of
the potential seller or vendor. Subsequently, it will open bidding in a process known
as tendering.
Among all above the methods mostly public sector companies or organizations used
the tendering method where they choose the lowest cost bidder due to the budget
constraints.
Canada’s Indigenous community takes a more holistic approach to procurement.
Utilizing the procurement process to positively impact their social-economic goals

5. and objectives, the cost is not always the determining factor. Major projects within
the Indigenous community are often viewed as an opportunity to provide training that
will lead to future employment opportunities for its citizens. Suppliers willing to
recognize the “bigger picture” often find additional opportunities their companies can
benefit from.
Indigenous communities will often utilize the “Invitation to Attend” request for bid or
documentation which should be interpreted as an opportunity to build a relationship
with the community.
What is Procurement Cycle or Procurement Process:
The procurement cycle is a series of steps to acquire goods and services after
identifying needs and specify them. This cycle follows by every industry and every
organization.
Fig.- Procurement Process or Cycle Image
From the first step identify the needs for payment and record maintenance this cycle
has different stages. These areas follow:
1. Identify Needs
2. Specification of Need
3. Selecting Procurement Method
4. Shortlist & Select Suppliers
5. Award of Contract
6. Receive Goods/Services
7. Evaluate Performance

6. 8. Supplier Relationship Management
9. Invoice Approvals and Payment
10. Record Maintenance
Identify Needs:
The first step of the procurement cycle is to identify what services and goods should
exactly need and why. The purchasing department, technical expertise, and some
other company department discuss the needs and summarizes the need, and prepare a
document.
Specification of Need:
All team members and experts specify the needs of services and goods. Specify the
quantity, quality, product, and service they want to acquire. After that, a legal
document prepares with all specifications.
Selecting Procurement Method:
Select one of the procurement methods suitable for the purchaser, buyer, and business
workflow. Most of the time public or government organizations choose the tendering
methods because of some budget constraints.
On the other end, private companies and organizations choose methods like rate
contracts, purchase orders, or maybe some time acquisition.
Shortlist & Select Suppliers:
After the process of tendering and bids are done, shortlisting and selecting the most
likely vendor is becoming the most important stage. The solicitation contains all of
the criteria that a prospective offeror must accommodate and honor to be considered
for award.
Award of Contract:
After selecting the most likely vendors the next step is to award a contract. This
happens when the buyer organization received and finalizes whose proposal fulfills
the required criteria and requirement.
Sometimes, the offeror needs more information and details about the proposal than
the offeror discuss with the vendor. In this stage, selected firms will enter negotiations
with the buyer so the additional information hashed out and a final award made.
Receive Goods & Services:
This stage of the procurement process involves the logistic department to come into
action. The supplier sends goods and services as mention in the contracts and
agreement.
Purchasers receive the goods and services they want.
Evaluate Performance:
The performance of the goods and services is evaluated in this step. Purchaser
monitor and review at agreed periods against Key Performance Indicators (KPIs) as
mention in the contractual terms.

7. Supplier Relationship Management(SRM):
This is the systematic approach an organization takes in assessing supplier
contribution. This clears the scenario for the supplier on how its services impact the
business of the buyer.
This also introduces the scope of improvement in the supply chain process between
needed and provider. This most important part of the Supply Chain
Development in Supply Chain Management (SCM).
This step also important because it is carried out to determine if business requirements
have changed.
Invoice Approval & Payment:
This stage of the procurement process will involve the company’s finance department.
The finance department receives bills and invoices from the supplier. After this
finance team matching the invoice against an approved Purchase Order(PO). If
everything is per the contract terms and purchase order finance department sends
payment to vendors.
Record Maintenance:
This final step of the procurement cycle is most important to justify all procurement
needs and how had this impacted company’s profit. The audit department keeps all
purchase requisitions through the invoice.
Summary:
The procurement process is the long-term strategic process for any organization. The
objective of this article is to provide the information and knowledge of an effective
procurement process that helps organizations to create a well-structured cycle.
After reading the complete post your last question may be “How and where to find
procurement opportunities?” then some organizations come into the picture that offers
procurement services for both purchasers and sellers to make easy business
development.