Procurement Policies That Work
Why do I need a Procurement Policy?
Procurement polices are often approached from a compliance perspective. Schools establish policy that allows them to protect their ability to access Federal funding. The “policy” becomes a necessary evil to spending money.
What if we changed that way of thinking?
What if a procurement policy was approached with the goal of maximizing your budget? What is a procurement policy was approached with the goal of finding better solutions to filling needs? What if this was approached as an effective process versus policy? It can. And, it should!
What should be included in my procurement process to use it as an effective tool?
- Set Thresholds. Every budget allow for different thresholds of expenditures. For a purchasing and procurement policy to be effective, an organization must identify the levels that best represent purchase patterns and risk. This can be determined by taking a look at common purchases over the years and assessing the risk they place on a budget. Federal guidelines set thresholds high. So high, that these thresholds may have no relevance to an organization with a “small” budget in comparison. Setting thresholds and process around those that are more relevant to the specific organization guides the process of good decision making.
- Incorporate Comparison Bids. The complexity of comparison bids should be increased as threshold levels increase, but at all levels some comparison should be made. Comparison requirements should support sound decision making processes, not add more paperwork or time to the process. For supply items a comparison can be as simple as getting online and comparing prices among multiple organizations. Joining into group purchasing cooperatives can save you time and money overall. For solution products, including large service contracts or consulting support, an effective proposal solicitation process should be implemented. At times, it is the need that defines process, not the dollar amount. Policy establishes minimum expectations. It should not limit the process.
- Develop An Effective Proposal Solicitation Process. Issuing a Request for Proposal (RFP) is valuable for a multitude of reasons. However, there are two noteworthy outcomes that should not be overlooked. The first is the value of planning. In order to distribute a request for proposal, an organization must take the time to establish outcomes to be met and criteria for which a decision will be made using the proposals. This process helps an organization ensure actual needs are met, not perceived needs. The planning that goes into developing an RFP is the beginning of an effective implementation strategy. The second noteworthy outcome is the value of receiving multiple solutions. There is no one size fits all model in most situations. Demographics, research, experience, size, etc. are all factors of which influence the way a need is fulfilled. Using an RFP to invite solutions to meet an established outcome is a great way to bring innovation to a process. This process can also help to find creative ways to fulfill needs and meet budget constraints.
- Plan for Decision-Making. A common decision approach for large-scale contract procurement in years past has been to use a low bid model. In this model, a request for proposal was initiated, providers came their best price bids and a contract was issued to the lowest bidder. The low bid model does not maximize return on investment! Using a decision-making model that measures against expectations is a more effective model and has proven to yield higher quality results. Using a rubric to assess the ability for a provider to meet expectations is an effective method for decision-making. A rubric allows for multiple factors to be incorporated, including objective aspects such as price and subjective items such as measuring the innovation in the approach. Various weights can be placed using assigned points. Using a rubric as a baseline for group decision-making is a resourceful tool for identifying strengths and weaknesses of each proposal. The collaboration of strengths from multiple proposals does maximize return on investment! See “Building An Effective Rubric”more information and examples!
How do I do focus on process and stay compliant?
Procurement policies vary in complexity. It is important for each organization to choose a policy that meets the requirements of the various funding sources. See a sample policy in our resource library!
Do you have questions?
Send us your questions to firstname.lastname@example.org!