What is the Purpose of A Procurement Policy?
Writing a Procurement Policy
Sample Procurement Policy
Conclusion

All community organizations need to procure (purchase) supplies, equipment, and services. Government funding sources usually require organizations to adopt and follow a formal policy that documents and regulates the purchasing process. Even if your organization does not receive government funds, a written procurement policy will avoid confusion and disputes.

A procurement policy is a set of guidelines that an organization follows when purchasing supplies, equipment, or professional services. While it may require a little time, it should not be burdensome. This booklet will help you develop a procurement policy to meet your organization's needs.

What is the Purpose of A Procurement Policy?

A procurement policy has four primary purposes:

1. To ensure a fair process.
2. To ensure a fair price.
3. To ensure proper authorization.
4. To document the above listed purposes.

A procurement policy divides purchases into categories by cost and establishes the process to be followed for each category. The more expensive the purchase, the more extensive the process.

If your organization were required to defend a purchasing decision, it woul be prepared with formal and legitimate documents as well as a written record of the guidelines (the procurement policy) used to make the decision.

• A procurement policy may require you to "comparison shop" for the best quality, price, and supplier.
• For more expensive purchases it also requires you to keep records of price quotes, bids, and receipts.
• It may require a director or the board to authorize expensive purchases.

Small organizations typically have very low cost categories because even smaller purchases can affect the budget. (E.g., $0-$500, $500-$1500, more than $1500). Larger organizations with more routine large purchases may have higher categories (e.g., $0-$2500; $2500 - $5,000, more than $5,000). followed for each category. The more expensive the purchase, the more extensive the process.

 

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Writing a Procurement Policy

Even though government funders usually require organizations to develop procurement policies, they allow each organization some flexibility to develop a practical policy that meets its unique purchasing needs and organizational structure. When you write your policy, make sure it includes these elements:

Cost Categories. Determine three cost categories that meet your organization's spending needs. If you receive government funding, ask your funder if they have any requirements or preferences. Each category should have its own purchasing guidelines. Cost categories should establish simpler guidelines for inexpensive items and stricter guidelines for expensive items.

Documentation. Your policy should require that records be kept of all purchases. Each cost category should state the kind of document to be kept on file such as receipts, competing bids, written estimates, a written record of price quotes given by telephone, authorizations, and the rationale for making a purchase. The higher the cost category, the more documentation required.

Supplier Guidelines. Because your organization may want to emphasize support for local or minority-owned businesses, it can formally factor this into the purchasing process. Such factors should not be mandatory, but they may be considered with all other factors.

Do not purchase items or procure services based only on price. Quality, durability, and experience may be worth the extra money you would need to spend. Public funders normally do not require you to make decisions based only on price.

Do not purchase items or consultant services from board members, regular members or staff unless they meet the procurement policy guidelines. Remember that the purpose of a procurement policy is to make purchases in an open, fair, and orderly fashion.

Authorization. Decide whom in your organization is best qualified to authorize final purchasing decisions in each cost category. The higher the price of an item or service, the more care the decision requires. In general, responsible staff members authorize every day, low-cost purchases while the board will often specifically authorize the purchase of expensive items or services.

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Sample Procurement Policy

Cavalier Community Council, Inc. Procurement Policy

The Cavalier Community Council, Inc., has established this policy to guide its procurement of supplies, equipment, and services. The purpose of this policy is to ensure that Cavalier Community Council makes procurement decisions and payments in an open and fair manner and to document all purchases when appropriate. This policy is intended to meet procurement standards stated in Office of Management and Budget Circular A-110. All services and items will be purchased with consideration of these priorities:

1. Best price. 2. Features and quality of the item. 3. Pittsburgh-based supplier. 4. Minority-owned supplier. 5. Willingness to meet billing, delivery, and service needs.

Services and items less than $250: Comparisons of prices, quality, and features can be made by visit, telephone or by consulting advertisements and catalogues. Executive Director must authorize purchases in writing. Written authorization and sales receipt confirming payment must be kept on file.

Services and items between $250 and $1,500: Comparison of prices, quality, and features must be made by inspecting the item in person or interviewing the service provider by telephone or in person. No fewer than three suppliers must be contacted for purposes of comparing price and quality. Executive Director must authorize the purchase in writing as well as briefly describe the need for the item or service and reasons supporting the final purchase decision in writing. Written authorization and sales receipt confirming payment must be kept on file.

Services and items more than $1,500: Services and items more than $1,500:must be authorized by vote of the Board of Directors. No sole source bids will be obtained. Executive Director must describe in detail and in writing the need for the item or service. All correspondence, bids, estimates,receipts, and rationale for making the final procurement decision will be available to the Board prior to authorization to purchase and will be kept on file for a minimum of three years.

Adopted by the Board on _______________(Date).

Conclusion

A clear procurement policy will reduce confusion and second-guessing, both from inside the organization and from the public. Remember your objectives:

• Ensure a fair process.
• Ensure a fair price.
• Ensure proper authorization.
• Document all of the above.

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