It is important to have a clear procurement policy to avoid confusion and to make sure we get value for money when buying goods or services. The policy also removes the suspicion of fraud – and the temptation!
Often we need to make sure we comply with donor rules and regulations so having our internal stages clearly defined helps us compare and adjust to donor regulations as required.
Where a donor’s rules are stricter than our own internal policies we must make sure we comply with the donor rules for that particular grant agreement.
The typical stages in a procurement process are illustrated below. Of course, your own organization’s process may vary, with more or fewer steps, and use different terminology and forms.
1. Check the budget and the specification of goods or services to be purchased
The exact quantity, standard and guide price of the goods or services required, as described in the project budget, must be checked to ensure funds are available and the correct items are purchased.
2. Prepare a purchase requisition
An internal request on a standard form is prepared to formally request the purchase of the goods/services specified.
3. Authorize purchase requisition
This will usually be checked and authorized by the budget holder or another nominated person to verify that there is a genuine reason for the purchase. The available budget is re-checked at this stage.
4. Obtain quotations
Quotations from reputable independent suppliers are obtained, as specified by the internal rules and/or donor rules.
5. Select the supplier
Quotations are reviewed and a supplier is selected based on price, quality, delivery and ‘after sales’ terms to ensure value for money. For larger purchases, it is usual to have a ‘Purchasing Panel’ or ‘Procurement Committee’ to select the supplier.
6. Issue purchase order (PO)
After the supplier is selected a Purchase Order, authorized by the budget holder, or other authorized signatory, is sent to the selected supplier with a copy kept on file. The quotation will be attached to the PO. This then forms a legally binding agreement between the supplier and the NGO.
7. Receive goods from supplier
When supplies are delivered/received, they must be checked against the purchase order to ensure they are the correct items. A Goods Received Note (GRN) is usually signed and a copy filed.
8. Receive and check supplier invoice
Once received, the invoice should be checked and matched up with the GRN, PO and quotation to make sure the goods have been received and the prices charged are as agreed.
9. Prepare and authorize the payment
The Payment Authority form is attached to the invoice and all the supporting documents. It includes budget and accounting codes and must be checked and authorized by the budget holder or another nominated person
10. Pay the supplier invoice
Payment should be made to the supplier within the specified payment terms, usually 30 days. However, in some countries suppliers require payment on delivery or even before delivery.
11. Enter payment into the accounts
The final stage is to record the payment in the organization’s books of account and add to the asset register, as soon as possible .