The procurement process is the stages through which a procurement activity is undertaken. Each of these stages has to be managed well in order to achieve the procurement objectives which would include achieving value for money in all procurement activities.

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The process ordinarily will be firm-specific but generally involve the following 7 stages of procurement.

1. Preparation of requisitions
2. Authorization of request
3. Search for suppliers
4. Selection of suppliers
5. Placing a purchase order
6. Receipt of goods and services
7. Invoice processing and payment of suppliers

Now let consider the explanation of each process of the government procurement process

WHAT ARE THE 7 STAGES OF PROCUREMENT?

1. Preparation of requisitions

The procurement process will begin with the raising of requisitions by the department or unit within the organization that realizes the need to replenish its stock of items.

The need for requisitions will be initiated when the stock levels of the goods reach the re-order level for existing items or by the commencement of a new activity that would require the good or service.

Upon the realization of the need for certain goods or services, the head of the unit in the organization or the responsible officer will request for them, normally from the procurement head by filling a requisition form. The requisition form details out the identification of the item needed, quantity needed, when needed, and the purpose for the request.

2. Authorization of request

The control activity in the procurement process requires that requisitions raised are duly authorized before they are processed. The authorization ensures that the request actually reflects the needs of the unit making it and it is in the best interest of the organization.

A designated person (superior), other than the one making the requisition will authorize the requisition.

3. Search for suppliers

The authorization of the requisition empowers the procurement office to commence the search for potential suppliers.

Normally, for the acquisition of regular items, the organization will have a list of potential suppliers to choose from, based on previous dealings.

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In the case of new business, depending on the nature and size of the transaction, the acquisition intention will have to be publicly advertised and a pool of suppliers constructed for selection.

Also, the nature and size of the transaction may warrant that the acquisition goes through a tender, irrespective of whether it is a new business or regular acquisition.

4. Selection of suppliers

The construction of the pool of suppliers should facilitate the process of choosing a supplier. A supplier will generally be settled on after considering the ability of the supplier to deliver the right items on time and at reasonable prices.

5. Placing a purchase order

An order is a firm request placed by a buyer with a supplier detailing the items to be supplied, quantity and quality of these items as well as the delivery dates.

The selected supplier is contacted to supply the organization with the said items to be acquired under the terms and conditions agreed upon between the supplier and the organization.

The order placed with the supplier needs to tally with the requisition raised by the requisitioning unit in terms of quantity, quality and delivery schedule.

6. Receipt of goods and services

These are arrangements within the firm put in place to facilitate the receipt of the items ordered from the supplier.

This stage of the procurement process is to ensure that the organization gets to receive only items it has ordered for.

Thus, items received need to be checked with orders placed with the supplier to confirm quality and quantity levels.

The condition of the supplied items needs to be verified. The supplier has to be notified of any anomaly as early as possible.

The delivery of the Goods is accompanied by goods received note (GRN) which when signed by the organization indicates the acceptance of the items and places a payment responsibility for the organization.

GRN is generally prepared by the stores unit of the buyer.  Where there are discrepancies, a debit note has to be raised by the buyer as a source document covering the goods being returned to the supplier.

The debit note indicates that the buyer’s indebtedness to the supplier has been reduced by the size of the amount indicated on the debit note.

7. Invoice processing and payment of suppliers

Subsequent to the receipt of the goods, the payment process is commenced. The accounts department needs to be furnished with copies of the requisition, purchase order, GRN and any other relevant documents connected with the acquisition. These documents will have to go through pre-audit before payment is affected.

SOME RELEVANT DEFINITIONS OF PROCUREMENT

Goods mean objects of every kind and description including raw materials, products and equipment and objects in solid, liquid or gaseous form, and electricity, as well as services incidental to the supply of the goods if the value of those incidental services does not exceed that of the goods themselves;

An example of services incidental to the supply of goods will be the training of staff (costs) on the use of acquired technical products.

Works means work associated with the construction, reconstruction, demolition, repair or renovation of a building or structure or surface and includes site preparation, excavation, erection, assembly, installation of plant, fixing of equipment and laying out of materials, decoration and finishing, and any incidental activity under a procurement contract.

Services mean intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment or transportation. Procurement entity means any entity conducting public procurement under this Act.

Tender: In procurement refers to the process whereby governmental institutions invite to bid for large projects that must be submitted within a finite deadline. These invitations are normally made public through publication in daily newspapers.

 Request for Tenders (RFT) is a formal, structured invitation to suppliers to submit a bid to supply products or services.

Tender document:  A written invitation sent to potential suppliers of a good or service to inform them about the information required for the buyer to choose among them.

Bid: Is to offer a certain price for something, especially at an auction.

In response to a request for tenders, potential suppliers indicate what they have to offer and the price at which they are willing to trade those goods, contracts and services. The bid-receiving party would then decide on who to buy from based on his/her requirements and bids received.

Proposal: It is a plan that is put forward for consideration.

Quotation: It is a written statement of the cost of a good, contract or service.

Tender Security: bid security is an amount of money that may be calculated as a percentage of the budget estimate of a procurement requirement or a percentage of a bidder’s bid price. It is used as a protection against bidders withdrawing their bids prior to the end of their bid validity period, or for refusing to sign the contract.

Tender Validity Period: is the period in course of which the supplier is bound by the tender, in relation to its content and conditions offered (price, execution time, guarantee, etc.).

The margin of Preference: Is the extent to which one person or group is given more favourable treatment than others. The percentage of reduction in the requirements of the goods, contracts and services to be procured by a procurement unit for domestic suppliers/ tenderers or domestically produced goods, works and services