Procurement planning is the process of deciding what to buy, when and from what source. It is the primary function that sets the stage for subsequent procurement activities. Procurement must take a thoroughly professional view of its role in business as a whole and that must include planning. Any procurement begins with the planning decision to make the purchase and this will involve in the first place, deciding whether there is a need for the particular goods or services, ensuring that the purchaser has the legal powers to undertake the transaction, obtaining any relevant approvals within the government hierarchy and arranging the necessary funding. The ultimate goal of procurement planning is coordinated and integrated action to fulfill a need for goods, services or works in a timely manner and at a reasonable cost.
Procurement planning is undertaken as part of the program/service planning process. The primary concept of procurement is that planning, scheduling and bulk purchasing result in cost savings, efficient business operation, and increased value for money. The public sector is expected to use procurement planning as an opportunity to evaluate/review the entire procurement process so that sound judgments and good decision making will facilitate the success of the overall project implementation in the procurement of goods, works and services. A mistake in procurement planning has wide implications for local governance, measured from the two indicators of accountability and participation. The ideals of planning suggest that procurement planning can be implemented in an atmosphere of complete harmony. As a function, procurement planning endeavors to answer the questions of what do you want to
- When to procure it;
- Where to procure them from; when the resources be available;
- The methods of procurement to be use; how timely procurement or failure will affect the user of the item(s);
- The procuring and disposing entity; efficient in the procurement process; and the people to be involved in the procurement.
Importance of procurement planning
Procurement Planning is important because:
1. It helps to decide what to buy, when and from what sources.
2. It allows planners to determine if expectations are realistic; particularly the expectations of the requesting entities, which usually expect their requirements met on short notice and over a shorter period than the application of the corresponding procurement method allows.
3. It is an opportunity for all stakeholders involved in the processes to meet in order to discuss particular procurement requirements. These stakeholders could be the requesting entity, end users, procurement department, technical experts, and even vendors to give relevant inputs on specific requirements.
4. It permits the creation of a procurement strategy for procuring each requirement that will be included in the procurement plan. Such strategy includes a market survey and determining the applicable procurement method given the requirement and the circumstances.
5. Planners can estimate the time required to complete the procurement process and award contract for each requirement. This is valuable information as it serves to confirm if the requirement can be fulfilled within the period expected, or required, by the requesting entity.
6. The need for technical expertise to develop technical specifications and/or scope of work for certain requirements can be assessed, especially where in-house technical capacity is not available or is non-existent.
7. Planners can assess feasibility of combining or dividing procurement requirements into different contract packages
The Benefits of Effective Procurement Planning
Effective Procurement Planning is essential for all procuring entities in the implementation of the purchasing objectives for the following reasons:
1. An effective plan saves time and money
2. An effective plan serves as a conduit to achieving entity‘s objectives
3. An effective plan ensures compliance with regulatory policies
4. An effective plan provides a framework to guide procurement officers in the achievement of their tasks and duties.
5. Effective procurement planning enables organization and its staff to work smoothly to achieve the organization‘s goals with the right quality and quantity of inputs in place
Consequences of lack of procurement planning
Lack of planning leads to:
- Delay in project implementation
- Inadequate supplier response
- Procurement process shortcuts
- Higher prices of goods, services and works
- Insufficient lead time
- Claims of unethical or unfair dealings
- Delay requisitions to create false emergencies