Procurement is the purchasing of goods, services or works contracts from third party suppliers, either through quotations/tender processes, call-off contracts from public sector frameworks (such as those put in place by CPC) or by directly awarding a contract to a supplier.
Your institution’s financial regulations will set out how its budget holders will spend the money allocated through annual budgets to each department. If you are unsure of how best to achieve this in a compliant manner, these pages will give you guidance and provide you with templates which you can adapt and use.
Procurement is different from purchasing
Procurement covers all areas of your non-pay expenditure; the entire process of acquiring supplies, services, or works from third parties. It includes:
Pre-market engagement
Identification of requirements
Specifications
Assessment of risks
Management of tendering processes
Contract award and management
Monitoring of suppliers' performance
The procurement process considers factors such as the cost over the life (whole life costs) of the supply or service, and the quality necessary to meet users' requirements to achieve value for money. It is distinct from 'purchasing' supplies and services, which refers to the specific activity of committing expenditure, which tends to focus on issues of price rather than of value for money. For a more detailed dive into whole life costing, here’s our guide to Whole Life Costing.
Why is procurement important?
Many decisions taken by departments have a procurement implication that can impact on the overall cost of carrying out the decision. Here cost includes the total cost of the goods or service and not simply the price that is paid.
In the private sector
Procurement is viewed as a strategic function working to improve the organisation's profitability. Procurement is seen as helping to streamline processes, reduce raw material prices and costs, and identifying better sources of supply. In essence, helping to reduce the ‘bottom line’.
In the public sector
The concept of a 'bottom line' is less well defined - there are no shareholders' dividends to be paid out or publicly declared profit (or loss) announcements. In the education sector, there is a need to maximise the output, in terms of teaching within the available funds. These funds come substantially from public funding in the form of grants, student fees etc. This places an inherent requirement that the funds provided are managed in a manner that is accountable and demonstrates both probity and value for money. At higher levels of expenditure, the need for transparency, equal treatment and proportionality is required by legislation. The Procurement Act requirements for supplies, services and works that exceed certain cost thresholds are advertised and tendered in accordance with published rules.
Pay and non-pay expenditure
An institution’s expenditure is made up of two elements: pay (salaries and wages) and non-pay (all other expenditure). Procurement is concerned with the management of a significant proportion of the non-pay expenditure and ensuring that the best possible value for money is obtained when committing this expenditure. Non-pay spend includes the day-to-day running costs of the institution as well as its capital expenditure. This expenditure can be further divided into that which is used to obtain goods and services from suppliers and other expenditure such as payments made to other educational establishments or to HM Revenue and Customs. The procurement function is concerned with obtaining the required supplies and services from appropriate suppliers to enable the institution to meet its strategic objectives in an economic, efficient and effective manner.
What are supplies, services and works?
Supplies, sometimes referred to as goods or products, are the commodities that you buy that help your institution to function, such as stationery, cleaning materials, copier paper, IT equipment and licences, etc. Services are those functions which you do not carry out in-house, such as grounds maintenance, cleaning and catering provision, annual lift inspections and servicing. Works are essentially investment into your institution’s infrastructure such as new campus buildings, extensions to existing buildings, or refurbishment of existing teaching facilities.
School / MAT members - the information on this page aligns with the following ISBL Professional Standards: 3.10, 3.11