A procurement strategy is a high-level document that states an institution's approach to its procurement activities, its objectives and key initiatives for the following three to five years. The document will provide:
General information on expenditure
Procurement structures
Regulatory considerations
A statement of commitment to developing good working relationships and dealing fairly with all potential suppliers
The procurement strategy will be supported by two further documents: a procurement policy and procurement procedures.
Depending on size or complexity, some institutions’ faculties and departments may have their own, more personalised, procurement strategy document. Such 'personalised' documents should, of course, reflect the aims and objectives of the institution's overall procurement strategy.
Backed by the right people and the necessary information, a procurement strategy can be formulated to ensure compliance and mitigate risk. Simultaneously, your procurement champion can establish a procurement network which allows for a two-way flow of information between senior leadership and departmental lead buyers.
Create a vision
Before setting the strategy, establish the procurement vision. Is your institution’s aim solely to achieve value for money? Or are there broader objectives such as supporting the local economy, developing partnerships with the local business community and contributing to the sustainability agenda?
Set a strategy
The procurement champion is responsible for the strategy. They should consult with as many procurement stakeholders as possible and may want to take soundings from other procurement champions in similar organisations with whom you collaborate to gain an idea of the issues they face, good practice and to identify further procurement opportunities. Several elements are involved in setting a strategy:
Drawing on the information provided by the spend analysis and determining how each category is best purchased
Establishing the procedures and processes for managing procurement activity, including implementing thresholds that trigger the use of a particular procedure or process such as a competitive tender. These must also ensure that your institution complies with UK procurement legislation
Ensuring finance regulations are up to date and support modern procurement methods, and that your institution’s spend thresholds and procurement processes are fit for purpose. For example:
Are spend thresholds achieving what is necessary?
Is the approval of a procurement board required above certain thresholds?
Which purchases and values of spend should be made through a procurement card?
At what thresholds of spend are a full tender or a mini competition required?
When and for which products and services should consortia and contracting bodies be used?
Set targets for improving procurement efficiencies
Develop a method for measuring value for money and efficiencies against targets. Create a sustainable and effective management information system to support procedures and check compliance. Include large scale activities that involve procurement, such as: construction, refurbishment and IT replacement. Use your contracts register to plan procurement activity. Ensure your procurement board or equivalent agrees this strategy.
The following issues should be considered when preparing a procurement strategy:
Benefits of having a strategy
There are several benefits of having a published procurement strategy. It:
Sets out the institution's procurement aims and objectives for the next 3 to 5 years
Sets out the institution's procurement vision
Demonstrates the support by senior management (through the ratification of the strategy by the institution's senior committee structure) for the work of the function and of the central procurement office staff
Maps out the major initiatives to be addressed in the upcoming 3 to 5 years
Provides a public commitment to maintain and improve the day-to-day procurement work within the institution and emphasises a determination to make continual improvements in that work
Sets out the framework upon which the institution's procurement policy and procedures are based
Provides objectives against which progress can be measured and reported
Flexibility
The strategy must be flexible so that where there are new developments these may be incorporated into the forward plan. Therefore, the strategy document should be reviewed annually to determine progress against the published aims and objectives. Where parts have become dated (due to, for example, technology shift) the document should be revised, even though its end-date is not due.
Informed way forward
Before beginning to draft a high-level strategic document in which to outline the institution's future strategic procurement direction, it is recommended that you:
Consider the different types of procurement function and take stock of the institution’s current procurement structure and the level of professional procurement influence it has over its procurement (and purchasing) function
Assess whether the current methods of working are providing the desired value for money, addressing areas of risk and meeting the ever-demanding needs of a complex organisation
Determine how the issues raised in these assessments should be addressed in the strategic document
The assessment may highlight an issue that is so serious that it is necessary to make an immediate, fundamental change in the institution's method of operation. Alternatively, an issue may be better managed by an incremental approach, for example, an intention to rationalise the institution's supplier base. There are a couple of ways to help you determine where your institution is and to help highlight areas that need to be addressed:
Transactional analysis - simple measures of transactions, value and volume to help determine the best use of staff time
Self-assessment exercise - a simple spreadsheet model to help determine your institution's current and desired, future, procurement structures
Procurement Plan
A procurement plan is a statement of any known major initiatives and projects that are specific to your institution, or within the sector where the institution will wish or need to be involved. The benefit of highlighting these within the strategy document is to draw attention to them. This will help ensure that the necessary resources and timetables are identified. Possible areas to be considered within an outline procurement plan are:
Major building projects
Major, expected, information technology changes
Major outsourcing initiatives
Aims and objectives
The strategy document should contain a relatively small number of aims supported by objectives. The aims may be as simple as:
To ensure value for money is achieved through the efficient and effective use of the institution's resources
To develop a strong procurement function that has the visible support of the institution's senior management
To ensure probity and regularity in the institution's procurement activities
The objectives should be SMART, providing guidance of what is to be completed and how their achievement can be measured. This original acronym has been extended to SMARTIES to reflect modern standards with each letter standing for an attribute that the objective should have:
Specific - what is the intention of the objective?
Measurable - can the outcome be measured? How can it be measured?
Achievable - can the objective realistically be achieved?
Realistic/Relevant - is it realistic to expect to achieve the stated objective and is it relevant to the institution's strategic aims?
Time-based - when is the objective to be achieved/completed?
Intelligent - does the objective make sense?
Environmentally Aware - are there environmental implications?
Sustainable - if achieved, can that achievement be maintained?
Regulatory considerations
In addition to the Procurement Act, there are several regulatory considerations which need to be factored into a procurement strategy. These include, but are not limited to:
Transfer of Undertakings (Protection of Employment) Regulations (aka TUPE)
Freedom of Information Act
Social Value (both the Act and the new National Procurement Policy Statement)
Modern Slavery Act
General Data Protection Regulations (aka GDPR)
Waste Electrical and Electronic Equipment Regulations (aka WEEE)
Health & Safety Legislation
Contract Law
Local community relationships
Your institution will be a significant employer and source of business within its local community. It is important that it acts to support local business, however this must be managed in such a way as not to distort competition, for example: stipulating that a local presence is necessary to a contract when it is not. There are a couple of steps that can be taken to help support and develop local community suppliers:
Publish a ‘Dealing with this Institution’ guide on your web site
Consideration should be given to preparing a guide to help small and medium sized enterprises (SMEs) to understand how your institution works and how they can go about winning some of your business. The guide should contain:
An introduction indicating the institution's non-pay expenditure and that business is sourced through competition and awarded based on ‘most advantageous tender’. The purpose of the guide is to help suppliers understand how to find out about business opportunities
Types of contracts - your thresholds for tenders and quotations
How to find out about current quotations and tenders - where are they advertised etc
Quotations that are not publicly advertised - what should they do?
The type of information the supplier will be expected to provide to the institution e.g. technical and financial data
Explain your institution's competitive process and how contracts are awarded. Also explain your contract management processes
Invoice and payment instructions e.g. should invoices be sent to a central accounts section or to the ordering department: do you prefer automated payments by BACS etc, outline your payment cycles
Do you prefer to deal with suppliers electronically – what do they need to do to be able to do this
Legislative considerations that the institution complies with such as: Procurement Act, equality legislation, etc
Use of consortia arrangements - perhaps including details on how the supplier could become a supplier to a consortium you use
Contact details for the institution including not only the central procurement office but also the functional heads of other major departments
Assess your institution's value to its local community
There is benefit in knowing how much of your institution's expenditure is placed with its local community. The easiest way to determine this is to use postcodes held within your financial system to identify the value of business your institution does in your local (or another) area. This is very powerful information and can help position your institution's importance within its local community
School / MAT members - the information on this page aligns with the following ISBL Professional Standards: 3.2, 3.3, 3.4, 3.7