3.1. Operational Procurement Planning

3.1.1. Introduction

The ultimate goal of procurement planning is coordinated and integrated action to fulfil a need for goods, services or works in a timely manner and at a reasonable cost. Early and accurate planning is essential to avoid last minute, emergency or ill-planned procurement, which is contrary to open, efficient and effective – and consequently transparent – procurement.  In addition, most potential savings in the procurement process are achieved by improvements in the planning stages. Even in situations where planning is difficult such as emergencies, proactive measures can be taken to ensure contingency planning and be better prepared to address upcoming procurement requests. For example:

  • Advance identification of suitable suppliers of potential products frequently requested in emergency operations, including confirmation by suppliers on willingness to respond on short notice.

  • Development of standard specifications/TOR/SOW for products/services/works requested in emergency operations.

Good procurement planning is essential to optimize the contribution of the procurement function towards achieving the overall goals of the organization. It supports:

  • Transparency.

  • Development of Key Performance Indicators (KPIs) according to milestones and accountabilities set in the procurement plan, and use of the same to monitor performance.

  • Effective and timely solicitation of offers, award of contracts and delivery of the goods, services and works required.

  • Early requisition to reduce any delays in procurement and timely delivery to project sites.

  • Early identification of right commodities and quantities to meet programme needs.

  • Sourcing the right suppliers on time to avoid cutting corners under rush procurement to meet deadlines or budget expenditure.

  • Effective supply strategy and timely programme and project implementation.

  • Avoidance of unnecessary exigencies and urgencies, enabling full competition and full compliance with standard rules and procedures.

  • Sufficient time to fully explore alternative procurement approaches, such as joint bidding with other organizations and use of LTAs of others.

  • Strengthened procurement power vis-à-vis suppliers.

  • Obtaining best prices for aggregate requirements.

  • Establishment of criteria to measure effectiveness of the procurement function.

  • Systematic and procedurally correct procurements.

  • Development of long term agreements.

Procurement planning clarifies what is needed and when it is needed to both user and buyer. Effective procurement planning enables the UN organization and its staff to work smoothly to achieve the organization’s goals with the right quality and quantity of inputs in place; ineffective procurement planning may result in failure to achieve those goals, putting in jeopardy the FRR and procurement principles and causing damage to the credibility of the organization.  

In this unit

This unit describes the following two types of procurement planning:

  • consolidated procurement plans

  • individual procurement planning.

3.1.2. Consolidated procurement plans

Consolidated procurement plans are often developed for the whole organization, but depending on the structure and level of decentralisation these may be developed at the corporate, divisional, country office or business unit level – or even at a number of these levels.

Responsibility

At the organizational level the responsibility for preparing the plan would normally lie with the authority responsible for procurement policy and planning, but in smaller business units it may lie with the procurement officer. Consolidated procurement plans would normally be prepared annually, but in some environments where the needs are more difficult to define, e.g. because business focus is on emergency relief or on procurement agency services, these may be done more frequently, though not normally more than quarterly.

The procurement plan is always based on estimates of procurement operations to be carried out in the specified period. Some procurement needs cannot be anticipated, and the plans can therefore never be accurate. However, a procurement plan based on estimates is still better than no procurement plan.

Information sources

The information for the procurement plan should be collected by the responsible person from a variety of sources depending on the particular organization. In some cases the information can be collected by asking requisitioners and clients to complete questionnaires, while in other cases the information can be collected through Management Information Systems or ERPs. Typically the information is collected from requisitioners, clients, project plans, forecasting systems and lists of expiring LTAs.

Data collected varies from organization to organization, but as a minimum would include:

  • expected requirement for goods/services/works

  • quantities

  • delivery time requirements

  • estimated budget.

Consolidation

Once this data has been collected from all the appropriate sources it should be consolidated into the overall procurement plan. Analysis of the plan provides an opportunity to identify potential consolidation of procurements to achieve economies of scale, to better utilize resources, and to provide an overview of the magnitude of the procurement activity. In addition, when used as a management tool, plans can identify periods of time in which a large percentage of procurement actions are required. This information can assist in planning and distribution of workload between various projects and operational units.

Good practice

It is good practice to publish these consolidated procurement plans, for example on the organization’s website. This provides advance information to the outside world of upcoming procurement activities and advances the key principle of transparency in procurement.

3.1.3. Individual procurement plans

Once a requisition or project plan is received determining an actual requirement, the procurement officer is then responsible for developing the individual procurement plan. The scope of the individual procurement plan will depend on the complexity of the requirement. While it is good practice to always make a plan, in the case of low risk/low spend requirements the plan should be simple, but should include an overview of the necessary steps of the process and associated timeline. At the other end of the scale, managing the procurement of an extremely high risk/high spend requirement is in fact project management and should entail a thorough and comprehensive planning process.

Responsibility

It is the responsibility of the procurement officer to ensure that an appropriate level of procurement planning is conducted depending on the particular requirement.

Significant purchases

Particular focus needs to be made in developing plans for “significant purchases”. Significant purchases are those goods, services of works that have been identified as being of high relative expenditure and/or are difficult to secure (see Unit 2.5 for details on objectives for significant purchases). An example of a significant purchase could be one annual purchase valued at USD 1 million, such as a complex consulting assignment. Alternatively it could be a large number of low value purchases within one year, which could be more economically addressed through an LTA.

Process

The diagram below shows each of the stages in the individual procurement planning process.

3.1.4. Identification of desired procurement outcomes and objectives

The first step in the planning process is to identify the desired outcomes and objectives of the procurement. However the process is not necessarily linear. In some cases information obtained in the informational gathering stage will also have an impact on the identification of objectives. For example, an analysis of the supply market shows that there are limited sources of supply which means that a key objective is to identify suppliers who can develop alternative products. This, in turn, will have an impact on the requirement definition stage of the process.

The complexity of this process will vary from case to case. In some instances, for example where the requirement is for a commodity used across the organization with high volume, e.g. vehicles, the objectives and the desired outcomes of the procurement action may already be clearly defined in the organization’s procurement strategy. In other instances, such as the procurement of a complex and high value solution that is critical to the organization or the client, then there may be a complex network of stakeholders each with their own ideas of objectives and desired outcomes.

Stakeholders

Where the situation is complex it can be a good idea to systematically analyse the stakeholders involved. Stakeholders are anyone who has an interest in procurement activities delivering actual or perceived objectives. They can include development partners, clients, end-users, civil society, senior management, finance, technical experts, etc. It is important to identify the interests and relative importance of each stakeholder. Sometimes the interests of various stakeholders can be in conflict or competition with each other. In practice the procurement officer usually needs to develop a collaborative, but focused relationship with key stakeholders. This includes listening to their concerns and ideas, seeking their agreement where necessary, keeping them informed, challenging their needs and wants, and adapting to their needs where necessary. Nevertheless, in this process, the procurement officer at the same time needs to represent and defend the interest of the UN organization within its regulative and procedural framework.

Specific objectives of key stakeholders may relate to:

  • delivery times

  • adherence to specific regulatory frameworks

  • sourcing from specific groups of suppliers

  • use of specific brands, if justified.

These stakeholder objectives need to be combined with the information gathered during the requirement specification and supply market analysis and the organization’s overall procurement strategy. Then, if necessary through a collaborative process, the objectives and outcomes for the procurement should be agreed. At this time performance measures and indicators should also be agreed which will enable the procurement officer to determine whether the agreed procurement objectives have been met.

3.1.5. Information gathering

The Information gathering stage relates to collecting and analysing two types of information:

  • definition of requirement

  • analysis of the supply market.

The information gathered in both cases will provide input into the identification of the objectives and outcomes and development of the procurement plan.

Note: Further details on information gathering are provided in Unit 3.2 Requirement Definition and 3.3 Sourcing.

3.1.6. Development of the procurement plan

Once the objectives have been set and the relevant information on the requirement definition and the supply market has been gathered the next stage is to develop the “procurement plan”. A key element of this is selection of the procurement method. This is covered in detail in Unit 3.4 Selection of a Procurement Strategy.

Once the procurement method has been selected the procurement plan can be elaborated, often in collaboration with key stakeholders such as the client, requisitioner or technical experts. Typically the procurement plan would include the following information:

  • procurement objectives and performance indicators

  • breakdown of activities in accordance with the selected procurement method

  • identification of responsible party for each activity

  • timeline and milestones taking into consideration procurement method and required clearances

  • all appropriate administrative requirements (relevant codes, budget allotments, etc.).