Commercial function

  • Commercial procurement institutions will have recognised procurement as a necessary function, although this may vary from department to department.  Typically, there will be a functional head within the department spending the largest amount of money on commonly required items.  Major departments are likely to have their own purchasing capability and resist the aggregation of expenditure where it implies a reduction in the control of their direct spend. 
  • Procurement is rarely involved in the specification process and is frequently constrained by product specifications which limit the choice of suppliers.  Often, too little time is allowed for the buyer to enter the marketplace and carry out a supply competitive analysis.
  • Suppliers are selected on the basis that they have proven to be of value in the past and they are rarely subject to market testing.  A large number of small suppliers and the dissipation of purchasing expenditure in commodity groups over many suppliers typify the supplier base.
  • Procurement activity is focussed with reference to finance or operating procedures that require competitive tendering at certain break points.  Most often, values related to an individual transaction, regardless of annual value or strategic importance of the procurement, determine the procedure to be followed.
  • Procurement strategies tend to be driven by user preference and are almost entirely informal.  General terms and conditions of contract printed on the reverse of purchase orders, or otherwise published, will support the strategies.
  • Procurement performance monitoring is based on cost overruns and budget excesses.  Supplier performance monitoring is targeted at problem resolution.