The Complete Guide to Procurement Planning

Before you start any procurement event, you should map out what needs to happen to ensure a successful outcome.

In this guide, we cover every question you might have about procurement planning, including how you should go about it.

To quote Benjamin Franklin, “By failing to prepare, you’re preparing to fail.” In procurement, preparation is crucial as failure could result in redundant spending, not obtaining a mission-critical product or service, or even media attention and reputational damage.

That is why procurement planning should always be the first step in the procurement journey. The research and questions asked at this stage will affect everything from your go-to-market strategy to how the contract will be managed.

There is no one set way to go about procurement planning, as no two procurement events are the same, and organizational requirements vary. However, a procurement planning process may involve:

• Identifying and gathering requirements
• Performing market analysis
• Establishing scope, budget, and ownership
• Determining the value of the procurement
• Deciding what procurement process will be used
• Identifying important roles, including panel members
• Detailing any contract management considerations
• Performing risk and complexity assessments
• Planning for probity
• Planning for innovation
• Obtaining relevant approvals

As a rule of thumb, the amount of planning should be proportional to the estimated value of the procurement event, as well as the level of risk or complexity involved. The result of all this planning and research typically goes into a procurement plan.

For buyers, it can be confusing to know what procurement processes to follow, how much planning to do and when. Manual procurement planning processes are also prone to human error, such as delays in approval or steps being skipped.

To solve this problem, many organisations automate and streamline the procurement planning process using software. We cover these solutions in greater detail later in this guide.

A procurement plan is a document that helps guide the way forward throughout the procurement journey. It should cover everything that needs to happen at a high level, as well as any risks, key dates, roles, and responsibilities.

A procurement plan is also important for reporting and probity purposes. It should capture who signed off on key decisions and when, providing you with a clear audit trail. It is also important that your plan is easily accessible and kept in a centralized location throughout the process.

Effective procurement planning can result in a wide range of benefits, listed below.

Cost Reduction

Streamlining internal processes and ensuring the best use of resources saves your organisation money. Doing research upfront also helps keep costs down, such as challenging specifications, doing proper market research, and negotiating with suppliers.

By planning ahead, you also make sure the scope and budget are clearly defined so spending is kept within set limits.

Speedy Delivery

If things are planned out ahead of time, there are less delays in project implementation. There is no confusion about what the next step is or how to go about it.

Meeting Needs, Ensuring Innovation

If you don’t take the time to fully identify and gather requirements, then you may wind up going down the wrong path from day one. This can result in procuring something that is not fit for purpose, wasting the organisation’s time and money.

On the flip side of this, effective procurement planning means knowing exactly what needs to be provided to help the organisation succeed. In fact, by planning for innovation, you can do more than just meet needs – you can improve existing processes.

Risk Reduction

By planning properly, any financial, legal or process risks can be flagged and handled from the beginning.

Transparency

You can set the framework for the procurement process to be handled in a fair and compliant manner, meeting any probity requirements, and ensuring there is an audit trail.

Better Contract Management

How are you going to measure the supplier’s performance, and how will they be managed? What are the delivery dates going to look like? By establishing these things upfront, expectations are set from the start.

Again, this will be dependent on your internal policy, as well as the value, risk, and complexity of the procurement.

For example, most organisations will not require you to fill out a comprehensive procurement plan for inexpensive, low-risk or repeated procurement activity. However, if you are going to market for something that is expensive and mission critical, a high level of planning is often required. This is because not delivering could cost the organisation dearly.

With that in mind, here are some of the steps that may be required as part of a best practice procurement planning process.

Identify and Gather Requirements

Conduct a needs identification process by starting with the classic 5W1H approach, which involves asking: What? Who? When? Where? Why? How?

• What are the goods, works or services that are needed?

• Who is asking for them, and who is going to use them?
• When are these needed by?
• Where are these goods, works or services needed?
• Why are they needed?
• How are they going to help?

When identifying needs, you should focus on the outcome you are trying to produce. What is the ideal output for this procurement event?

By asking these questions, you may find out that the “why” is not very strong, or there is already something in place that meets this need. This can avert something being procured that is not necessary, therefore keeping costs down.

Perform a Market Analysis

Before you approach the market, it helps to find out what it has to offer. This helps you put your best foot forward and get the outcome you want.

This may involve looking at:

• The suppliers that are available
• The current prices
• Any market trends or technological developments
• Market competition and demand

Some of the ways to get useful information are to leverage your own personal knowledge, do online research, or learn from similar past projects.

This is also a good time to investigate social procurement options in order to create social value. To learn more on this subject, read our article “Social Procurement and Our Evolving Understanding of ‘Value’.”

Establish Scope, Budget & Ownership

It’s important to determine any constraints you have - unless you’ve got unlimited scope and budget, in which case, congratulations! Otherwise, you need to know what limitations you’re working within. These can include, but are not limited to:

• Legal requirements
• Security requirements

• The budget you’re working with
• Geographic limitations
• Scheduling limitations
• Other business requirements

Another important question to ask is which department owns this procurement event. By including this in your plan, you avoid a scenario where everyone believes responsibility for moving things along rests with someone else, causing things to stall.

Determine the Value of the Procurement

What is the estimated value of the procurement? What pricing model you are going to use? E.g. Fixed price, schedule of rates. These are essential questions for any procurement event.

Decide What Procurement Process Will Be Used

This is typically influenced by the threshold value and will decide the award output. Ask yourself the following questions:

• Will this procurement event be using exemptions (e.g. emergency procurement)?

• What is the proposed market approach (Private / public)?
• Are there preferred vendors to be invited?

This is also the time you should decide if panels or registers will be used. Using a panel or register can shave time off the procurement process, as the suppliers have already been assessed.

Deciding if you are going to go down this path is important to consider prior to starting your procurement journey. For instance, some panels have rules on how they must be used that need to be taken into consideration.

Identify Important Roles & Panel Members

There are several important questions to ask regarding roles and responsibilities at this stage, such as:

• What roles need to be involved in the procurement process?
• Who are the people in these roles, and how are you going to keep in touch with them?
• Who is going to be on the evaluation panel?
• Do they have any relevant conflicts of interest? These will need to be identified and formally declared.

• If you are using a procurement IT solution, do these people have system access?

Detailing any Contract Management Considerations

Before you select a supplier, it helps to detail how you are going to manage a contract once you sign it. This can be kept to a high-level.

Some key considerations:

• Who is going to be managing the contract post award?

• How are you going to engage with the supplier?
• What is your exit strategy once the contract ends?

Determining a Timeline

Once you know when the goods, works or services need to be delivered, you can determine when the procurement process needs to be kicked off and what the finishing date needs to be for delivery.

Assess Risks

You should identify any risks that could threaten to derail the procurement. This is not a once-off process, as you will need to keep an eye on risks you have identified and be aware of new ones that may crop up.

These risks should be documented and managed. Avoiding risk entirely can lead to unsatisfactory outcomes, so it is preferable to manage it where possible.

To learn more about how to reduce risk in procurement, read our report: “Procurement Risks to Manage in 2022.”

Assess Complexity

You should assess the complexity of the procurement e.g. how difficult is it going to be to buy the goods or services you are after? There are many things that can affect this, such as the risk level, total cost of ownership, internal capacity levels, or market factors.

Planning for Probity

Probity in procurement can be complex. That’s why we’ve written an easy-to-follow guide on the subject that is useful for the whole procurement process, not just the planning phase. Read it here: “A Complete Guide to Probity in Procurement.”

Planning for Innovation

Innovation isn’t always something the supplier brings to you, it’s something you need to lay the groundwork for. When you’re engaging suppliers in the market, you can ask them for information and guidance about what solutions to buy.

When you go to market, the way that your specifications are written can have a drastic effect on the solutions you are provided with, including how innovative they are.

To learn more about how to write specifications that encourage innovation, read: “Writing Specifications: A How-To Guide.” Alternatively, check out our infographic here: "The Three Types of Procurement Specifications (And When to Use Each)."

Logging Approvals & Sign-Off

Keeping on top of approvals and logging them can be tough, such as making sure all the panelists have declared their individual conflicts of interest, or having all relevant parties sign off on your procurement plan.

Asking yourself how you’re going to keep on top of this before you start is important. Any approvals should be date stamped and stored in a register or similar solution.

Make sure that once you have completed all your planning, you check over all the details one last time before going to market.

We've talked about some of the benefits of best practice procurement planning, but what are some of the things you should watch out for? There are a number of common issues that may crop up when you're planning any procurement event.

To read our list of the top twelve procurement planning pitfalls you should make sure to avoid, click here.

There are procurement suites with dedicated features to help you and your users with the procurement planning process. These features help ensure compliance, automate workflows, and increase control of procurement spend.

These features will often come in the form of a policy guide or procurement planning solution, explained below.

A policy guide solution makes sure your users follow the correct procurement process by asking them a series of questions upfront, such as the cost bracket and risk level associated with the procurement event. They are then channeled to the appropriate procurement plan. Both the questions and the workflow are customizable based on your organisation’s policies.

This sort of solution is ideal for ensuring compliance with procurement policy in decentralised or center-led environments. This way, staff are never in doubt on what policy to follow.

A procurement planning solution guides users through the planning stage via a step-by-step workflow. The user is asked to answer a series of questions, and provide any information needed to populate the procurement plan. The user can also be prompted to justify the spend, helping keep costs down. Like a policy guide solution, the workflow and questions are customizable based on your organisation’s policies.

This sort of solution allows for many tasks to be automated: creating the plan, auto-populating a proposed timeline, reaching out to key parties for approval and relevant information (e.g. Declaring conflicts of interest), and more. Everything is time-stamped and recorded for compliance purposes. Any information can be automatically carried over to the next steps of supplier discovery and going to market.

This solution is ideal for ensuring compliance, improving process efficiency and spend management, and reducing risk.

To learn on this topic, read: "How the Right Software Can Improve Your Procurement Planning."

These solutions do not need to be mutually exclusive, and most organisations can benefit from having both. For instance, a buyer can start by using a policy guide solution and filling out a few, high-level questions. Depending on their answers, they may need to create a procurement plan, so they are automatically directed into a procurement planning solution.

Ideally, your procurement software should offer both solutions, so you can guide users to follow the proper process no matter the scale of the procurement event. If you’re using a source-to-pay solution, any information from the planning stage is automatically carried over to pre-populate fields later in the procurement life cycle.

VendorPanel is a source-to-pay solution that offers both policy guide and procurement planning modules. Both modules allow you to customize your workflows according to your organizational policies. It is designed to allow you to automatically guide your buyers into making the right procurement decisions, so that compliance becomes the norm, and you are always audit-ready.

VendorPanel is the platform of choice for hundreds of public and private-sector organisations, with customers such as the Victorian and Queensland State Governments, the Royal Women’s Hospital, BGIS and McDonald’s.

To learn more about VendorPanel’s procurement planning and policy guide solutions, contact us today.